TaxTMI 
TaxTMI 
2006 (11) TMI 185
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....son" fails to pay to the credit of the Central Government, the tax deducted at source by him then he is, by virtue of section 276B, punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine. The reference to "person" in section 276B is with regard to the requirement of such person to pay to the credit of the Central Government the tax deducted at source collected by him. Section 192, which falls under Chapter XVII-B, relates to tax deducted at source in respect of income-tax chargeable under the head "Salaries". There are other similar provisions in respect of dividends (section 194), rent (section 194-I) and other such provisions for different kind of payments. In all these provisions, the reference is to "a person responsible for paying". This expression is defined in section 204 which also falls under Chapter XVII-B as under : "204. For the purposes of the foregoing provisions of this Chapter and section 285, the expression 'person responsible for paying' means- (i) in the case of payments of income chargeable under the head 'Salaries', other than payments by the Central Government or the Gover....
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....al officer thereof ;" 5. Consequently, relying upon section 2(35)(b), learned counsel for the petitioners submitted, only that person can be regarded as a principal officer who is not only connected with the management or the administration of the company but upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof.Learned counsel for the petitioners pointed out that no such notice has been served on the petitioners indicating the Assessing Officer's intention of treating any one or more of them as the principal officer(s) thereof. He referred to the decision of the Madras High Court in the case of ITO v. Roshni Cold Storage P. Ltd. [2000] 245 ITR 322 as well as to the Punjab and Haryana High Court decision in Greatway P. Ltd. v. Asst. CIT [1993] 199 ITR 391. Learned counsel for the petitioners referred to the following passages contained in the decision of the Madras High Court to submit that unless and until the mandatory notice under section 2(35)(b) of the Income-tax Act is served on a person, he cannot be prosecuted merely because he happens to be a director (page 328) : "Ground No. 1 : The statutory notice as requ....
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....ct, 1975, does not alter or take away the mandatory requirement of issuing notice as contemplated under section 2(35)(b) for an offence under section 276B. While inserting section 278B, no corresponding changes have been introduced either under section 2(35)(b) or under section 204(iii) of the Income-tax Act, 1961. Thus, such a statutory notice as contemplated under section 2(35)(b) is mandatory only for offence under section 276B in view of the meaning of 'person responsible for paying', 'if the payer is a company, the company itself including the principal officer thereof' in section 204(iii). For other offences under the Income-tax Act, 1961, such as under sections 276C, 277, 276CC, etc., such a notice as contemplated under section 2(35)(b) to either the managing director or director is not necessary as there was no expression akin to the expression used in section 204 in any of the provisions related to those offences under sections 276C, 276CC, 277, etc. This position is made clear in the decision reported in Geethanjali Mills Ltd. v. V. Thiruvengadathan [1989] 179 ITR 558 (Mad), wherein, his Lordship, after taking note of the ruling rendered in M. R. Pratap v. V. M. Mut....
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.... the principal officer as defined in section 2(35) of the Act. The prosecution of the persons other than the petitioner-company, would, thus, be bad on this short ground alone.' In view of the above three rulings, the prosecution of the managing director and other directors without issuing notice under section 2(35)(b) is bad in law." 6. On the other hand, learned counsel for the respondent submitted that the present petition is at the stage after the summoning order has been passed and in such a case no notice asking the petitioners to show cause is necessary. He submits that the provisions of section 2(35)(b) of the Income-tax Act would have applicability only in the cases of regular assessments. He also submitted that notice to show cause was, in fact, issued on December 12, 2004, asking the company to explain by December 27, 2004, which the company failed to do. A reply was filed on January 17, 2005, without giving an appropriate answer and that is the reason why the prosecution was launched. It is the contention of learned counsel for the respondent that they shall establish before the court as to who are the persons responsible and who are the principal of....