Telangana High Court
Sudhir Sanghi, Hyderabad., vs Dy.Commissioner Of Income Tax, ... on 22 September, 2023
Bench: K.Surender
THE HONOURABLE SRI JUSTICE K.SURENDER
CRIMINAL PETITION Nos.8634 & 12664 OF 2016
COMMON ORDER:
1.
Criminal Petition No.8364 of 2016 is filed by the
petitioners/A1 and A2 and Criminal Petition No.12664 of 2016 is
filed by the petitioner/A3 to quash the proceedings in C.C.No.108
of 2016 on the file of Special Judge for Economic Offences,
Nampally, Hyderabad. Both petitions are heard together and
disposed by way of this Common Order.
2. The petitioners are arrayed as A1 to A3 in the complaint filed
by the Deputy Commissioner of Income Tax, Circle-3(1). The
offence alleged is under Section 276-C(2) & 278-B of the Income
Tax Act, 1961.
3. In the complaint filed, it is alleged that A1 is Limited
company, A2 and A3 are its Directors. A1/company filed return of
income tax for the assessment year 2010-11 on 20.09.2010
determining its net aggregate liability at Rs.2,56,03,810/-. The
returns were filed without payment of tax. The Assistant
Commissioner of Income Tax issued notices on 21.01.2011 under
Section 221(1) and 140A of Income Tax Act, 1961 to the accused
for non payment of self assessment tax as filed by the accused.
4. In response to the notice, reply was given stating that the
company was in financial crisis and time was sought for payment
of tax. The Assistant Commissioner, Income Tax passed penalty
imposing an amount of Rs.64,00,953/-. Aggrieved by the order,
appeal was filed before the CIT (A) and the penalty was restricted to
Rs.10.00 lakhs. The decision of CIT-A was challenged which is
pending adjudication before the ITAT.
5. Learned Senior Counsel appearing for the petitioners would
submit that the entire amount of tax was in fact was paid even
prior to 14.03.2011. The complaint in question was filed on
29.03.2016. Further, petitioner/A3 was non-executive promoter.
He resigned as Director from 17.12.2011. The petitioner/A3 being a
non-executive Director, was not responsible for the day to day
management of the company.
6. On the other hand, learned counsel appearing for the Income
Tax Department would submit that these are questions of fact
which can only be decided during trial. Accordingly, prayed to
dismiss the petitions.
7. The offence alleged is under Section 276-C(2) of the Income
Tax Act, 1961. If any person willfully attempts in any manner
whatsoever to affect the payment of tax, penalty or interest under
the Act, he shall be punishable with rigorous imprisonment for a
term which shall not be less than three months but which may
extend to two years and shall also liable to fine. .
8. Section 278-B of the Income Tax Act, 1961 deals with the
offences by Companies. When the offence is committed by the
company, every person who at the time of commission of offence
was in-charge and was responsible for conducting business of the
company as well as the company shall be deemed to be guilty of the
offence and shall be liable for punishment.
9. The petitioner/A3 is roped in by way of vicarious liability. In
the complaint, it is not stated as to how this petitioner was
responsible for the day today affairs of the company. The twin
requirement for making a person responsible by way of vicarious
liability is that i) a person should have been responsible for
conduct of the business of the company; ii) and company as a
whole. Unless both the ingredients are satisfied, a person cannot be
roped in to face criminal prosecution.
10. The Hon'ble Supreme Court in the case of Sunil Bharti
Mittal v. Central Bureau of Investigation 1 held that a Director or
Managing Director or Chairman of the company could be made
accused along with the company only if there is sufficient material
to prove his active role coupled with criminal intent.
11. As seen from the record, which are annual report for the
years 2009-2010, 2010-2011 and 2011-2012 of A1 company,
petitioner/A3 was shown as the promoter and non-executive
Director. Further, the day today management of the company was
conducted by the Vice-Chairman and Managing Director.
12. In the absence of any specific allegation in the complaint that
petitioner/A3 was responsible for the filing of the returns without
payment and was responsible for day to day basis for the conduct
of the business and supervision of the affairs of the company, the
petitioner/A3 cannot be criminally proceeded with for the violation
of the said provisions under the Act.
13. Learned Senior Counsel relied on the judgments; i) judgment
in Criminal Miscellaneous No.36697 of 2007, dated 03.12.2009 of
(2015) 4 SCC 609
High Court of Patna; ii) Judgment in Criminal O.P (MD) No.13383
of 2019 and Crl.M.P.(MD) Nos.8303 and 8304 of 2019 dated
12.03.2020; iii) judgment of Gujarat High Court in the case of
Vinaychandra Chandulal Shah v. State of Gujarat (1995 213 ITR
307 Guj) and iv) order of the Income Tax Appellate Tribunal in ITA
Nos.122 & 834/HYD/2016, dated 01.10.2019.
14. In all the judgments, it was found that unless the prosecution
establishes that the returns were filed with an intention to evade
tax, proceedings cannot be continued.
15. In the present case, the entire tax liable was paid before
14.03.2011, even prior to lodging of the complaint on 28.03.2011.
The said payment is not disputed by the prosecution. Sub-section
2 of Section 276C would be attracted only when a person willfully
attempts in any manner whatsoever to evade the payment of any
tax, penalty or interest under the Act and not otherwise. In view of
the payment being made by the petitioners even before the lodging
the complaint after receiving the notice, it cannot be said that there
was any willful evasion. Further, the tax was accepted by the
department without any reservation.
16. In the result, the proceedings against petitioners/A1 to A3 in
C.C.No.108 of 2016 on the file of Special Judge for Economic
Offences, Nampally, Hyderabad, are hereby quashed.
17. Accordingly, both the Criminal Petitions are allowed.
Consequently, miscellaneous applications pending, if any, shall
stand closed.
__________________
K.SURENDER, J
Date:22.09.2023
kvs
THE HON'BLE SRI JUSTICE K.SURENDER
CRIMINAL PETITION No.8634 & 12264 OF 2016
Dt. 22.09.2023
kvs
