Criminal prosecution under the Income-tax Act cannot survive once the assessment basis is set aside and remanded.

Criminal complaints under sections 276C, 277 and 278 of the Income-tax Act could not survive once the assessment orders forming their foundation were set aside in appeal and remanded for fresh adjudication. The alleged escapement of income and falsity of the return ceased to furnish a live basis for prosecution, because the criminal proceedings depended on the continued existence of the assessment foundation. The complaints were therefore liable to be quashed.

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Issues: Whether criminal complaints and prosecution under sections 276C, 277 and 278 of the Income-tax Act, 1961 could survive after the assessment orders giving rise to them had been set aside in appeal and remanded for fresh adjudication.

Analysis: The complaints were founded on the alleged escapement of income and the asserted falsity of the return and verification. Once the appellate tribunal set aside the assessment orders and remanded the matters, the basis on which the prosecution rested ceased to exist. In such circumstances, the criminal proceedings could not be independently sustained, since the subsistence of the prosecution depended on the continued existence of the assessment foundation.

Conclusion: The complaints were liable to be quashed and the writ petition was allowed.

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