Tax assessment findings cannot sustain prosecution once final adjudication nullifies the complaint's factual foundation.

A prosecution founded on income-tax assessment findings may not continue where those findings have been displaced by subsequent adjudication of the Settlement Commission and the ITAT. The article notes that once the assessment basis is nullified and the tax authorities have recorded final findings on the factual foundation, the criminal court must give due regard to that conclusion. It further states that a Magistrate should not compel the recording of evidence under section 244 of the Code where the complaint's no longer survives. The order issuing process to prosecution witnesses was therefore set aside on the facts described.

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Issues: Whether the prosecution launched on the basis of the income-tax assessment could continue and whether the Magistrate was justified in issuing process to the prosecution witnesses under the procedure for warrant cases instituted otherwise than on a police report.

Analysis: The complaints rested on assessment findings that had been overtaken by the orders of the Settlement Commission and the Income-tax Appellate Tribunal. The Tribunal had set aside the assessment orders and directed fresh assessments after taking into account the Settlement Commission's findings, while the Settlement Commission had accepted the factual basis in favour of the assessees and had also dealt with immunity from prosecution. In such circumstances, the criminal court was required to give due regard to the tax authorities' final findings on the very factual foundation of the prosecution. The Court held that if the basis of the complaint has been nullified by authoritative tax adjudication, the prosecution cannot be allowed to proceed merely to record evidence under section 244 of the Code of Criminal Procedure, 1973, and the Magistrate ought not to compel continuation of proceedings on a footing that had ceased to survive.

Conclusion: The prosecution was held not to survive on the facts, and the order directing issuance of subpoenas to the prosecution witnesses was set aside.

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