1997 (3) TMI 79 - HC - Income Tax

Central Government, Criminal Proceedings, High Court, Offences And Prosecution, Tax At Source

Issues Involved:
1. Maintainability of the criminal proceedings under sections 276B and 278B of the Income-tax Act, 1961.
2. Whether the partners of the dissolved firm can be held responsible for non-payment of tax deducted at source.
3. The scope of writ jurisdiction in quashing criminal proceedings.
4. Whether the complaint disclosed the essential ingredients of the offence.
5. The applicability of the principles laid down by the Supreme Court in quashing criminal proceedings.

Issue-wise Detailed Analysis:

1. Maintainability of the criminal proceedings under sections 276B and 278B of the Income-tax Act, 1961:
The appellants challenged the institution of Criminal Case No. C/284/93 under sections 276B and 278B of the Income-tax Act, 1961, arguing that the criminal proceedings were not maintainable. They contended that the firm had credited interest payable to creditors but failed to deduct and deposit the tax due to financial difficulties. However, the tax was subsequently paid. The court found that the complaint did disclose an offence as it stated that the firm had failed to deduct and deposit the tax within the stipulated time, thus prima facie constituting an offence under the charging sections.

2. Whether the partners of the dissolved firm can be held responsible for non-payment of tax deducted at source:
The appellants argued that no criminal complaint could be filed against the partners since the firm alone was responsible for the payment of tax. The court noted that the Income-tax Act defines "partner" and "partnership" in line with the Indian Partnership Act, 1932, and includes partners in the definition of a "person" responsible for tax compliance. Therefore, the court held that it was not unreasonable to charge the partners along with the firm for the offence.

3. The scope of writ jurisdiction in quashing criminal proceedings:
The court referenced several Supreme Court judgments to outline the limited scope of writ jurisdiction in quashing criminal proceedings. It emphasized that writ jurisdiction should be exercised sparingly and only in the rarest of rare cases to prevent abuse of the process of law or harassment of a citizen. The court cited precedents where the Supreme Court held that the High Court should not interfere unless the complaint does not disclose any offence, is inherently improbable, or suffers from fundamental legal defects.

4. Whether the complaint disclosed the essential ingredients of the offence:
The appellants contended that the complaint did not allege that the failure to deduct and deposit tax was "without reasonable cause or excuse," an essential ingredient of the offence. The court held that it was not necessary for the complaint to use the exact technical words of the charging section. It found that the complaint, by narrating the facts and stating that the accused committed an offence under the charging section, implied all the necessary ingredients of the offence.

5. The applicability of the principles laid down by the Supreme Court in quashing criminal proceedings:
The court applied the principles laid down by the Supreme Court in various judgments, including Delhi Development Authority v. Smt. Lila D. Bhagat, Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi, and State of Haryana v. Ch. Bhajan Lal. It concluded that the case did not fall within the rarest of rare cases warranting the quashing of the criminal proceedings. The court emphasized that arguments requiring extensive legal analysis should not be entertained in a writ petition to stifle prosecution at the threshold.

Conclusion:
The court dismissed the appeal, holding that the criminal complaint did disclose an offence and that the partners could be held responsible along with the firm. It reiterated that writ jurisdiction should be exercised sparingly and that the case did not meet the criteria for quashing the proceedings. The court clarified that it had not delved into the merits of the case, leaving it to the trial court to determine the matter based on the evidence presented.

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