Prosecution for tax concealment cannot continue after final cancellation of penalty on the same facts.

Criminal prosecution for concealment of income and furnishing of inaccurate particulars could not proceed where the penalty orders based on the same allegations had been set aside by the appellate authority and that finding had attained finality before the Tribunal. The Tribunal also recorded that the Department had failed to prove concealment or furnishing of inaccurate particulars. Although penalty and prosecution are distinct proceedings, the final statutory finding in favour of the assessee removed the foundation of the complaint, making continuation of the criminal case on the same facts unjustified.

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Issues: Whether criminal prosecution for concealment of income and furnishing of inaccurate particulars could continue after the penalty orders under the Income-tax Act had been set aside by the appellate authority and that view had attained finality before the Tribunal.

Analysis: The complaint under sections 276C, 277 and 278 was founded on the same concealment allegations that had led to penalty orders under section 271(1)(c). Those penalty orders were annulled by the appellate authority and the annulment was confirmed by the Tribunal, which also held that the Department had failed to prove concealment or furnishing of inaccurate particulars. The final fact-finding determination under the Act, therefore, removed the very of the prosecution. Although penalty and prosecution are distinct proceedings, continuation of the criminal case on the selfsame facts would be unjustified once the statutory finding in favour of the assessee had become final.

Conclusion: The prosecution could not be continued and the accused were entitled to discharge.

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