1993 (8) TMI 63 - HC - Income Tax

Attempt To Evade Tax By Firm, Offences And Prosecution, Prosecution Of Partner For Offence Of Firm

Summary

Issues Involved:
1. Quashing of criminal proceedings against the third accused under Section 482 of the Criminal Procedure Code, 1973.
2. Liability of partners under Section 278B of the Income-tax Act, 1961.
3. Specific averments and overt acts in the complaint against the third accused.
4. Applicability of relevant case law and judicial precedents.

Detailed Analysis:

1. Quashing of Criminal Proceedings Against the Third Accused:
The petitions were filed under Section 482 of the Criminal Procedure Code, 1973, to quash the proceedings in C.C. Nos. 47 and 46 of 1986 on the file of the Additional Chief Judicial Magistrate, Madurai. The third accused, a partner in the firm Messrs. Rasi Metals and Alloys, contended that she was merely a sleeping partner and had no involvement in the day-to-day administration of the firm.

2. Liability of Partners Under Section 278B of the Income-tax Act, 1961:
The prosecution was based on alleged offences under various sections of the Indian Penal Code and the Income-tax Act, 1961. The prosecution argued that under Section 278B of the Income-tax Act, every person connected with the affairs of the firm is liable for prosecution. However, the court noted that specific averments must be made in the complaint to show that the partner was responsible for the conduct of the business at the time the offence was committed.

3. Specific Averments and Overt Acts in the Complaint Against the Third Accused:
The court observed that there were no specific averments or overt acts attributed to the third accused in the complaint. The third accused had stated that she was an old lady and a sleeping partner, with no involvement in the firm's management. The court cited several judicial precedents to support the view that mere reproduction of statutory language without specific allegations is insufficient for prosecution.

4. Applicability of Relevant Case Law and Judicial Precedents:
The court referred to various rulings, including those from the Supreme Court and High Courts, which emphasized the necessity of specific averments in complaints against partners. The court highlighted the principles laid down in cases such as Municipal Corporation of Delhi v. Ram Kishan Rohtagi and Sham Sunder v. State of Haryana, which require specific allegations to establish a partner's responsibility for the conduct of the business.

Conclusion:
The court concluded that the prosecution had failed to provide specific averments and overt acts against the third accused in the complaint. Therefore, the proceedings in C.C. Nos. 47 and 46 of 1986 were quashed as far as the third accused was concerned. The court noted that it is always open to the trial court to invoke Section 319 of the Criminal Procedure Code if evidence during the trial indicates that the third accused had committed any offence. Consequently, Criminal Original Petitions Nos. 2970 and 2973 of 1993 were allowed.