2001 (10) TMI 24 - HC - Income Tax

Offences And Prosecution Liability Of Directors - Section 278B(1) which deals with the vicarious liability of directors etc. says that where an offence under the Act is committed by a company every person who at the time of commission of offence was in charge and responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and liable to be proceeded against. At this stage what is to be seen is whether the allegations made in the complaint and/or the statements of witnesses recorded in support thereof taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of the offence which is alleged against the accused (see Municipal Corporation of Delhi v. Ram Kishan Rohtagi and State of Haryana v. Ch. Bhajan Lal, ). Considering the allegations made in the aforesaid para. 3 and the statement of PW-1 this complaint qua the petitioner cannot be legally quashed under section 482 of the Code of Criminal Procedure. The non-joining of remaining nine directors in the complaint as accused has no relevance whatsoever at this stage. The petition in regard to prayer (c) thus deserves to be dismissed being without any merit

Summary

Issues:
1. Petition filed under section 482 of the Code of Criminal Procedure seeking various reliefs.
2. Allegations of vicarious liability of a director under section 276CC read with section 278B of the Income-tax Act.
3. Legal challenge to the complaint and proceedings against the petitioner.

Analysis:
1. The petitioner filed a petition under section 482 of the Code of Criminal Procedure seeking relief, including staying the operation of certain orders and quashing the complaint and proceedings against them. The prayers related to non-bailable warrants and processes under sections 82 and 83 of the Code of Criminal Procedure were not pressed during arguments.

2. The complaint alleged the petitioner's involvement in an offense under section 276CC read with section 278B of the Income-tax Act. The petitioner argued that criminal liability could not be imposed on them as they were not actively involved in the management of the company and had resigned as a director before the relevant period. The complaint only named the petitioner and another individual as accused, despite the company having multiple directors.

3. The court examined the provisions of section 278B(1) of the Income-tax Act, which establishes vicarious liability for directors in certain circumstances. The court considered whether the complaint and witness statements supported the allegations against the petitioner. It was noted that the complaint implicated the petitioner as being in charge of the company's affairs during the relevant period. The court cited precedents to emphasize that the complaint should not be quashed if it discloses essential elements of the offense.

4. Ultimately, the court found that the allegations in the complaint, along with the witness statement, were sufficient to establish a prima facie case against the petitioner. The court concluded that the petition lacked merit and dismissed it. The legal challenge to the complaint and proceedings against the petitioner was rejected, and the petition was dismissed.