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TMI Blog1993 (1) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance amounting to Rs. 5,30,506 was also claimed which A-1 could not have done. Similarly, there was fabrication of false evidence regarding commissioning of the intermix before March 31, 1985, to entitle the company to claim depreciation and investment allowance. The machinery was not commissioned till September 24, 1985. The complainant-respondent further alleged that the accused persons had wilfully attempted to evade payment of taxes to the Revenue. A-3 is in charge of and responsible for conduct of the business of the company, whereas A-4 has given audited reports to the shareholders as required under section 227(2) of the Companies Act, 1956. In fact, A-4 has abetted the commission of these offences by A-1 to A-3. These are the allegations in brief in the complaint filed by the respondent. In challenging the legality of the trial court taking cognizance of the offences against them in these petitions, the petitioners-accused have raised and urged the following contentions : (a) There can be no prosecution of a company which is a juristic person and it cannot be imprisoned under sections 276C and 277 of the Act. (b) The sanction accorded by the sanctioning authority to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation (a). It is urged for the petitioners herein that, because, under section 277, both imprisonment and fine are made compulsory as the law now stands and because "a company" which is corporate body cannot be sentenced to imprisonment, it cannot be proceeded against by filing a criminal complaint against it as now done by the respondent. Though a Division Bench of the Allahabad High Court in the case of Modi Industries Ltd. v. B. C Goel [1983] 144 ITR 496, pointed out that the words person " occurring in sections 277 and 278 of the Income-tax Act, 1961 "the Act" for short), in view of the definition clause in section 2(31), includes a company and hence a company is prima facie liable to be prosecuted for the commission of an offence under sections 276 and 278 of the Act. Further, it pointed out that the law is well settled that a corporation or a juristic personality cannot be subjected to bodily punishment or imprisonment. The learned single judge of the Kerala High Court in the case of S. M. Badsha v. ITO [1987] 168 ITR 332 and of the Rajasthan High Court in the case of Shree Singhvi Brothers v. Union of India [1991] 187 ITR 219 and also a Division Bench of the Calcutta High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Words are certainly not crystals, transparent and unchanged' (vide Towne v. Eisner [1918] 245 US 418 at page 425). So much so, as put by Learned Hand J., 'Statutes should be construed, not as theorems of Euclid, but with some imagination of the purposes which lie behind them (Lenigh Valley Coal Co. v. Yensavage (218 FR 547 at 553)). The Supreme Court having followed the above principles of Mr. Justice Holmes and Learned Hand J. in Union of India v. Filip Tiago De Gama, AIR 1990 SC 981, also observed that the legislators do not always deal with specific controversies which the courts decide and that if a given case is well within the general purpose of the Legislature but not within the literal meaning of the statute, the courts must strike a balance. Keeping these principles in mind and advancing the purpose behind incorporating section 278B and rendering section 277, by way of amendments from time to time, more and more severe and following the decision of the Full Bench of the Delhi High Court, it is to be held that a company can be sentenced to fine only though the section contemplates imposition of minimum sentence of imprisonment and fine. Question No. 2 is, accordingly, ans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned judge, even though imprisonment is also compulsory, as imposition of fine is also made compulsory under section 277 after the amendment in the year 1975, to give effect to the statute, fine alone could be imposed on the company in the event of it being found guilty under section 277 of the Act. It is true that, prior to the amendment of section 277 in the year 1975, imprisonment alone was the punishment that could be imposed on the person found guilty. But, in our view, the amendment does not, in any way, affect the proposition or the principle that a company, a juristic person cannot have any mens rea. When the amended provision itself has made the punishment more rigorous by making imposition of fine also compulsory, it does not follow that the Legislature intended that wherever a corporate body or a juristic person is involved, a fine alone could be imposed. To that extent, it must be said that there is a lacuna in the provision with regard to punishment and simply because the section makes both imprisonment and fine compulsory, courts cannot lay an interpretation which was not in the contemplation of Parliament. In this context, it would be apposite to refer to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The proceedings against the