1988 (9) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Maintainability of prosecution after order of remand by the Income-tax Appellate Tribunal.
2. Application of mind by the Department before launching prosecution.
3. Issuance of notices to all petitioners by the Assessing Authority.
4. Criminal liability of a juristic person like a company.

Issue-wise Detailed Analysis:

1. Maintainability of prosecution after order of remand by the Income-tax Appellate Tribunal:
The petitioners argued that the prosecution was not maintainable as the basis for it ceased to exist once the Income-tax Appellate Tribunal set aside the order of the Commissioner of Income-tax and remanded the case for fresh disposal. They contended that the complaint was based on the earlier order, not the fresh order post-remand. However, the court rejected this argument, referencing the case of Telu Ram Raunqi Ram v. ITO, which held that "mere expectancies should not stand in the way of the criminal court from proceeding in the matter." The court emphasized that the pendency of assessment or penalty proceedings does not bar the launching of simultaneous prosecution. The assessment had been completed and confirmed by the Inspecting Assistant Commissioner, and the prosecution was based on the false claims and bogus vouchers submitted by the petitioners. Therefore, the first contention was dismissed as having no substance.

2. Application of mind by the Department before launching prosecution:
The petitioners claimed that the Department failed to apply its mind, as it included deceased individuals (accused Nos. 5 and 9) and nominee-directors who should be immune from prosecution. The court acknowledged that the inclusion of deceased individuals would lead to abatement of proceedings against them but would not vitiate the entire prosecution. Regarding the nominee-directors, the petitioners relied on Section 41A of the State Financial Corporations Act and Section 30A of the Industrial Development Bank of India Act, which provide immunity for actions done in good faith. However, the court noted that good faith and responsibility are matters of evidence to be determined during the trial. The court also referenced Section 278B of the Income-tax Act, which holds persons in charge of the company responsible for offences unless they prove lack of knowledge or due diligence. Thus, the court found no lack of application of mind by the Department.

3. Issuance of notices to all petitioners by the Assessing Authority:
The petitioners argued that not all of them were served notices by the Assessing Authority, which should preclude their prosecution. They cited M. R. Pratap v. V. M. Muthuramalingam, ITO, where the absence of notice to the managing director led to quashing of proceedings. However, the court distinguished that case, noting that the determination of a "principal officer" is necessary only under specific circumstances like tax deduction at source, not applicable here. The court reiterated that under Section 278B of the Income-tax Act, the company and those responsible for its conduct at the time of the offence are deemed guilty. Thus, the non-issuance of individual notices was deemed inconsequential.

4. Criminal liability of a juristic person like a company:
The court noted that the petitioners did not raise the argument that a juristic person like a company cannot be subjected to imprisonment or possess the requisite mens rea for offences under the IPC. The court observed that a corporation cannot be subjected to bodily punishment or imprisonment and that offences requiring mens rea are typically committed by natural persons. The court left this point open for the petitioners to agitate at the proper forum, if so advised.

Conclusion:
The petition to quash the proceedings was dismissed. The court directed the lower court to dispose of the case within three months from the receipt of the records, considering the stay had been in place since March 19, 1985.