1979 (12) TMI 12 - HC - Income Tax

Summary

Issues:
1. Liability of a company for failure to deposit tax deductions at source.
2. Liability of directors of a limited company for company's default in depositing tax deductions.
3. Interpretation of Section 278B of the Income Tax Act, 1961.
4. Application of ex post facto laws in criminal offenses.

Analysis:

The judgment pertains to Criminal Appeals involving complaints under the Income Tax Act, 1961 and the Indian Penal Code. The complaints alleged that the respondents, including directors of a limited company, failed to deposit tax deductions made at source into the Government treasury. The Chief Judicial Magistrate initially held that the directors were not liable due to lack of evidence regarding payment of salaries and disbursement of funds.

The Revenue's counsel highlighted an admission by the company stating financial difficulties leading to delays in salary payments and partial payments after tax deductions. The court found this admission contradictory to the Magistrate's view, establishing the company's failure to deposit tax deductions. However, the court noted that under Section 278B of the Act, only the director in charge of the company's business could be held guilty, but this provision was enacted after the offenses in question were committed. Applying ex post facto laws would violate constitutional principles.

The court affirmed the Magistrate's decision regarding directors 1 to 3 but held the company itself (respondent No. 4) liable for the offenses, ordering a fine of Rs. 200. Similarly, in another appeal, respondents 1 to 5 were not held liable, but the company (respondent No. 6) was convicted and fined Rs. 200. The judgment concluded by disposing of both appeals accordingly.