Income-tax prosecution may be quashed when the assessment basis is under challenge and the complaint becomes uncertain.

Criminal prosecution under the Income-tax Act may be quashed where it rests on an assessment order that is under challenge in appeal or writ proceedings. The note states that offences of wilful attempt to evade tax and false verification are closely tied to the tax authorities' findings, so a later appellate or revisional determination can remove the factual basis of the complaint. Continuing the criminal case while the assessment dispute remains unresolved may amount to abuse of process, and the contrary view that possible success in appeal can never justify intervention is rejected.

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Issues: Whether criminal prosecution for alleged offences under the Income-tax Act should be quashed when the assessment order forming its basis was under challenge in appeal and writ proceedings.

Analysis: Offences of wilful attempt to evade tax and making false verification under the Income-tax Act arise from the assessee's acts or omissions in the assessment process and are closely linked to the findings recorded by the tax authorities. The prosecution was founded on the assessment order, and the Court treated the later appellate or revisional determination as capable of removing the very basis of the complaint. Relying on the principle that prosecution should not proceed on uncertain facts and on the binding effect of final findings in the assessee's favour, the Court held that continuing the criminal case while the assessment dispute remained pending would amount to abuse of process. The Court also declined to follow the contrary view that mere expectation of success in appeal could never justify intervention.

Conclusion: The prosecution was liable to be quashed and the complaint was dismissed in favour of the assessee.

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