2014 (2) TMI 133 - HC - Income Tax

Maintainability of the complaint criminal proceedings - Petitioner treated as an office in default u/s 201(1) and 201(1A) of the Act Held that - The criminal proceedings are independent of recovery proceedings - The criminal proceedings are not dependent on the recovery proceedings thus, the pendency of proceedings initiated under Section 201(1) and Section 201(1-A) of the I.T. Act is not a legal impediment to continue the criminal prosecution against the petitioners - The pendency cannot act as a bar to the institution and continuance of criminal prosecution for the offences punishable under Section 276-B of the I.T. Act - the proceedings initiated against the petitioners cannot be quashed on the ground that the proceedings under Section 201(1) and Section 201(1-A) of the I.T. Act are pending Decided against Assessee. Necessary ingredients to be filed in the complaint Held that - The details of non-remittance of TDS of salaries for each financial year and monthwise is also specified thus, the complaint filed by the respondent contains the necessary ingredients for taking cognizance of offence against the petitioners Decided against Assessee. Validity of sanction u/s 279(1) of the Act Held that - Section 2(35-B) of the I.T. Act specifies that there is no bar for treating more than one person as the Principal Officer for initiation of criminal proceedings Relying upon Madhumilan Syntax Limited And Others Versus Union of India And Another 2007 (3) TMI 205 - SUPREME Court - The subsequent event treating Sri. T. R. Venkatadri as the Principal Officer of petitioner No.1 company will not result in quashing of the proceedings against petitioner No. 2 - It is open for the Revenue to proceed against the company, its directors or any other principal officer or officers responsible for default Decided against Assessee.

Summary

Issues Involved:
1. Maintainability of complaints before the Special Court.
2. Sufficiency of necessary ingredients in the complaint.
3. Validity of the sanction order under Section 279(1) of the Income Tax Act.

Detailed Analysis:

On Point No. i: Maintainability of Complaints

Chapter XXII of the Income Tax Act relates to offences and prosecutions, specifically Section 276-B, which deals with the failure to pay tax deducted at source. The court clarified that criminal proceedings for failure to remit TDS are independent of recovery proceedings under Sections 201(1) and 201(1-A) of the Act. The pendency of recovery proceedings does not bar the initiation or continuation of criminal prosecution. The complaints against the petitioners are based on admissions and documentary evidence, not solely on the Assessing Officer's order. Therefore, the criminal proceedings are maintainable despite the pending recovery proceedings.

On Point No. ii: Sufficiency of Necessary Ingredients in the Complaint

The complaints specify the relevant financial years, the amount deducted at source, and the failure to remit the same to the Central Government. They also reference the petitioners' admissions of liability through various correspondences. The court found that the complaints contain the necessary ingredients for taking cognizance of the offence. Thus, the contention that the proceedings should be quashed due to lack of necessary averments is rejected.

On Point No. iii: Validity of the Sanction Order under Section 279(1)

Section 279(1) of the Income Tax Act requires the previous sanction of the Commissioner or appropriate authority for prosecution. The court clarified that the Commissioner can issue a sanction independently of any instructions or directions from the Chief Commissioner or Director General. The contention that the sanction was invalid because it was given by ACIT, TDS Circle 16(1) instead of 16(2) was rejected. The Commissioner had accounted for the change in jurisdiction and correctly authorized the ACIT, TDS Circle 16(1) to initiate proceedings. Additionally, the court found no error in treating the Chairman and Managing Director as the Principal Officer responsible for the default, despite a subsequent event naming another officer as the Principal Officer. The court held that multiple individuals could be treated as Principal Officers for the purpose of prosecution.

Conclusion:

The petitions were dismissed, affirming the maintainability of the complaints, the sufficiency of the necessary ingredients in the complaints, and the validity of the sanction order under Section 279(1) of the Income Tax Act.