2021 (8) TMI 432 - HC - Income Tax

Economic Offences u/s 276B against the petitioner - Liability of directors - Failure to pay tax to the credit of Central government under Chapter XIID or XVIIB - Offences by companies u/s 278B - HELD THAT - In the present case, the DIR-12 Form produced by the petitioner shows that she had resigned as a Director of the accused No.1 company on 17.02.2016 itself. As such, she cannot be prosecuted on the ground that she is a Director of the Company at the relevant point of time. The complaint does not have a single averment about any of the persons said to be Directors of the 1st accused Company. In view of the aforesaid Judgments of National Small Industries Corporation Limited vs. Harmeet Singh Paintal and another 2010 (2) TMI 590 - SUPREME COURT the proceedings against the petitioner in C.C.No.80 of 2019 on the file of the IV Additional District Judge-cum-Special Judge, Economic Offences Court at Visakhapatnam under Section 276B of Income Tax Act, 1961 has to be quashed on both grounds, namely, that the petitioner was not a Director of the company at the relevant point of time and there are no allegations of any nature against the petitioner required under the provisions of Section 278B of the Income Tax Act, to rope the petitioner into the complaint. Accordingly, the criminal petition is allowed quashing order of Additional District Judge-cum-Special Judge, Economic Offences Court at Visakhapatnam under Section 276B of Income Tax Act, 1961 against the petitioner herein.

Summary

Issues:
1. Quashing of criminal complaint under Section 276B of Income Tax Act, 1961 against the petitioner.
2. Interpretation of Section 278B of the Income Tax Act regarding liability of directors in case of company offenses.

Analysis:
1. The petitioner, accused No.4, sought to quash C.C.No.80 of 2019 under Section 276B of the Income Tax Act, contending she resigned as a Director before the relevant assessment year. The complaint alleged non-credit of TDS to the Central Government by the company. The petitioner relied on Form-DIR-12 to prove resignation. The Court considered the plea and previous judgments allowing document scrutiny under Section 482 of Cr.P.C. The Court accepted the resignation evidence, ruling the petitioner cannot be prosecuted as a Director at the time of the offense.

2. Section 278B imposes liability on persons in charge of the company's business for offenses committed by the company. The petitioner argued that only those in charge at the time of the offense are liable. The Court referenced Supreme Court judgments emphasizing specific averments in complaints to hold directors vicariously liable. The Court noted the absence of allegations against the petitioner as required by Section 278B. Citing precedents, the Court quashed the complaint, stating the petitioner was not a director at the relevant time, and no allegations under Section 278B were made against her.

3. The judgment highlighted the need for specific averments to hold directors responsible for company offenses. It emphasized that vicarious liability must be pleaded and proved, not inferred. The Court referenced case law to establish the criteria for director liability under Section 278B and similar provisions in other Acts. By analyzing relevant legal principles and precedents, the Court granted the petitioner's plea to quash the complaint, ensuring adherence to statutory requirements for director liability in company offenses under the Income Tax Act.