Income-tax prosecution can proceed despite pending adjudication, and discharge fails where prima facie material shows grave suspicion.

Income-tax prosecution may proceed independently of pending assessment or adjudication, and such pendency does not bar criminal proceedings unless exoneration on merits makes the allegations unsustainable. A sanction objection will not vitiate prosecution at the threshold where the statutory scheme and notification support competence, and any defect is at most an irregularity absent failure of justice. At the discharge stage, the court only tests whether the material discloses a prima facie case or grave suspicion, not a mini-trial. On the facts, the materials supported proceeding to trial and no discharge was warranted.

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Issues: (i) Whether pendency of income-tax adjudication proceedings barred the criminal prosecution and discharge application; (ii) Whether the sanction for prosecution was invalid for want of competence in the authority issuing it; (iii) Whether the materials disclosed a ground for discharge under Section 245(2) of the Code of Criminal Procedure, 1973.

Issue (i): Whether pendency of income-tax adjudication proceedings barred the criminal prosecution and discharge application.

Analysis: The governing principle applied was that adjudication proceedings and criminal prosecution are independent and may proceed simultaneously. The Court relied on the settled position that initiation of prosecution need not await completion of assessment or adjudication, and that only where exoneration in adjudication is on merits and the allegations are found unsustainable would continuation of prosecution be impermissible.

Conclusion: The pendency of assessment or adjudication did not bar the prosecution, and this contention was rejected.

Issue (ii): Whether the sanction for prosecution was invalid for want of competence in the authority issuing it.

Analysis: The Court examined Section 279 of the Income-tax Act, 1961 along with the statutory definition and classification provisions, and also considered the effect of the notification relied upon by the Revenue. It held that the definition clause and the scheme of the Act had to be read contextually, that the notification conferred authority, and that at most any defect in sanction would be an irregularity unless failure of justice was shown. The Court further held that the sanction objection did not establish absence of jurisdiction so as to vitiate the prosecution at the threshold.

Conclusion: The sanction was not treated as invalid in a manner warranting discharge, and this contention was rejected.

Issue (iii): Whether the materials disclosed a ground for discharge under Section 245(2) of the Code of Criminal Procedure, 1973.

Analysis: The Court applied the settled standard that, at the stage of discharge, the court may sift the material only to see whether a prima facie case or grave suspicion exists, without conducting a mini-trial. On the material before it, the Court found that the allegations of tax evasion and the connected offences disclosed sufficient grounds to proceed to trial.

Conclusion: No case for discharge was made out.

Final Conclusion: The revisional challenge failed in full, and the order refusing discharge was left undisturbed, leaving the prosecution to proceed in accordance with law.

Ratio Decidendi: Income-tax prosecution may proceed independently of pending adjudication, and at the discharge stage the court interferes only when the material fails to disclose a prima facie case or grave suspicion.

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