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Issues: Whether a prosecution launched for alleged concealment and false statements under the Income-tax Act and the Indian Penal Code could continue after the Settlement Commission had allowed the settlement application to proceed and had recorded that concealment of income had not been established or was not likely to be established.
Analysis: The settlement scheme under Chapter XIX-A makes the Settlement Commission the repository of exclusive jurisdiction once an application under section 245C is allowed to proceed under section 245D. Until the final order under section 245D(4), the Commission may call for reports, direct further enquiry, and ultimately pass a conclusive settlement order under section 245I. On the facts, the Commission had rejected the Commissioner's objection under section 245D(1A) and held that concealment was not established or likely to be established. That finding removed the factual foundation on which the pending prosecution rested. The mere pendency of the final settlement order did not preserve the criminal complaint, because during that interregnum the prosecution lacked the necessary substratum and could not be continued on the same material.
Conclusion: The prosecution and the summoning order could not be sustained and were liable to be quashed in favour of the assessee.
Final Conclusion: The settlement framework displaced the ongoing criminal complaint on the existing material, and the revision succeeded with the impugned order and complaint set aside.
Ratio Decidendi: Once the Settlement Commission allows a settlement application to proceed and records that concealment is not established or likely to be established, the pending prosecution founded on that very allegation cannot continue until a contrary final settlement determination is made.
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