Penalty cancellation does not bar concealment prosecution, but partner liability needs specific pleadings of business responsibility.

Cancellation of an income-tax penalty does not by itself bar prosecution for concealment or false verification where the criminal complaint is based on the false declaration in the return and not on the later penalty order. Liability of partners in a firm requires specific averments that they were in charge of and responsible for the conduct of the business under section 278B. On the facts noted, the complaint could proceed against the firm and the partner who signed the return, but was quashed against other partners for want of such pleadings.

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Issues: (i) Whether cancellation of penalty under the Income-tax Act barred prosecution for offences relating to concealment and false verification. (ii) Whether the complaint could proceed against the remaining partners in the absence of specific averments that they were in charge of and responsible for the firm's business.

Issue (i): Whether cancellation of penalty under the Income-tax Act barred prosecution for offences relating to concealment and false verification.

Analysis: The cancellation of penalty affected only the penalty order and did not undo the addition made by the Income-tax Officer or amount to a finding that there was no concealment. The prosecution was founded on the allegedly false declaration in the return, not on the later affidavit concerning the cheque amount. The earlier appellate order therefore did not furnish a complete defence to the criminal complaint.

Conclusion: The prosecution was not barred on this ground and could continue against the persons against whom the complaint was otherwise maintainable.

Issue (ii): Whether the complaint could proceed against the remaining partners in the absence of specific averments that they were in charge of and responsible for the firm's business.

Analysis: In case of offences by a firm, liability under section 278B of the Income-tax Act requires an allegation that the concerned person was in charge of and responsible for the conduct of the business. The complaint contained specific allegations only against Jaswant Rai, who had signed the return and appeared in the assessment and penalty proceedings. As to the other partners, the complaint contained no such material averments.

Conclusion: The complaint and revisional order were quashed qua the other partners, while prosecution was permitted to continue against the firm and Jaswant Rai.

Final Conclusion: The petition succeeded only in part: the criminal proceedings were set aside for the partners against whom no statutory responsibility was pleaded, but the prosecution survived against the firm and the partner who signed the return.

Ratio Decidendi: Cancellation of penalty does not, by itself, bar prosecution for concealment or false declaration, and criminal liability of partners under section 278B requires specific averments that they were in charge of and responsible for the business of the firm.

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