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1995 DIGILAW 341 (CAL)

J. TEWARI v. UNION OF INDIA

1995-09-03

SATYA NARAYAN CHAKRABARTY

body1995
S. N. CHAKRABARTY, J. ( 1 ) CRIMINAL Revision No. 1287 of 1994 is directed against an order dated 21. 3. 1994 passed by a Metropolitan Magistrate in case no. 0/992/90 under section 276b, and 276b read with 278b on the Income Tax Act, 1961, whereby the learned Magistrate directed that the case be proceeded against the Secretary-accused petitioner so. 2 only as the case did not lie against accused no. 1 Company a juristic person. ( 2 ) DEPUTY Commissioner of Income Tax, Special Range 15, Calcutta filed a petition of complaint against (1) M/s. Chem Crown India Limited and (2) J. Tewari, the Secretary of the Company, in which it was alleged that the Company filed its return of income on 31. 7. 1987 for the Assessment Year 1987-88 and while scrutinizing the details filed by the Company along with the return it was observed from a perusal of Annexure-XVI of the Tax Audit Report dated 28. 7. 1987 that a tax of Rs. 85,045. 00 was deducted under section 194a of the Income Tax Act, 1961 from the interest paid to the loan creditor viz. , M/s. IND Mark Services (P) Ltd. , on 31. 3. 1987, but the tax so deducted appears not to have been deposited to Central Government Account within the statutory prescribed time i. e. within 31. 5. 1987 as provided under Section 200 of the Income Tax Act, 1961 read with Rule-30 of the Income Tax Rules, 1962. ( 3 ) IT is, therefore, alleged that the Company amused no. 1 having failed to pay the tax deducted to the credit of the Central Government, it committed an offence punishable under Section 276b of the Income Tax Act, 1961 and the accused no. 2 being in-charge of and responsible for the conduct of the business of Company during the material time has committed an offence punishable under Section 276b read with section 278b of the Income Tax Act, 1961 and he has also been treated as principal officer of the company by issuing notice on him. ( 4 ) BEFORE the Lower Court, the learned Advocate for the complainant conceded that as the principal offender Company being a juristic person cannot be subjected to imprisonment, the accused no. 2 cannot also be held liable vicariously. ( 4 ) BEFORE the Lower Court, the learned Advocate for the complainant conceded that as the principal offender Company being a juristic person cannot be subjected to imprisonment, the accused no. 2 cannot also be held liable vicariously. The learned Magistrate, however, on a perusal of the petition of complaint held in agreement with the arguments advanced by the learned Advocates of both sides relying upon the decisions reported in 1989 CF. L. R. Calculus, 171, 1992 Vol. 1 CHN 299 and 1980 Vol. 1 CHN 326 that as substantive sentence of imprisonment cannot be imposed on the accused Company, being a juristic person, it will be an abuse of process of the Court, if such proceeding is continued against the Company and accordingly he found that the case does not lie against the accused no. 1. As regards, accused no. 2, the learned Magistrate seeing that the. accused was treated as `principal officer', and proper notice under section 2 (35) (b) of the Income Tax Act being served upon him held that the proceeding was maintainable against the accused no. 2. ( 5 ) THE learned Counsel for the petitioner relying upon a Single Bench decision of this Court by A. K. Chatterjee, 3 reported in 1992 (11) CHN Page 434 M/s, Shyam Lal Dey Housing Industries (Pvt.) Ltd. and others, v. Sidheswnr Bhusan Puttenda, a Division Bench decision reported in 1991 (17) CHN Page 48 Prakash Chand Jain v. State of West Bengal and another, 1980 (H) CHN Page 326 (Division Bench); 1989 Cr. L. R. (Calcutta) Page 171 ; AIR 1971 ; SC 447 (State of Madras v. C. V. Parekh) and AIR 1984 SC Page 620 tried to argue that the accused no. 2 being made liable vicariously and the principal accused No. t Company being discharged by the Magistrate, the question of liability of accused no. 2 as the person in-charge of the Company does not arise and he cannot be prosecuted. He, further, submitted that the unreported decision by the Division Bench comprising of Mr. Justice A. K. Chatterjee and Mr. Justice S. N. Chakrabarty in M/s. Kanoi Udyog and others rendered on 28. 9. 94 has no binding effect as it is a judgment silencio is as-much-as the Division Bench did not consider and discuss the previous Single Bench decision reported in 1992 (11) CHN Page 434 and the aforesaid decisions. Justice A. K. Chatterjee and Mr. Justice S. N. Chakrabarty in M/s. Kanoi Udyog and others rendered on 28. 9. 94 has no binding effect as it is a judgment silencio is as-much-as the Division Bench did not consider and discuss the previous Single Bench decision reported in 1992 (11) CHN Page 434 and the aforesaid decisions. The learned Counsel on behalf of the State on the other hand submitted that all these decisions were considered by the Division Bench and these decisions do not absolve accused no. 2 of his liability, as argued. He further submitted that the accused Company was not acquitted by the Magistrate on merits and accordingly it cannot be argued by the other side that as the Company has been acquitted, no responsibility can be imposed on the accused no. 2 Secretary. He, further, submitted that the Single Bench decisions reported in 1992 (II) CHN Page 434 has no value after the Division Bench decision in M/s. Kanoi Udyog and others. Basing on AIR 1984 SC Page 620, 1994 Cr. L. J Vol. 100, Page 628 and the unreported decision of the Division Bench he