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Issues:
1. Whether the prosecution for furnishing false return can continue when the appeal of the petitioner has been allowed? 2. Whether the complaint constitutes an offence under sections 276C and 277 of the Income-tax Act? 3. Whether the assessment order and penalty proceedings initiated against the petitioner are valid? Analysis: 1. The petitioner, a registered firm under the Income-tax Act, submitted revised returns for the assessment year 1990-91, showing a significant increase in income. The Deputy Commissioner assessed the income at 10% of gross receipts without allowing necessary depreciation rebate, leading to penalty proceedings. The petitioner appealed the order, which was dismissed by the Commissioner of Income-tax (Appeals) and was pending before the Income-tax Appellate Tribunal. A complaint was filed for prosecution under sections 276C and 277. The petitioner sought to quash the complaint, arguing that prosecution was premature as the appeal was pending. The Tribunal partly allowed the appeal, citing a Supreme Court case where prosecution was quashed upon appeal success. However, the Court found that the facts of the present case differed, and the prosecution could not be quashed solely based on appeal success. 2. The complaint alleged that the petitioner, along with its partners, willfully attempted to evade tax by furnishing inaccurate particulars of income and making false verifications in the return of income. The assessing officer determined the total income at a higher amount due to discrepancies in the accounts and lack of evidence for expenses claimed. The Commissioner of Income-tax upheld the assessment order, and penalty proceedings were initiated. The Tribunal partly allowed the appeal, emphasizing the unreliable nature of the petitioner's accounts and upheld the assessment of net profit. The Court held that the complaint did constitute offences under sections 276C and 277, and the prosecution could not be quashed based on the appeal outcome alone. 3. The assessment order was made under sections 143(3)/182(1) of the Income-tax Act, where the petitioner failed to provide complete books of account despite opportunities. The assessing officer fixed the income at 10% of gross receipts due to discrepancies and lack of evidence for claimed expenses. The Commissioner of Income-tax upheld the assessment order, and penalty proceedings were initiated. The Tribunal partly allowed the appeal, noting the discrepancies in the returns and the rejection of the books of account. The Tribunal directed the revised return to be accepted but upheld the assessment of net profit. The Court found that the assessment and penalty proceedings were valid, as the issues raised by the petitioner were to be considered during the trial, and the prosecution could not be quashed solely based on the appeal outcome.
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