do you think i can be prosecuted simply because I did not touch out properly. I had more than enough credit on my oster
The problem isn't just that you didn't touch out properly. It's that you didn't let the system know you'd travelled to Zone 3.
If you told him you have a 4-5 travelcard, he should know that the amount of credit on the Oyster won't make any difference to the main fact:
If you don't touch out, the system won't charge you for the Zone 4 to Zone 3 part. That's because the travelcard enables you to end a journey at a Zone 4 or 5 station without touching out. If you don't touch out, the system assumes you kept to those zones.
Whether they'll prosecute for it is a different matter. Perhaps it's difficult to speculate as these things may hinge, rightly or wrongly, on staff perceptions.