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Issues Involved:
1. Whether the petitioners, as partners of the firm, can be prosecuted u/s 276B read with section 278B of the Income-tax Act, 1961, for failure to deduct and remit tax. 2. Interpretation of "person responsible for paying" u/s 204(iii) and "principal officer" u/s 2(35) of the Income-tax Act. 3. Applicability of section 278B regarding offences by companies to the partners of a firm. 4. Adequacy of allegations in the complaint to sustain prosecution. Summary: Issue 1: Prosecution of Partners u/s 276B read with section 278B The petitioners, who are partners of the firm, are being prosecuted for failing to deduct and remit tax deducted at source u/s 194A of the Income-tax Act. The prosecution is based on the allegation that they were in charge of and responsible for the conduct of the business of the firm. Issue 2: Interpretation of "Person Responsible for Paying" and "Principal Officer" The court examined the terms "person responsible for paying" u/s 204(iii) and "principal officer" u/s 2(35) of the Income-tax Act. It was held that if the payer is a company, the company itself, including the principal officer, is liable. The partners of the firm do not fall within this category unless served with a notice by the Income-tax Officer indicating his intention to treat them as the principal officer. Issue 3: Applicability of Section 278B to Partners The court noted that u/s 278B, the prosecution must prove that the petitioners were in charge of and responsible for the conduct of the business of the firm. The Supreme Court's rulings in analogous cases under the Prevention of Food Adulteration Act were cited, emphasizing that mere allegations without specific details of the partners' roles are insufficient for prosecution. Issue 4: Adequacy of Allegations in the Complaint The court found that the complaint merely repeated the statutory language without providing specific details about the roles and responsibilities of the petitioners. Citing Supreme Court precedents, the court held that such general allegations are inadequate to sustain prosecution. The court emphasized that the prosecution must provide clear averments regarding the active role and extent of liability of each partner. Conclusion: The court concluded that the prosecution against the partners is not sustainable due to the lack of specific allegations and details in the complaint. The proceedings in C.C. Nos. 968, 969, 970, and 971 of 1986 were quashed to the extent they relate to the petitioners.
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