2011 (11) TMI 671 - HC - Income Tax

Issues Involved:
1. Delay in filing the petition.
2. Validity of the complaint u/s 276CC of the Income Tax Act, 1961.
3. Responsibility of directors under Section 140(c) of the Income Tax Act, 1961.
4. Applicability of the Central Board of Direct Taxes circular dated 07.02.1991.

Summary:

1. Delay in filing the petition:

For the reasons explained, delay of 125 days is condoned. Criminal M.A. stands disposed of.

2. Validity of the complaint u/s 276CC of the Income Tax Act, 1961:

Vide the instant petition, the petitioner has assailed the order dated 10.05.2010 and 02.11.2010 passed by learned ACMM; New Delhi. The respondent No.1 filed a complaint case under Section 276 CC of the Income Tax Act, 1961 for the assessment year 1981-82 against both the petitioners besides two other accused persons. The allegations against the accused persons are that they were in charge of and responsible to the company for the conduct of its day-to-day business.

3. Responsibility of directors under Section 140(c) of the Income Tax Act, 1961:

Mr.Sanjeev Sachdeva, learned Senior Advocate for the petitioners, submits that as per the provisions of Section 140(c) of the Income Tax Act, 1961, it is the managing director of the company who is responsible for signing of the returns to be filed under Section 139 of the Income Tax Act, 1961. He further argues that both petitioners are the sons of the managing director, and the liability to file the return is of the managing director. If the managing director fails to file the return, he only can be held liable under Section 140 of the Income Tax Act, 1961.

4. Applicability of the Central Board of Direct Taxes circular dated 07.02.1991:

Mr.Sanjiv Rajpal, learned Senior Standing Counsel for Income Tax/respondent No.1, submits that the complaint case against the petitioners was filed way back in the year 1990, and the summons were issued vide order dated 14.09.1990. He concedes that as on the date of filing the complaint, respondent No.3, Shri S. N. Bhatia, was above the age of 70 years, and as per the circular dated 07.02.1991 issued by Central Board of Direct Taxes, no prosecution can be initiated against a person who is above the age of 70 years.

Judgment:

Admittedly, the petitioners were and are directors of the company. Under Section 140 of the Income Tax Act, 1961, only the managing director of the company is responsible. The managing director was fully capable of filing the income tax return. The petitioners were not under obligation to file the return. Therefore, the complaint filed under Section 276CC of the Income Tax Act, 1961 against the petitioners is bad in law. Due to the reasons and law discussed above, the orders dated 10.05.2010 and 02.11.2010 passed by learned Trial Court are liable to be set-aside. Keeping the circular dated 07.02.1991 issued by Central Board of Direct Taxes into view, the complaint against the respondent No.3 is liable to be rejected. Consequently, in the interest of justice, the complaint case filed by respondent No.1 under Section 276 CC of the Income Tax Act, 1961 against the petitioners and respondent No.3, pending adjudication before the Trial Court is rejected and they are discharged from all the charges. Consequently, orders dated 10.05.2010 and 02.11.2010 are hereby set-aside. Accordingly, Criminal Revision Petition 36/2011 stands allowed. In view of above order, Criminal M.A.754/2011 for stay of proceedings renders infructuous and stands disposed of as such. No order as to costs.

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