sub-, milted that the accused no. 2 Secretary is also independently liable. ( 6 ) I have considered the submissions of the learned Counsels of both sides and also the rulings referred to as well as the relevant provisions of the Income Tax Act. The alleged offence is punishable with compulsory imprisonment and fine. In this case the assessee Company (accused no 1) cannot be sent to prison in view of the peculiar penal provision, the learned Magistrate discharged it saying that it will be an abuse of the process of the Court if the proceedings against the Company are continued, but that does not mean that the Company cannot commit an offence. The Company was not acquitted on merits after evidence but it was discharged under section 245 (2) Cr. P. C. before evidence and there is allegation, that the contravention was by the Company. Accordingly, it cannot be said at this stage that the Company did not commit the alleged offence by contravening the provisions of section 276b of the Income Tax Act, the language of which does not involve any mens rea as far as Company is concerned. P. C. before evidence and there is allegation, that the contravention was by the Company. Accordingly, it cannot be said at this stage that the Company did not commit the alleged offence by contravening the provisions of section 276b of the Income Tax Act, the language of which does not involve any mens rea as far as Company is concerned. We have, however, pointed out in the unreported decision in M/s. Kanoi Udyog and others that the rule of evidence embodied in section 278e of the Act regarding presumption of culpability on the part of the accused does not differentiate between a natural person and a juristic person and the Court will presume the existence of the culpable state of mind unless the accused proves to the contrary. It has been clearly stated by the Supreme Court 'in the decision reported in 1984 SC Page 620 that it cannot be said that if it is alleged that the person contravening the provision is a company, the prosecution of the person in- charge or an officer of the company is precluded, unless the company itself is prosecuted. The only condition precedent for such prosecution is that there should be a fording that the contravention was by the company and it is not necessary that the person in-charge or the officer of the company should also be arraigned with the company and prosecuted. The Supreme Court thus amplified the matter while clearing misunderstanding in the submission made before it on behalf of the petitioner at the time of construction of the analogues provisions of Section 10 of the Essential Commodities Act. The unreported Division Bench decision of this Court to which J am a party, certainly superseded the Single Bench decision by Hon'ble Justice A. K. Chatterjee. As far as the Division Bench decision reported in 1991 (II) CHN Page 48 is concerned it relates to an infringement of the provision of the Prevention of Food Adulteration Act and has no application to the facts of the present case and thus it cannot be argued on behalf of the petitioner that the commission of offence by the company not being proved the commission of offence by its employee viz. , the Secretary also fails in view of the clear decision of the Apex Court in AIR 1984 SC ( 7 ) THE definition of the word "person" in section 2 (31) of the Income Tax Act, 1961 includes a Company, but it does not exclude the 'principal officer' which has been defined under section 2 (35) of the Income Tax Act as meaning the Secretary or any person connected with the management or administration of the Company upon whom the Income Tax Officer has served notice of his intention of treating him as the principal officer thereof. Here the Secretary has been notified by the Income Tax Officer of his intention to be treated as a principal, officer of the Company. The word "person" in Section 2768 of the Income Tax Act, includes the principal officer and he is also independently and primarily liable. In this case from the interest paid to the loan creditor, the tax was deducted under Section 194a of the Income Tax Act, but the same was not paid to the credit of the Central Government under section 200 of the Act, by the Company Secretary through whose instrumentality the Company acted and the word "person" referred to in this section includes the principal officer of the Company, i. e. the Secretary, besides the Company being also responsible for paying as laid down in section 204. It has also been held by the Apex Court in 1994 Cr. L. J. Page 628 that by the introduction of section 278b of the I. T. Act with effect from 1. 10. 75, it has been enacted that where an offence under this Act, has been committed by the Company, every person who, at the time the offence was committed, was in charge of, and was responsible, to the Company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. ( 8 ) IT is, therefore, clear that everybody mentioned in this Section including the Company shall be liable for the offence committed by the Company, and proceeded against. ( 9 ) THIS revision accordingly fails. The interim order of stay of proceedings of the Court below granted on 6. 7. 94 is vacated. ( 8 ) IT is, therefore, clear that everybody mentioned in this Section including the Company shall be liable for the offence committed by the Company, and proceeded against. ( 9 ) THIS revision accordingly fails. The interim order of stay of proceedings of the Court below granted on 6. 7. 94 is vacated. The learned Court below will dispose of the proceedings before it as early as possible. Revision rejected.