Income-tax prosecution quashed where appellate finding showed disputed amount was not income of the assessee.

A prosecution under the Income-tax Act based on alleged non-disclosure of a disputed amount was held unsustainable after the appellate tribunal found the addition unjustified and deleted it. The criminal complaint rested on the same factual foundation, and once the competent appellate forum recorded that the amount did not belong to the petitioners and could not form part of their income, continuation of the prosecution would amount to abuse of process. The prosecution was therefore liable to be quashed in favour of the petitioners.

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Issues: Whether the prosecution for offences under the Income-tax Act could be quashed after the appellate tribunal had held that the disputed amount did not belong to the petitioners and could not be included in their income.

Analysis: The appellate tribunal had recorded a clear finding that the addition of the disputed amount was without justification and had deleted the addition. The prosecution was founded on the same alleged non-disclosure of that very amount in the return. Once the competent appellate forum had held that the amount was not the income of the petitioners, allowing the criminal case to proceed on the same factual foundation would amount to abuse of the process of court.

Conclusion: The prosecution could not be continued and was liable to be quashed in favour of the petitioners.

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