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2019 (10) TMI 1532 - HC - Income TaxCriminal liability u/s 278B of the Income Tax - Whether Non-Executive nominee directors of the first accused company are criminally liable to be prosecuted for an offence involving non-remittance of the TDS amount? - scope of Section 141 of the Negotiable Instruments Act, 1881 - HELD THAT:- As the Proviso to Sec.141 of NI Act explicitly exempt those who are not liable for criminal prosecution, Sec.278B of the Income tax does not provide it. That, in the opinion of the Court, does not make any real difference in understanding the provision, for the operative portion of both the provisions in both the enactments themselves provide such necessary factors as would be sufficient to identify those who are liable for criminal prosecution. To repeat they both read-“Those who are in charge of, or responsible to the business”. Ultimately, if a nominee Directors of a financial institution, or shareholders of a company have a duty to, or responsibility to be, in charge of the affairs of the company, depends on the terms of contract or any legal provisions on the basis of which such nominee director came to be nominated. This cannot be left to any unfounded belief of the Complainant, or to his random statement that a nominee director is the Principal Officer of the company. In Madhumilan Syntex case [2007 (3) TMI 670 - SUPREME COURT] a case where the accused, who are the Directors of the company (and not Nominee directors) approached the Court seeking to exclude them from criminal prosecution under sec.278B of the I.T. Act, for an offence of non remitting the TDS (exactly the same offence for which the petitioners herein are sought to be prosecuted), the Honble Supreme Court declined to grant relief to the Directors of the company, because they happened to be Directors, and proceeded to hold that their actual role via-a-vis, the company is a matter for trial. As indicated earlier, that was a case involving the Directors of the company, and not Nominee Directors. This court has little hesitation to conclude that there is nothing in the complaint, that the petitioners, even as Nominee Directors were in charge of the affairs of the companym and consequently they cannot be made liable to face criminal prosecution. In the result, this Court allows all the petitions and quashes the complaints pending on the file of Judicial Magistrate Court, Trichy, only as against the petitioners.
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