2007 (8) TMI 314 - HC - Income Tax

Prosecution launched u/s 276C and 277 on basis of diary found during search which revealed that certain additional income was not explained in the income-tax return filed AO made additions on basis of entries in diary assessee filed appeal against assessment order and simultaneously obtained stay of criminal prosecution during pendency of appeal before the income tax authorities since tribunal has deleted additions, entire criminal proceedings was to be quashed

Summary

Issues:
1. Concealment of income leading to criminal prosecution under sections 276C and 277 of the Income-tax Act, 1961.
2. Stay of criminal prosecution during the pendency of an appeal before the Income-tax Department.
3. Quashing of criminal prosecution based on the deletion of extra income from the assessment order.

Analysis:
1. The judgment dealt with a case where a search and seizure operation revealed additional income in a diary belonging to the petitioner, leading to criminal prosecution under sections 276C and 277 of the Income-tax Act, 1961. The petitioner had filed an appeal against the assessment order while the criminal case was pending.

2. During the pendency of the appeal before the Income-tax Department, the petitioner sought a stay on the criminal prosecution, which was granted by the court. Subsequently, the appeal was allowed, and the additional income mentioned in the diary was deleted from the assessment order, which was the primary basis for the prosecution.

3. The petitioner's senior counsel argued that since the appeal had been successful, and the extra income had been removed from the assessment, continuing with the criminal prosecution would amount to an abuse of the court's process. Citing relevant case laws, it was contended that when the foundation of a case is eliminated, further proceedings would be unjust.

4. The counsel representing the Income-tax Department did not contest the legal principle that continuing with the complaint case after the basis had been invalidated would be an abuse of the court's process.

5. Considering the legal precedents and in the interest of justice, the court exercised its power under section 482 of the Code of Criminal Procedure to quash the entire criminal prosecution arising from the complaint case pending before the Special Judge, Economic Offences, Patna.

6. Consequently, the court allowed the petitioner's application, thereby bringing an end to the criminal prosecution against the petitioner in light of the successful appeal and the deletion of the additional income from the assessment order.