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Issues Involved
1. Whether a company, being a juridical person, is liable for prosecution for an offence under the provisions of the Income-tax Act. 2. Whether a company, being a juridical person and incapable of being put to bodily punishment like a sentence of imprisonment, can be sentenced to fine only though the punitive provision in the tax law contemplates imposition of a minimum sentence of imprisonment and also fine. Detailed Analysis Issue 1: Liability of a Company for Prosecution Under the Income-tax Act The court examined whether a company, as a juridical person, can be prosecuted under the Income-tax Act. The Revenue argued that the firm could be sentenced to a fine, even if imprisonment is not feasible, as section 277 of the Act includes provisions for both imprisonment and fine. The court noted that the definition of "person" under section 2(31) of the Income-tax Act includes a company, firm, or any juridical person. Section 277 prescribes rigorous imprisonment and fine based on the quantum of tax evaded. Section 278B, incorporated in 1975, explicitly states that a company can be prosecuted and punished for offences committed under the Act. The court reviewed various case laws, including Director of Public Prosecutions v. Kent and Sussex Contractors Ltd. [1944] 1 KB 146, Rex v. I. C. R. Haulage Ltd. [1944] 1 All ER 691, and H. L. Bolton (Engineering) Co. Ltd. v. T. J. Graham and Sons Ltd. [1957] 1 QB 159, which establish that a company can be held liable for the criminal acts of its agents. Based on the abundant case law and the specific provision in section 278B, the court concluded that a company is liable for prosecution under the Income-tax Act. Therefore, the first question was answered in the affirmative. Issue 2: Imposition of Fine Only When Imprisonment is Also Mandated The court then addressed whether a company can be sentenced to fine only when the law mandates both imprisonment and fine. The Full Bench of the Delhi High Court in Delhi Municipality v. J. B. Bottling Co. [1975] Crl. LJ 1148 dealt with a similar issue under the Prevention of Food Adulteration Act. The court held that while the section contemplates both imprisonment and fine, a company can only be sentenced to a fine since imprisonment is not feasible for a juridical person. The court referred to the principle that statutes should be construed to advance the remedy intended by the Legislature, as noted by Gajendragadkar J. in Siraj-ul-Haq-Khan v. Sunni Central Board of Waqf, AIR 1959 SC 198. The court also considered the decisions in State of Maharashtra v. Jugmander, AIR 1966 SC 940, and General Sales P. Ltd. v. Gopal Mukherjee, ITO [1987] 166 ITR 77, but found them not directly applicable to the issue at hand. Following the decision of the Full Bench of the Delhi High Court, the court held that a company can be sentenced to fine only, even though the section contemplates a minimum sentence of imprisonment and fine. Thus, the second question was also answered in the affirmative. Conclusion and Sentence The court noted that the finding of guilt against the firm was not challenged. Consequently, the firm was convicted under section 277(1) of the Income-tax Act and sentenced to pay a fine of Rs. 1,000 in each appeal. The appeals were allowed accordingly. Summary The court addressed two main issues: whether a company can be prosecuted under the Income-tax Act and whether it can be sentenced to a fine only when the law mandates both imprisonment and fine. The court concluded that a company is liable for prosecution under the Act and can be sentenced to a fine only, despite the statutory requirement for both imprisonment and fine. The firm was convicted and fined Rs. 1,000 in each appeal.
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