The assessee-company and its directors were facing criminal prosecution for wilful attempt to evade tax under sections 276C, 277, 278B and 278E. The prosecution was initiated after the Assessing Officer had imposed a penalty for concealment of income under section 271(1)(c). In parallel proceedings, the Tribunal deleted this penalty, and its order attained finality as the revenue did not appeal against it. The High Court held that the criminal prosecution could not be sustained. It observed that as per settled law, notably the Supreme Court’s decision in K.C. Builders v. ACIT  (2004) 135 Taxman 461/ 265 IT R 562 (SC). Once the penalty which forms the very basis for a criminal prosecution is cancelled, the prosecution itself becomes untenable. Since the finding of concealment was struck down by the Tribunal, continuing with the criminal trial on the same set of facts would be an abuse of the process of law and an empty formality. Accordingly, the criminal complaint and all consequent proceedings were quashed. (AY. 2009-10)