Quashing criminal complaint after penalty was set aside removed the foundation for prosecution and prevented abuse of process.

Where criminal prosecution rests on the same factual foundation as income-tax penalty proceedings, the continuation of the complaint can be challenged once the underlying penalty has been set aside and that order has attained finality. The High Court noted that the search, show-cause notice, settlement proceedings and penalty order all stemmed from one common basis; after the Appellate Tribunal removed the penalty, the foundation for the prosecution no longer survived. Continuing the criminal complaint in those circumstances was treated as harassment and an abuse of the process of law, so the complaint and consequential proceedings were liable to be quashed.

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Issues: Whether criminal complaint and consequential proceedings could be quashed under the inherent jurisdiction of the High Court after the penalty imposed in the underlying income-tax proceedings had been set aside by the Appellate Tribunal.

Analysis: The search, the show-cause notice, the settlement proceedings and the penalty order all arose from the same factual foundation. The petitioner's penalty was ultimately set aside by the Appellate Tribunal, and that order had attained finality. In such circumstances, the very basis for continuing the prosecution stood removed. Continuation of the criminal complaint on the same foundation would amount to harassment and abuse of the process of law.

Conclusion: The criminal complaint and all consequential proceedings were liable to be quashed.

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