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Issues:
Prosecution of all partners of a firm under sections 276B and 278B of the Income-tax Act, 1961 without specifying who was in charge of the business and the liability of sleeping partners in criminal proceedings. Analysis: The judgment under scrutiny pertains to a petition challenging the framing of charges under sections 276B and 278B of the Income-tax Act, 1961 against a firm and its partners for failure to deduct tax at source. The key contention raised was the criminal liability of all partners, including sleeping partners, without establishing who was in charge of the business. The prosecution argued that all partners, including sleeping partners, could be deemed guilty under section 278B of the Act. However, the defense contended that criminal liability should only apply to those responsible for the conduct of the business. The judgment emphasized the need for the prosecution to prove who was in charge of the business before criminally prosecuting partners. The court referred to a similar provision in the Essential Commodities Act, highlighting the necessity to establish the individual's responsibility for the business's conduct before imposing criminal liability. Citing a Supreme Court case, the judgment stressed that partners not involved in the firm's operations should not be prosecuted unless it is proven they were responsible for the business. The court scrutinized the documents and found that only one partner was actively involved in the firm's affairs, justifying their prosecution. However, it ruled that the sleeping partners lacked involvement in the business and thus could not be held criminally liable. Drawing from precedents, the judgment quashed the charges against the sleeping partners, emphasizing the importance of proving individual responsibility for business conduct before imposing criminal liability. It allowed for additional persons to be implicated if evidence of their involvement surfaced during the trial. The judgment upheld the prosecution against the actively involved partner and the company, directing them to appear before the Magistrate for further proceedings.
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