Cancellation of penalty does not automatically quash tax prosecution; effect of appellate relief must be examined on the facts.

Cancellation of penalty or appellate relief in assessment proceedings does not, by itself, compel quashing of prosecution for Income-tax Act offences. The effect of later appellate orders on the maintainability of criminal proceedings must be examined on the facts of each case, and no blanket rule for quashing can be laid down merely because concealment or late-filing liability was found absent in appeal. In proceedings under Section 482 CrPC, the petitioners were directed to seek discharge or other appropriate relief before the trial court, which was ordered to decide such application expeditiously before proceeding further.

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Issues: Whether criminal proceedings launched for offences under the Income-tax Act could be quashed under Section 482 of the Code of Criminal Procedure, 1973, on the ground that appellate orders had cancelled the penalty and found no concealment or late-filing liability.

Analysis: The appellate orders relied on by the petitioners were held not to automatically destroy the foundation of the prosecution in every case. The Court held that maintainability of the prosecution and the effect of later appellate orders must be examined on the facts of each case, and that a blanket rule for quashing could not be laid down merely because penalty had been cancelled. As the matter was sought to be pursued in a petition under Section 482, the Court declined to enter into the merits and held that the petitioners should first approach the trial court for appropriate relief, including discharge, where they could raise all their contentions. The trial court was directed not to proceed further without deciding such application expeditiously.

Conclusion: The request to quash the criminal complaints was not granted, and the petitioners were left to seek discharge or other appropriate orders before the trial court.

Ratio Decidendi: Cancellation of penalty or appellate relief in assessment proceedings does not, by itself, require quashing of prosecution for tax offences; the effect of such orders must be examined on the facts of each case, ordinarily in the trial court.

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