2005 (3) TMI 39 - HC - Income Tax

Offence and Prosecution - discharging the accused - ITO, has filed the instant petition under section 482 of the Criminal Procedure Code, for setting aside the order passed by the Sessions Judge whereby the revision petition filed by the petitioner against the order of the Chief Judicial Magistrate has been dismissed. - no interference is required in the impugned order, particularly when the order of discharge was affirmed in revision by the Court of Sessions. Though this petition has been filed under section 482 of the Criminal Procedure Code, in substance it is a second revision against the order of discharge which is barred under section 397(2) of the Criminal Procedure Code. The provisions of section 397(2) of the Criminal Procedure Code cannot be circumvented merely by filing the petition under section 482 of the Criminal Procedure Code. On the merits also, in held that in the absence of pleading in the complaint about the involvement of the respondents and about their responsibility for the conduct of the business, the discharge order passed by the trial court on the said ground cannot be said to be unjustified

Summary

Issues:
1. Dismissal of revision petition against the order of the Chief Judicial Magistrate.
2. Allegations against the respondent-firm regarding tax deductions.
3. Legal requirements for prosecuting partners of a firm under the Income-tax Act.
4. Discharge of accused partners by the trial court and subsequent dismissal of the revision petition.
5. Applicability of Criminal Procedure Code provisions in the case.

Issue 1:
The High Court addressed the dismissal of the revision petition filed by the Income-tax Officer against the order of the Chief Judicial Magistrate. The complaint filed by the petitioner accused 17 partners of a firm under sections 276B and 278B of the Income-tax Act, alleging failure to deduct tax at source. The trial court concluded that there was insufficient evidence to convict the accused partners, leading to their discharge.

Issue 2:
The complaint alleged that the respondent-firm failed to deduct tax at source on an amount credited as carrying charges, resulting in penalty proceedings. The trial court emphasized the necessity of proving that the partners were in charge of and responsible for the firm's business conduct to convict them under section 278B. The court cited a Madras High Court decision to support the requirement of serving notice to partners before prosecution.

Issue 3:
The trial court based its decision on the premise that partners cannot be considered principal officers without proper notice under the Income-tax Act. It also highlighted the importance of averring that the partners were responsible for the firm's business conduct in the complaint. The court referred to legal precedents to establish the legal requirements for vicarious prosecution under section 278B.

Issue 4:
The Sessions Judge upheld the trial court's decision to discharge the accused partners, citing the lack of specific allegations in the complaint regarding their roles in the firm's affairs. The petitioner argued that partners could be prosecuted without separate notice, but the court maintained that the discharge was justified based on the absence of evidence implicating the partners in the firm's tax-related offenses.

Issue 5:
The High Court dismissed the petition, noting that it essentially constituted a second revision petition, which is barred under the Criminal Procedure Code. The court emphasized that the provisions of the Code cannot be circumvented by filing the petition under a different section. Additionally, the court highlighted the importance of providing notice before prosecuting individuals under the Income-tax Act, as established by legal precedents cited in the judgment.

In conclusion, the High Court upheld the decisions of the lower courts, emphasizing the legal requirements for prosecuting partners of a firm under the Income-tax Act and highlighting the significance of following procedural norms outlined in the Criminal Procedure Code.