L. Manoharan, J.
1. This petition under Section 482 of the Code of Criminal Procedure is to quash annexure-I complaint in C. C. No. 84 of 1990 on the file of the Chief Judicial Magistrate (Economic Offences), Ernakulam. The first petitioner is an assessee under the Income-tax Act, 1961 (for short, 'the Act'), the second petitioner is the managing director, the third petitioner is one of the directors and the fourth petitioner is the general manager of the first petitioner-company. For the assessment year 1986-87, the first petitioner-company filed a return after deducting certain claims under the Act. Two such claims were depreciation and investment allowance under Sections 32 and 32A of the Act in respect of two items of machinery. These two machines were purchased on March 5, 1986, and March 8, 1986, respectively. If the said machines were put to use duringthe accounting period, the two claims could be entertained. The assessing authority conducted enquiries and found that the machinery was not used during the accounting year and hence the assessing authority completed the assessment rejecting the two claims. An appeal was preferred by the first petitioner-company before the Commissioner of Income-tax; but he confirmed the order of assessment. The assessing authority had also initiated proceedings under Section 271(1)(c) of the Act. In that, after completing the necessary steps, the authority passed an order levying penalty. The order of assessment as well as the order levying penalty were challenged by the company before the Income-tax Appellate Tribunal, Ernakulam. The Tribunal, by annexure-II order, allowed the two claims and set aside the order appealed against. Annexure-I complaint is based on the assessment order as confirmed by the Commissioner of Income-tax. The Department filed an application for reference under Section 256(1) of the Act ; that was also dismissed by the Tribunal by annexure-III order.
2. According to the petitioners, since the very basis of the prosecution thus is no longer in existence, the prosecution is not sustainable ; consequently, the same is liable to be quashed under Section 482 of the Criminal Procedure Code, 1973.
3. It was contended by learned counsel for the respondent that the respondent has a right to file an application under Section 256(2) of the Act for compelling the Tribunal to make the reference for which the period is six months and the same is yet to expire, and therefore, the challenge is premature and that the grounds now raised are such that they could urge the same before the criminal court and hence they cannot, in the circumstances, invoke the jurisdiction of this court under Section 482 of the Criminal Procedure Code.
4. Learned counsel for the petitioners maintained that, as matters now stand, the very basis of the prosecution is no longer existing as a result of annexures-II and III orders. According to him, in such circumstances, annexure-I complaint is only an abuse of the process of the court and, consequently, the same has to be quashed. In the decision in Uttam Chand v. ITO : [1982]133ITR909(SC) (SO, the Income-tax Officer granted registration to the firm for the assessment year 1969-70. The Income-tax Officer cancelled the registration of the firm on the ground that the firm was not genuine, since one of the alleged partners stated that her signature in the records was not hers and that she was not a partner. The Tribunal found that she was in fact a partner of the firm and that the firm was genuine and set aside the cancellation of the order of the Income-tax Officer. In the meantime, the Income-tax Officer initiated prosecution against the firm under Section 277 of the Act for having filed false returns. In a revision petition for quashing the prosecution against the firm, the Punjab and Haryana High Court held that the Tribunal's finding was not binding on the criminal court and the same cannot be a bar to the prosecution proceedings. The firm preferred an appeal before the Supreme Court by special leave. The Supreme Court held, in view of the finding recorded by the Appellate Tribunal that she was a partner of the firm and that the firm was genuine, the assessee could not be prosecuted for filing false returns and quashed the prosecution. In the subsequent decision of the Supreme Court in P. Jayappan v. S.K. Perumal, First ITO : [1984]149ITR696(SC) , a search was conducted in the premises of the petitioner and several documents and account books which revealed suppression of purchase and deposits were revealed. The return filed by the assessee thus was not true and correct. A complaint was filed against the assessee under Sections 271(1)(c), 273A, 276C, 277, 279(1A) of the Act and Sections 193 and 196 of the Indian Penal Code. The assessee filed a petition under Section 482 of the Criminal Procedure Code, 1973, to have the proceedings quashed contending that the launching of the prosecution was premature because the reassessment proceedings started against him for these years had not been completed. The High Court dismissed the petition. The petitioner preferred a petition under Article 136 of the Constitution for special leave. The Supreme Court dismissed the petition, holding that the pendency of the reassessment proceedings could not act as a bar to the institution of the criminal prosecution for the offence under Section 276C or Section 277 of the Act. In considering the said aspect, the Supreme Court, in P. Jayappan's case [1984] 149 ITR 696, at page 700, adverting to the case of Uttam Chand : [1982]133ITR909(SC) (SO observed :
'It is true that, as observed by this court in Uttam Chand v. ITO : [1982]133ITR909(SC) , the prosecution once initiated may be quashed in the light of a finding favourable to the assessee recorded by an authority under the Act subsequently in respect of the relevant assessment proceedings but that decision is no authority for the proposition that no proceedings can be initiated at all under Section 276C and Section 277 as long as some proceeding under the Act in which there is a chance of success of the assessee is pending.'
