TMI Blog2014 (9) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... as the complaint clearly stated that they were being treated as principal officers of the company - Even otherwise for the purpose of Section 278 B of the IT Act, once the offence is shown to have been committed by the company, then the liability of the directors in charge of its affairs is attracted - The burden then shifts to such directors to show that the offence occurred without their knowledge or that they had exercised all due diligence to prevent the commission of such offence – both the Courts erred in acquitting the directors of the company only because they were not issued separate notices It is seen that both directors have signed the Company”s balance sheets. Their defence that they were not in charge of the affairs of the company is, therefore, untenable. - Decided in favour of revenue. - CRL.L.P. 241 of 2012, CRL.L.P. 243 of 2012, CRL.L.P. 242 of 2012 - - - Dated:- 23-9-2014 - Justice S. Muralidhar,JJ. For the Petitioner : Mr. P. Roy Chaudhuri with Mr. Rohit Madan, Advocates. For the Respondents : Mr. Jeevesh Mehta with Mr. Kapil Gulati, Advocates for R-2. Proxy counsel for Mr. P.K. Sharma, Advocate for R-1. ORDER 1. These petitions raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were allowed and their convictions were set aside. 6. As regards the AY 1982-83 the learned Additional Chief Metropolitan Magistrate ( ACMM ) has by an order dated 3rd December 2011 in CC No. 7/4/09 acquitted A-2 and A-3 while convicting the company (A-1) for the offence under Section 276-B of the IT Act and by an order of the same date the company (A-1) was sentenced to pay a fine of ₹ 50,000. Aggrieved by the aforementioned orders dated 24th September 2011 of the learned ASJ and order 3rd December 2011 of the learned ACMM, the ITD has filed the present appeals. 7. The main ground on which A-2 and A-3 were acquitted is that the SCNs issued by the ITD were only to the principal officer of the company and not to the individual directors, i.e., A-2 and A-3. In both the impugned judgments, reliance has been placed on the decision of this Court in Income Tax Officer v. Delhi Iron Works (P) Ltd. 2010 (175) DLT 495. Before the learned DJ-ASJ the ITD had also placed reliance on the decision of the Division Bench of the Madras High Court in Income Tax Officer v. Dinesh Kumar Shah (1997) 223 ITR 68. However, following the decision in Premwati v. Raghubans 1992 RLR 223 the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill-founded or not maintainable. 45. It was argued that a separate notice and/or communication ought to have been issued before issuance of show cause notice under Section 276B read with Section 278B of the Act that the Directors were to be treated as Principal Officers under the Act. In our opinion, however, no such independent and separate notice is necessary and when in the show cause notice it was stated that the Directors were to be considered as Principal Officers under the Act and a complaint was filed, such complaint is entertainable by a Court provided it is otherwise maintainable. 10. As far as the present case is concerned, in the complaint filed before the learned ACMM it is stated by the ITD as under: 1. That the Complainant is an Inspecting Assistant Commissioner of Income Tax (Assessment) In Charge of the assessment of Accused No. 1 which is a private limited company. Accused Nos. 2, 3 and 4 are the Directors/Principal Officer of the said company and were in charge and responsible to Accused No. 1 for the conduct of its business at the time when the offence, which is the subject matter of this complaint, was committed. The Complainant has been authorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h offence. (2) Notwithstanding anything contained in sub- section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purposes of this section,- (a) company means a body corporate, and includes- (i) a firm; and (ii) an association of persons or a body of individuals whether incorporated or not; and (b) director', in relation to- (i) a firm, means a partner in the firm; (ii) any association of persons or a body of individuals, means any member controlling the affairs thereof 13. Section 278 B of IT Act makes the directors of the company in charge of its affairs liable for the offence committed by it unless the presumption is able to be rebutted by such director. This explains why the Supreme Court in Madhumilan Syntex Limited (supra) expressly rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. 17. Accordingly, this Court sets aside the impugned judgment dated 24th September 2011 of the learned DJ ASJ and the impugned judgment dated 3rd December 2011 of the learned ACMM and convicts the Respondents, i.e., A-2 and A-3 for the offence under Section 276 B of the IT Act for the aforementioned three assessment years. 18. The punishment for the offence under Section 276 B of the IT Act is a minimum sentence of three months rigorous imprisonment with fine. Considering that these matters pertain to AYs 1982-83 to 1984-85 and given the long pendency of matters, the Court is of the view that A-2 and A-3 should be given the benefit of probation. 19. Accordingly, while sentencing A-2 and A-3 to pay a fine of ₹ 50,000 each for the offence under Section 276 B IT Act for each of the AYs, and in default to undergo simple imprisonment for seven days, the Court grants both A-2 and A-3 the benefit of probation and directs each of them to file bond of good behaviour in the trial Court in the sum of ₹ 10,000 each for the period of six months. 20. The appeals are disposed of in the above terms. The trial Court record along with a certified copy of this order be del ..... X X X X Extracts X X X X X X X X Extracts X X X X
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