Tax prosecution cannot survive once the related concealment penalty is deleted in appeal.

Where a penalty for alleged concealment under the Income-tax Act had been deleted in appeal, criminal prosecution under the same Act based on the same seized material was treated as unsustainable. The Rajasthan HC noted the principle that, once the penalty no longer survives, prosecution founded on that identical basis need not continue. The sanction orders and the complaint were therefore quashed in favour of the assessee.

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Issues: Whether criminal prosecution for alleged tax evasion could continue after the penalty imposed for the same conduct had been deleted in appeal.

Analysis: The petitioner had been subjected to penalty under section 271(1)(c) of the Income-tax Act, 1961, and prosecution had been sanctioned under section 276C of the same Act on the basis of the seized material. The appellate authority had deleted the penalty, and the Court took note of the view that when the penalty itself does not survive, the prosecution founded on the same foundation need not continue.

Conclusion: The prosecution could not be sustained and the sanction orders and complaint were quashed in favour of the assessee.

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