Finality of appellate exoneration bars criminal prosecution under the Income-tax Act when the same facts no longer support liability.

Criminal prosecution under section 276C of the Income-tax Act could not continue where the Commissioner (Appeals) had already set aside the penalty order for want of evidence and exonerated the assessee on the same facts. Once that appellate finding had attained finality and had not been shown to be challenged or reversed in accordance with law, the Department could not rely on the same factual foundation to sustain criminal liability. As the basis of the prosecution no longer survived, continuation of the complaint was unjustified. The complaint proceedings were therefore liable to be quashed in favour of the assessee.

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Issues: Whether the criminal prosecution under section 276C of the Income-tax Act, 1961 could continue after the Commissioner (Appeals) had set aside the penalty order and exonerated the assessee on the same facts.

Analysis: The appellate order had set aside the penalty for want of evidence and there was nothing to show that it had been challenged or reversed in accordance with law. Once the competent authority's finding had attained finality, the Department could not treat the same factual foundation as sufficient to sustain criminal liability. Where the basis of the prosecution no longer survived, continuance of the complaint would be unjustified.

Conclusion: The prosecution was not sustainable and the complaint proceedings were liable to be quashed in favour of the assessee.

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