1979 (6) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of "failure to pay" under Section 276B of the IT Act.
2. Applicability of Section 276B to delayed payments.
3. Prosecution of a company and its principal officer under Section 276B.
4. The necessity of notice before prosecution under Section 276B.
5. The definition and scope of "a person" under Section 276B.
6. Liability of the principal officer for prosecution under Section 276B.

Issue-wise Detailed Analysis:

1. Interpretation of "failure to pay" under Section 276B of the IT Act:
The petitioners argued that the words "failure to pay" in Section 276B should only apply to cases where there has been a refusal to pay, not to delayed payments. They contended that delayed payments, if made before prosecution, should only attract interest under Section 201(1A). The court rejected this interpretation, emphasizing that Section 276B includes both failure to deduct and failure to pay within the prescribed time, as per Chapter XVII-B of the Act, which includes Section 200 mandating timely payment.

2. Applicability of Section 276B to delayed payments:
The petitioners claimed that Section 276B does not apply to delayed payments, arguing that delayed payments should only incur interest and not prosecution. The court refuted this, stating that Section 276B does not differentiate between delayed and total failure to pay. The court highlighted that Section 200 requires payments to be made within the prescribed time, and failure to comply with this requirement falls under the purview of Section 276B.

3. Prosecution of a company and its principal officer under Section 276B:
The petitioners contended that a company, being a juridical person, cannot be prosecuted under Section 276B, as it cannot be imprisoned. The court dismissed this argument, stating that Section 276B uses the term "a person," which includes a company and its principal officer. The court clarified that the term "a person" in Section 276B must be read in conjunction with Sections 192 and 200, which apply to both individuals and companies.

4. The necessity of notice before prosecution under Section 276B:
The petitioners argued that they were not given a notice of prosecution, depriving them of the opportunity to show cause against it. The court held that Section 276B does not mandate a notice before prosecution. The court emphasized that the power of prosecution under Section 276B is not restricted and can be initiated without prior notice.

5. The definition and scope of "a person" under Section 276B:
The petitioners argued that the term "a person" should be limited to individuals and not include companies or their officers. The court rejected this, stating that the term "a person" in Section 276B includes companies and their principal officers, as defined in Sections 192, 200, and 204 of the Act. The court emphasized that the term must be interpreted in the context of the Act, which includes companies and their officers within its scope.

6. Liability of the principal officer for prosecution under Section 276B:
The petitioners contended that the principal officer of a company cannot be prosecuted under Section 276B, as the section does not explicitly include the term "principal officer." The court dismissed this argument, stating that the principal officer is included in the definition of "a person" responsible for paying, as per Sections 192, 200, and 204 of the Act. The court clarified that the principal officer can be prosecuted if they have been served notice by the ITO and treated as such.

Conclusion:
The court dismissed the petition, holding that Section 276B applies to both delayed and total failure to pay tax deducted at source. The court clarified that the term "a person" includes companies and their principal officers, who can be prosecuted under Section 276B. The court emphasized that prosecution under Section 276B does not require prior notice and that the principal officer can be held liable if they have been served notice by the ITO. The Chief Metropolitan Magistrate was directed to dispose of the complaint expeditiously, allowing the petitioners to present other defenses based on the evidence.