Tax prosecution u/ss 276C(1) and 278B settled; question on officer's competence and HC precedent left open

SC recorded that the dispute between the Revenue and the assessee in the prosecution for alleged offences under s. 276C(1) and s. 278B of the Income Tax Act had been fully and finally settled under the mechanism invoked by the 2nd respondent pursuant to the Finance (No. 2) Act, 2024. In view of the settlement, SC declined to adjudicate the issue of competence of the Deputy Director/Assistant Director of Income Tax to initiate prosecution, expressly leaving that question open for determination in an appropriate future case. The impugned HC judgment was directed not to operate as a precedent.

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The Supreme Court dealt with a Special Leave Petition arising from a prosecution dispute between the Revenue and the Assessee. The second respondent, by I.A. No. 223230 of 2025, produced orders dated 14.02.2025 and 11.03.2025 issued under Rule 7 read with Section 92(2) and Section 93 of the Finance (No. 2) Act, 2024, confirming that "towards full and final settlement of the subject matter of prosecution, the issue has been resolved between the Revenue and the Assessee." Counsel for the petitioner accepted the passing of these orders but requested that the Court expressly neutralize the binding effect of the findings in the impugned judgment, particularly on the "competence of the Deputy Director/Assistant Director to initiate prosecution." The Court, noting the settlement and "to keep the issue open," held that all findings on such competence are left open for determination "in an appropriate case in accordance with law." It further directed that "the impugned judgment shall not be treated as a precedent for any purpose" and disposed of the Special Leave Petition and pending applications.

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