Income-tax prosecution cannot continue when the assessment order is set aside and remanded for fresh adjudication.

Criminal prosecution under the Income-tax Act could not proceed where it was founded on an assessment order that had already been set aside and remanded for fresh adjudication. The Madras HC noted that the assessment and penalty proceedings formed the factual basis of the complaint, but once the underlying assessment was no longer final, the prosecution became premature. As a result, the criminal complaint proceedings were liable to be quashed until reassessment was completed.

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Issues: Whether criminal prosecution for alleged income tax offences could continue when the assessment order on which the prosecution was founded had already been set aside and the matter remanded for fresh assessment.

Analysis: The prosecution was initiated on the basis of assessment and penalty proceedings under the Income-tax Act. The assessment order had subsequently been set aside by the appellate forum and the matter was remanded for fresh consideration. In that situation, the factual foundation for the prosecution was not final, and continuation of the criminal complaint would be premature until a fresh assessment was completed.

Conclusion: The prosecution could not be sustained at that stage, and the criminal complaint proceedings were liable to be quashed.

Ratio Decidendi: Where criminal prosecution under the Income-tax Act is founded on an assessment order, and that assessment order is set aside with the matter remanded for fresh adjudication, the prosecution cannot continue until the reassessment is completed.

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