De novo income-tax reassessment does not automatically quash prosecution for alleged false statements or fabricated records.

A remand for de novo income-tax assessment does not, by itself, nullify a criminal prosecution based on alleged false statements or fabricated documents. The prosecution can proceed independently where the remand order merely requires fresh appraisal of the accounts and does not record any positive finding that the disputed entries, transactions, or interest payments are genuine. The criminal court must still examine the ingredients of offences such as conspiracy, forgery-related false statements, cheating, attempted cheating, and filing a false return on the evidence before it. In the absence of a factual finding in favour of the accused, the complaint remains maintainable.

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Issues: Whether an order of remand directing de novo assessment under the Income-tax Act, 1961, by itself destroys the basis of a pending prosecution and justifies quashing of the criminal proceedings.

Analysis: The complaint alleged conspiracy, forgery-related false statements, cheating, attempt to cheat, and filing of a false return under the Indian Penal Code, 1860 and section 277 of the Income-tax Act, 1961. The assessment order had been set aside and the matter remanded for fresh examination of the accounts, but the Tribunal did not record any positive finding that the disputed entries were true or that the alleged transactions with Prabhakaran and the alleged interest payments to the named persons were genuine. The remand was only for reappraisal of the material for fiscal assessment. The criminal prosecution, however, stood on the alleged falsity of the counterfoils, cheques, accounts and statements, and the criminal court was required to examine the ingredients of the offences independently on the evidence adduced before it. The absence of a favourable factual finding on the truth of the entries distinguished the case from authorities where the statutory forum had positively found the returns or underlying facts to be true.

Conclusion: The remand of the assessment proceedings did not furnish a ground to quash the prosecution, and the complaint was maintainable.

Final Conclusion: The prosecution was held to be capable of proceeding independently of the reassessment, because the remand order did not negate the factual foundation of the alleged penal offences.

Ratio Decidendi: A remand for de novo assessment under the income-tax law does not, by itself, quash a criminal prosecution founded on alleged false statements or fabricated documents unless the statutory finding is one of positive truth in favour of the accused.

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