Thus, the decision in Uttam Chand's case : [1982]133ITR909(SC) is reaffirmed by the Supreme Court. What is significant to be noted is that in this case no proceeding is now pending and there is a finding of the Tribunal in favour of the assessee.
5. The Punjab and Haryana High Court also has held in the decision in Parkash Chand v. ITO that, in view of the finding of the Tribunal that there was no concealment, the criminal prosecution against the assessee is liable to be quashed. The fact that the finding of the Tribunal in favour of the assessee would take away the very basis of the prosecution is reiterated in the decision of the Supreme Court in K.T.M.S. Mohammed v. Union of India : 1992CriLJ2781 , where it is observed (at page 219) :
'In the present case, on two occasions, .the Tribunal has held that the amount of Rs. 6 lakhs was not owned by the first appellant. In exhibit D-4, the Tribunal has further held that Section 69A dealing with unexplained money, etc., has no application to the facts of the case. Taking this finding of the Tribunal into consideration, we are constrained to hold that the appellants cannot be held to be liable for punishment under Section 120B read with Section 277 and Section 277 (simpliciter) of the Income-tax Act, 1961, as the very basis of the prosecution is completely nullified by the order of the Tribunal which fact can be given due regard in deciding the question of the criminal liability of appellants Nos. 1 and 2.'
These decisions would show that the finding of the Tribunal, since it is in favour of the assessee, would take away the very basis of annexure-I complaint. But learned counsel for the respondent relied on the decision of the Madras High Court in Hema Mohnot v. State by Chief CIT : [1992]198ITR410(Mad) to contend that, in such circumstances the proper procedure is not to invoke the jurisdiction under Section 482 of the Criminal Procedure Code to quash the proceedings, but the proper forum is the criminal court itself where an assessee could prove that the prosecution is not sustainable. In that case, the prosecution had reached the stage of questioning the accused under Section 313(a) of the Code. The decision is distinguishable on facts and also is not in accordance with Uttam Chand's case : [1982]133ITR909(SC) .
6. The only other question that remains to be considered is the contention of the respondent that, since the period of six months under Section 256(2) of the Act has not expired, on the basis of the order of the Tribunal, relief under Section 482, Criminal Procedure Code, cannot be allowed. Learned counsel for the respondent relied on the decision in CIT v. Bansi Dhar and Sons : [1986]157ITR665(SC) . In that case, the Supreme Court held that for staying the recovery pending reference before the High Court or the Supreme Court, the assessee should apply before the appellate authority. In that case, it was observed that until the reference is answered, the appeal is kept pending and that the jurisdiction of the High Court is purely advisory. But here the question for consideration is, with due regard to the scope of Section 256(2), in the context of the order of the Tribunal in favour of the assessee, whether it is necessary to quash the criminal proceeding to secure the ends of justice. This court, in Criminal M.C. No. 1047 of 1991, invoked its jurisdiction under Section 482 of the Criminal Procedure Code and quashed the complaint where the prosecution was launched against the assessee under Sections 276C(1) and 277 read with Section 278B of the Act. In that case, the orders on the basis of which the complaints were laid were set aside by the Tribunal and reassessment was ordered. This court quashed the complaints without prejudice to the right of the respondent to file a fresh application in the light of the result of the reassessment proceedings.
7. In the decision in W.L. Kohli v. CIT : [1985]152ITR154(Delhi) , the Tribunal's decision was in favour of the assessee. The application by the Department under Section 256(1) of the Act was rejected and the application under Section 256(2) of the Act was pending. A complaint against the assessee under Sections 277 and 278 of the Act and Sections 193 and 196 of the Indian Penal Code was quashed, but it was clarified that, if the application made under Section 256(2) of the Act is allowed, the complaint will be treated as pending and the Income-tax Officer will be entitled to revive the complaint. Again, in the decision in D.N. Bhasin v. Union of India , on the basis of the decision of the Commissioner of Income-tax (Appeals) in favour of the assessee, criminal proceedings pending against the assessee were quashed, providing that in case the order of the Commissioner of Income-tax (Appeals) is set aside, the Revenue will be entitled to file fresh complaints. The said view is in accordance with the decision of this court in Criminal M. C. No. 1047 of 1991. The Revenue has not yet filed any reference under Section 256(2) of the Act. In view of the fact that, so long as the decision of the Tribunal is in force, the criminal court cannot come to a contrary conclusion, as the effect of the decision of the Tribunal is to take away the very basis of the prosecution, the prosecution is liable to be quashed safeguarding the right of the Revenue to file a fresh complaint in case the order of the Tribunal is set aside consequent upon the decision under Section 256(2) of the Act. Therefore, annexure-I complaint is quashed without prejudice to the rights of the respondent to file a fresh complaint if the order of the Tribunal is set aside consequent upon an order under Section 256(2) of the Act.
8. In the result, the Criminal M. C. is allowed as indicated above.