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Issues:
Quashing of annexure-I complaint in C. C. No. 84 of 1990 on the file of the Chief Judicial Magistrate (Economic Offences), Ernakulam under section 482 of the Code of Criminal Procedure. Analysis: The petitioners, who are the assessee under the Income-tax Act, 1961, filed a return for the assessment year 1986-87 with claims for depreciation and investment allowance under sections 32 and 32A of the Act in respect of machinery purchased in March 1986. The assessing authority rejected these claims as the machinery was not used during the accounting year. Subsequently, the Income-tax Appellate Tribunal allowed the claims and set aside the assessment order. The annexure-I complaint was based on the original assessment order, which was challenged by the company before the Tribunal. The Tribunal also dismissed the Department's application for reference under section 256(1) of the Act. The petitioners argued that since the basis of the prosecution no longer existed due to the Tribunal's orders, the prosecution should be quashed under section 482 of the Criminal Procedure Code. The petitioners relied on previous court decisions, such as the Supreme Court's ruling in Uttam Chand v. ITO, where it was held that a prosecution can be quashed if subsequent findings favor the assessee. The Supreme Court emphasized that a prosecution can be initiated even if other proceedings under the Act are pending. The High Court noted that the findings of the Tribunal in favor of the assessee would nullify the basis of the complaint. The respondent cited a Madras High Court decision to argue that the proper forum to challenge the prosecution's sustainability is the criminal court, not under section 482 of the Criminal Procedure Code. Regarding the contention that relief under section 482 cannot be allowed due to the pending period for reference under section 256(2) of the Act, the High Court referred to previous cases where criminal proceedings were quashed based on Tribunal decisions in favor of the assessee. The court highlighted that as long as the Tribunal's decision stands, the criminal court cannot reach a contrary conclusion, leading to the quashing of the prosecution. The High Court quashed the annexure-I complaint without prejudice to the respondent's right to file a fresh complaint if the Tribunal's order is set aside under section 256(2) of the Act. In conclusion, the High Court allowed the Criminal M. C. and quashed the annexure-I complaint, considering the Tribunal's findings in favor of the assessee and the legal precedents supporting the quashing of the prosecution based on such findings.
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