Valid prosecution authorisation and special-court procedure under tax evasion law, but unquantified allegations made prosecution premature.

Complaints under section 276C(1) were held to be validly authorised where the sanction order under section 279(1) empowered the investigating income-tax to institute prosecution, and the departmental notification supported that authorisation. However, the Special Court could not take direct cognizance of such complaints under the statutory scheme, as the offences were treated as non-cognizable and required the prescribed procedure for trial. The prosecution was also found premature because wilful attempt to evade tax under section 276C(1) requires a prima facie basis showing chargeable liability or imposable tax, penalty or interest; unaccounted transactions alone were insufficient before quantification.

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Issues: (i) Whether the complaints under section 276C(1) of the Income-tax Act, 1961 were filed by an authority competent to prosecute and whether the Principal Director of Income-tax (Investigation) could validly authorise the filing of such complaints; (ii) Whether the Special Court could take cognizance of the complaints directly and whether the prosecution under section 276C(1) of the Income-tax Act, 1961 was premature in the absence of determination of liability and quantification of tax sought to be evaded.

Issue (i): Whether the complaints under section 276C(1) of the Income-tax Act, 1961 were filed by an authority competent to prosecute and whether the Principal Director of Income-tax (Investigation) could validly authorise the filing of such complaints;

Analysis: The complaint was accompanied by a sanction order issued under section 279(1) of the Income-tax Act, 1961, and the authorisation specifically empowered the Deputy Director of Income-tax (Investigation) to institute the criminal complaints. The provisions dealing with search material and its transfer to the Assessing Officer did not bar prosecution, and the notification relied upon by the Department supported the authorisation exercised by the superior income-tax authority.

Conclusion: The complaints were not without authority of law, and the authorisation to prosecute was valid.

Issue (ii): Whether the Special Court could take cognizance of the complaints directly and whether the prosecution under section 276C(1) of the Income-tax Act, 1961 was premature in the absence of determination of liability and quantification of tax sought to be evaded;

Analysis: The offences under Chapter XXII of the Income-tax Act, 1961 are triable by the designated Special Court, but cognizance by that Court is conditioned by the statutory scheme and the requirement of commitment for trial. The offences were treated as non-cognizable, and the Court held that the Special Court could not assume original jurisdiction on complaints presented directly before it. On merits, the ingredients of section 276C(1) require a wilful attempt to evade tax, penalty or interest, which calls for a positive act and a prima facie basis showing that the amounts in question were chargeable or imposable; unaccounted transactions by themselves did not establish a completed basis for prosecution before determination of liability.

Conclusion: The Special Court could not proceed directly on the complaints, and the prosecution was premature and unsustainable.

Final Conclusion: The revision petitions failed, and the discharge of the respondent was sustained because the prosecution under the Income-tax Act was found to be procedurally unsustainable and premature.

Ratio Decidendi: A prosecution for wilful attempt to evade tax under section 276C(1) of the Income-tax Act, 1961 cannot proceed on unquantified allegations alone and must satisfy the statutory conditions for cognizance and trial under the special procedure prescribed by the Act and the Code of Criminal Procedure, 1973.

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