Penalty order quashing does not bar tax evasion prosecution where false particulars and wilful evasion are alleged.

Quashing of the penalty order did not bar prosecution under sections 276C and 277 of the Income-tax Act where the complaint alleged wilful attempt to evade tax and filing of false particulars. Setting aside the penalty order did not annul the assessment or destroy the factual basis of the complaint, and section 276C operates without prejudice to penalty otherwise imposable. The criminal complaint was therefore maintainable, and the request to quash it failed.

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Issues: Whether quashing of the penalty order barred prosecution for offences under sections 276C and 277 of the Income-tax Act, 1961.

Analysis: The complaint was founded on alleged wilful attempt to evade tax and on false particulars in the return. The setting aside of the penalty order did not mean that the assessment had been annulled or that the prosecution ceased to have a basis. Section 276C expressly contemplates punishment for wilful attempt to evade tax, penalty or interest, and such liability is without prejudice to any penalty otherwise imposable. The cancellation of the penalty order alone was therefore not sufficient to invalidate the criminal complaint.

Conclusion: The prosecution was maintainable and the prayer to quash the complaint failed.

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