Wilful tax default prosecution may continue despite later payment, with compounding remaining a separate statutory option.

A discharge petition in a prosecution for wilful failure to pay tax under the Income-tax Act was rejected because subsequent payment of tax did not by itself negate the prosecution, and the claimed retirement from the firm did not justify interference at the discharge stage. The Court found no infirmity or illegality in the order declining discharge, and held that the partnership reconstitution and the Section 69 Partnership Act plea did not bar continuation of proceedings. The accused were left free to seek compounding before the competent authority if the offence is compoundable, but the prosecution was permitted to proceed.

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Issues: Whether the petitioners were entitled to discharge in a prosecution under Section 276C of the Income-tax Act, 1961 on the ground of subsequent payment of tax, alleged retirement from the firm, and the possibility of compounding.

Analysis: The petition seeking discharge under Section 245 of the Code of Criminal Procedure, 1973 was considered in the context of the allegation of wilful failure to pay tax to the credit of the Central Government. The Court found no infirmity or illegality in the order declining discharge. The plea based on reconstitution of the partnership and the bar under Section 69 of the Partnership Act did not warrant interference at this stage, and the reference to subsequent payment did not negate the prosecution. The Court also noted that the petitioners could approach the competent authority if the offence was compoundable.

Conclusion: The petitioners were not entitled to discharge, and the prosecution was permitted to proceed. The decision was against the petitioners.

Final Conclusion: The revision was rejected, while leaving open the petitioners' liberty to seek compounding before the competent authority if the offence is compoundable.

Ratio Decidendi: A discharge in a prosecution for wilful tax default cannot be granted merely because tax is paid later or because the accused claims retirement from the firm; unless the order under challenge is shown to be infirm, prosecution may continue and compounding remains a separate statutory avenue.

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