2018 (7) TMI 1818 - HC - Income Tax

Offences u/s 276B - Failure to pay tax (TDS amount) to the credit of Central Government - Held that - In the present case, this Court finds sufficient materials in the complaint as well as the documents filed along with the complaint and also the evidence given by the witnesses and therefore, this Court does not want to interfere with the cognizance taken by the Court below on the irregularity pointed out by the learned Senior Counsel. In the considered opinion of this Court, the irregularity pointed out by the learned senior counsel does not vitiate the entire proceedings. There are no grounds to discharge the petitioner. This Court does not find any ground to interfere with the order passed by the Court below. Accordingly, this Court confirms the order passed by the Court below dismissing the discharge petition. It is made clear that the findings that have been given both by the Court below and this Court, are only based on prima facie materials. None of these findings will have any bearing while Court below decides the case finally and the decision will be made only based on the evidence on record and on the merits of the case without being influenced by any of the findings given while dismissing the discharge petition. The complaint is of the year 1991. It is therefore necessary for this Court to fix a time limit for the completion of the proceedings. The Additional Chief Metropolitan Magistrate (EO-1), Egmore, Chennai is directed to complete the proceedings strictly within a period of four months from the date of receipt of copy of this order. The petitioner and the respondent are directed to co-operate with the proceedings to ensure that the same is completed within a time stipulated by this Court. Criminal Revision Petition is dismissed.

Issues Involved:
1. Issuance of notice under Section 2(35) of the Income Tax Act.
2. Effect of the order passed by the Income Tax Appellate Tribunal.
3. Responsibility of the petitioner for the conduct of the company’s business.
4. Inclusion of Indian Penal Code offences in the complaint.
5. Validity of the cognizance taken by the lower court.

Issue-wise Detailed Analysis:

1. Issuance of Notice under Section 2(35) of the Income Tax Act:
The petitioner argued that the complaint was not maintainable without a notice under Section 2(35) of the Income Tax Act, which is required to treat someone as the Principal Officer of the company. The court clarified that such notice is mandatory only for offences under Section 276(B) of the Income Tax Act, which deals with the responsibility for paying tax deducted at source (TDS). However, the offences in this case are under Sections 276(C)(1), 277, and 278(B) of the Income Tax Act, which do not require such notice. Therefore, the court found no substance in the petitioner’s argument and held that the non-issuance of the notice was inconsequential for the present case.

2. Effect of the Order Passed by the Income Tax Appellate Tribunal:
The petitioner contended that the criminal complaint should be dismissed because the Income Tax Appellate Tribunal had remanded certain issues for reinvestigation. The court noted that the Tribunal upheld the findings of the Assessing Officer regarding the commission payment and only remanded the issue of the loss on film distribution for further investigation. Since the entire order of the Assessing Officer was not set aside, the court held that the criminal complaint could still proceed. The judgments cited by the petitioner were found inapplicable as they pertained to cases where the entire order was set aside.

3. Responsibility of the Petitioner for the Conduct of the Company’s Business:
The petitioner argued that she was not in charge of the day-to-day affairs of the company and merely signed the profit and loss account and balance sheet. The court found that there were sufficient averments in the complaint and witness statements to make a prima facie case against the petitioner. The court emphasized that the petitioner’s role and knowledge at the time of signing the documents were matters to be determined during the trial.

4. Inclusion of Indian Penal Code Offences in the Complaint:
The petitioner challenged the inclusion of Indian Penal Code (IPC) offences in the complaint, arguing that the respondent was not competent to file such a complaint. The court rejected this argument, stating that an assessee could be prosecuted under both the Income Tax Act and the IPC for offences committed in relation to income tax proceedings. Therefore, there was no bar to including IPC offences in the complaint.

5. Validity of the Cognizance Taken by the Lower Court:
The petitioner pointed out that the lower court had taken cognizance of the complaint using a rubber stamp, which indicated a lack of application of mind. The court acknowledged that the Supreme Court had deprecated this practice but found that there were sufficient materials in the complaint, documents, and witness statements to support the cognizance taken. The court held that the irregularity did not vitiate the entire proceedings.

Conclusion:
The court concluded that the lower court had carefully considered all the issues raised by the petitioner and found no grounds to discharge the petitioner. The court confirmed the order of the lower court dismissing the discharge petition. It was clarified that the findings were based on prima facie materials and would not influence the final decision of the case. The court directed the lower court to complete the proceedings within four months and instructed both parties to cooperate.

Result:
The Criminal Revision Petition was dismissed, and the connected miscellaneous petition was also closed.

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