1981 (2) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Prosecution of a company u/s 277 and 278 of the I.T. Act.
2. Applicability of imprisonment to a juristic person.
3. Validity of proceedings against a company through its chairman.

Summary:

1. Prosecution of a company u/s 277 and 278 of the I.T. Act:
The Income-tax Officer filed two complaints against nine persons, including M/s. Industries Ltd., for the assessment years 1965-66 and 1966-67, alleging that the company filed false returns claiming excessive expenditure. The Chief Judicial Magistrate summoned the accused, leading M/s. Modi Industries Ltd. to seek quashing of the proceedings u/s 482, Cr. P. C. The petitioner argued that a company, being a juristic person, cannot be punished with imprisonment and hence cannot be prosecuted for breaches of ss. 277 and 278 of the I.T. Act.

2. Applicability of imprisonment to a juristic person:
The court examined the amendments to ss. 277 and 278, noting that between April 1, 1964, and October 1, 1975, the offences were punishable only with rigorous imprisonment. The court referenced multiple cases, including Director of Public Prosecutions v. Kent and Sussex Contractors Ltd., and concluded that a corporation cannot be subjected to bodily punishment. The court held that a juristic person like a company cannot be awarded imprisonment, and continuing prosecution where the only punishment is imprisonment would serve no useful purpose.

3. Validity of proceedings against a company through its chairman:
The court noted that the income-tax returns were filed under the signatures of the late Sri G. M. Modi, and the present chairman, Sri K. N. Modi, had no involvement in the alleged offence. The court found the impleadment of the company through its chairman to be illegal. Consequently, the court quashed the proceedings against the petitioner-company, stating that prosecution against a company where imprisonment is the only punishment is not valid.

Conclusion:
The application was allowed, and the proceedings against the petitioner-company were quashed, as prosecuting a juristic person like a company for offences punishable only with imprisonment is not legally sustainable.