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Issues involved: The judgment involves the issue of whether the second accused, a managing director of a company, can be held liable for prosecution under section 276B of the Income Tax Act for delayed payment of tax deductions.
Summary: The High Court of Madras dealt with a criminal revision against the order of the Chief Metropolitan Magistrate, Madras, in a case involving non-payment of income tax deducted from employees' salaries. The second accused, a managing director, filed a petition seeking discharge from the proceedings, arguing that he had not been served a notice under section 2(35)(b) of the Act to be treated as the principal officer of the company. The Court analyzed the provisions of the Act, particularly section 276B, which imposes stringent punishment for failure to deduct or pay tax. It noted that the section does not specifically mention managing directors or directors but refers to a "person." The definition of "principal officer" under section 2(35) clarifies that a person connected with the company can only be treated as the principal officer if the Income-tax Officer serves a notice as per section 2(35)(b). The Court emphasized that the managing director cannot be held liable under section 276B unless a notice under section 2(35)(b) has been served. As the Department admitted to not serving such a notice, the Court accepted the petitioner's contention. It distinguished the case from a previous judgment involving a different section of the Act, highlighting that liability under section 276B is on the company and the principal officer, not solely on the managing director. In conclusion, the Court allowed the revision and quashed the proceedings against the managing director, stating that he cannot be treated as the principal officer without proper notice.
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