Sanction order validity in income-tax prosecution: quashing declined at cognizance stage, with challenge left to trial court.

Criminal proceedings for an alleged offence under Section 276CC of the Income-tax Act were said to be vulnerable because the sanction order allegedly reflected non-application of mind and relied on another assessee's reply. The Madras HC declined to quash the proceedings at the cognizance stage, noting that the validity of the sanction could still be examined during trial and that the accused could seek discharge under Section 245 CrPC. It also clarified that the department could not cure the alleged defect by substituting or creating a fresh sanction order or additional document. The challenge was therefore left to be raised before the trial court.

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Issues: Whether the criminal proceedings for offence under Section 276CC of the Income-tax Act, 1961 were liable to be quashed on the ground that the sanction order suffered from non-application of mind and relied upon the reply of another assessee.

Analysis: The sanction was assailed on the ground that material belonging to another assessee had been taken into account and that the sanctioning authority had not applied its mind. The proceedings, however, had already reached the stage of cognizance and no charges had yet been framed. The Court noted that where sanction exists, its validity may be examined in the course of trial, and that the accused could seek discharge under Section 245 of the Code of Criminal Procedure, 1973. In such circumstances, the Court declined to interfere in exercise of quashing jurisdiction. At the same time, it clarified that the department could not substitute or create any fresh sanction order or additional document to cure the defect alleged in the existing sanction.

Conclusion: The challenge to the sanction was not accepted at the quashing stage, and the petition for quashing was rejected, leaving the issue open to be raised before the trial court.

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