1992 (3) TMI 27 - HC - Income Tax

Summary

Issues:
1. Whether partners of a firm can be held liable for offences under sections 276C and 277 of the Income-tax Act, 1961 if they are not in charge of or responsible for the conduct of the business of the firm.

Analysis:

The case involved a complaint filed against a firm and its partners for offences under sections 276C and 277 of the Income-tax Act, 1961. The trial court allowed an application by some partners to drop proceedings against them, stating they were not responsible for the firm's conduct. The Additional Sessions judge overturned this decision, suggesting that liability of partners needed to be determined based on evidence. The revision petition was filed by accused partners seeking relief from the Additional Sessions judge's order.

During the hearing, it was argued that partners not in charge of the firm's business cannot be held liable for the mentioned offences. The respondent contended that the partners, by sharing profits, were abetting the filing of a false return. However, it was emphasized that the petitioners had not prepared any false records, signed, or verified the return. The judge referred to relevant cases to support the argument that partners not involved in the conduct of the business cannot be prosecuted under the Act.

The judge highlighted that the complaint did not allege the partners' involvement in submitting a false return or any willful attempt to evade tax. Consequently, the judge concluded that the trial court's decision to discharge the partners was not premature. The revision petition was accepted, the Additional Sessions judge's order was set aside, and the trial court's decision was restored.

In conclusion, the judgment clarified that partners of a firm cannot be held liable for offences under the Income-tax Act if they are not in charge of or responsible for the firm's business conduct. The decision emphasized the importance of specific allegations and evidence to establish liability in such cases.