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Issues:
- Whether a regular assessment under the Income-tax Act is necessary for filing a complaint under section 276C? - Can prosecution be initiated without finalization of regular assessment orders? - Impact of pending regular assessment proceedings on criminal prosecution under section 276C. Analysis: The judgment by M. B. Sharma of the Rajasthan High Court addresses the common question of law in several revision petitions concerning the necessity of a regular assessment under the Income-tax Act for filing a complaint under section 276C. The cases stemmed from a raid conducted by the Income-tax Officer, resulting in the discovery of undisclosed income and assets. The accused petitioners challenged the premature complaints filed against them under section 276C, arguing that without finalized regular assessment orders, the prosecution lacked grounds. The defense contended that prosecution should not proceed without conclusive proof of tax evasion, as highlighted in the case of Uttam Chand v. ITO. However, the court emphasized that the prosecution must establish all elements of the offense independently to succeed under section 276C. In analyzing the impact of pending regular assessment proceedings on criminal prosecution, the court referred to the Supreme Court's decision in P. Jayappan v. S. K. Perumal, emphasizing that the mere pendency of assessment/reassessment proceedings does not bar criminal prosecution under section 276C or section 277. The court stressed that the criminal court must evaluate the case based on the evidence presented, with due regard to any subsequent assessment orders favoring the assessee. The judgment in PNB Finance & Industries Ltd. v. Miss Gila Kripalani further supported the notion that prosecution may not be incompetent in the absence of a determination of tax liability. Regarding the specific cases of the petitioners, the court noted that while regular assessment orders were pending or finalized for some assessment years, the prosecution under section 276C was not hindered. The court highlighted the need for the prosecution to prove the offense elements independently, regardless of the status of assessment proceedings. It was clarified that the criminal court should consider any developments in assessment orders during the trial and exercise discretion judicially if requested to stay proceedings pending appeal outcomes. Ultimately, the court dismissed all revision petitions, affirming that the initiation of proceedings under section 276C was not contingent on finalized regular assessment orders. The judgment underscored the requirement for the prosecution to establish the offense elements conclusively, independent of the assessment status, and highlighted the discretionary power of the criminal court in managing proceedings in light of assessment outcomes.
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