Concealment prosecution not barred by reduced settlement penalty; no fresh hearing required before authorising criminal proceedings.

Prosecution for concealment of income was held not to be barred under section 279 merely because a penalty had been reduced in settlement under section 271(4A); the penalty was treated as relatable only to the concealed income for one assessment year, and the statutory immunity claimed for the wider alleged concealment was not available. The settlement clause reserving the department's right to consider prosecution on merits did not require a fresh hearing of the partners before authorising criminal proceedings. The challenge to the prosecution therefore failed, and the criminal proceedings were allowed to continue.

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Issues: (i) Whether prosecution for concealment of income was barred under section 279 of the Income-tax Act, 1961 because penalty had been reduced in the settlement under section 271(4A); (ii) Whether, under the settlement, the question of prosecution had to be decided only after hearing the partners before authorisation of criminal proceedings.

Issue (i): Whether prosecution for concealment of income was barred under section 279 of the Income-tax Act, 1961 because penalty had been reduced in the settlement under section 271(4A).

Analysis: The penalty accepted in the settlement was treated as relatable only to the concealed income for the assessment year 1970-71 and not to the entire undisclosed amount spread over earlier years. The Court held that the departmental material showed positive concealment only to the extent of the amount on which penalty was imposed, and the penalty amount did not attract the statutory immunity claimed by the petitioner for the whole alleged concealment.

Conclusion: The prosecution was not barred under section 279, and the objection failed.

Issue (ii): Whether, under the settlement, the question of prosecution had to be decided only after hearing the partners before authorisation of criminal proceedings.

Analysis: Clause 5 of the settlement was construed as reserving the department's right to consider prosecution and other penalties on merits. It did not require a fresh hearing of the partners before deciding whether to launch prosecution.

Conclusion: No prior hearing was required before authorising prosecution, and this objection also failed.

Final Conclusion: The petition challenging the criminal prosecution was rejected, and the prosecution was permitted to proceed.

Ratio Decidendi: A prosecution for concealment of income is not barred merely because a penalty has been reduced under a settlement unless the statutory conditions for immunity are satisfied, and a settlement clause reserving consideration of prosecution on merits does not by itself require a fresh pre-prosecution hearing.

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