company-accused No. 1 are liable to be quashed. The second contention of the petitioners is that the principles of natural justice were violated by the Commissioner of Income-tax inasmuch as, before according sanction to prosecute the petitioners, he ought to have given opportunity to them of being heard. Section 279 which is relevant in this behalf is as follows : " 279. (1) A person shall not be proceeded against for an offence under section 275A, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277 or section 278, except with the previous sanction of the Chief Commissioner or Director General or Commissioner : Provided that no such sanction shall be required if the prosecution is at the instance of the Commissioner (Appeals) or the appropriate authority. Explanation.- For the purposes of this section, 'appropriate authority' shall have the same meaning as in clause (c) of section 269UA. (1A) A person shall not be proceeded against for an offence under section 276C or section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners were given opportunity of being heard before the sanction was accorded, they could have availed of the opportunity to compound the offence and also could have shown, if possible, whether the penalty imposed or imposable on them had been reduced or waived by an order under section 273A of the Act. What section 279(1A) states is that a person shall not be proceeded against for an offence stated therein of which the penalty imposed or imposable has been reduced or waived by an order under section 273A. Section 273A gives discretion to the Chief Commissioner or Commissioner to reduce or waive the amount of penalty imposed or imposable, if he is satisfied that such person acted in good faith and also co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under the Act. Similarly, under subsection (2) of section 279, any offence under Chapter XXII may, before or after institution of the proceedings, be compounded by the Chief Commissioner or a Director-General. It was argued on behalf of the petitioners that they are deprived of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislations came to be considered by the Full Bench of this court in the case of S. V. Bagi v. State of Karnataka, ILR 1992 Kar 1123, 1130 ; [1992] 87 STC 138. That case, of course, arose under section 31 of the Karnataka Sales Tax Act, 1957. The question before the Full Bench was whether an appeal lies under section 20 of the Act challenging the order made against the assessee to save from " disgrace and ignominy of prosecution ". While holding that no appeal lies from an order made in favour of the assessee, the learned judges held while concluding the judgment thus ( at page 144 of 87 STC): " For the purpose of this judgment, we have proceeded upon the basis that an `order' of compounding is required to be made under section 31. Even so, no appeal can lie there against under section 20, because the appellant cannot object thereto. The order is, in fact, in his favour, made to save him `the disgrace and ignominy of a prosecution'. " If the provisions of section 279 of the Act are read in totality together with the provisions of section 278 regarding abetment of assessee or person abetting the commission of the offence under section 276C, the intention of the Legislature bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secution which could result in the sentence of fine or jail, it was obligatory on the part of the Deputy Commissioner of Sales Tax to give an opportunity of being heard to the petitioner before the sanction was accorded. The argument did not find favour with the learned judges. The learned judges pointed out that granting of sanction is an administrative act. At the same time, the High Court agreed that the principles of natural justice apply even to administrative decisions if they involve civil and penal consequences of grave nature, and no full review or appeal on merits against that decision is provided, and the administrative order finally decides the rights. But, in cases of this nature, the accused has a reasonable opportunity of being heard and to put forward his case at the trial. It was also of the view that the function of according sanction is neither judicial nor quasi-judicial. Reliance was placed on the decision of the same court in the case of Parasnath v. State, AIR 1962 Bom 205 and also of the Madras High Court in the case of Kalagava Bapiah, In re [1903] ILR 27 Mad 54. The Madras High Court referred to section 197 of the Code of Criminal Procedure and said that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee by the Lt. Governor and it was contended that the order of supersession was passed in complete violation of principles of natural justice and total disregard of fair play. No notice to show cause was ever issued and there was not the slightest hint until the order was made that there was any such proposal to supersede the committee. Suffice it to note for the purpose of the case at hand, that their Lordships made it amply clear that the distinction between a judicial act and an administrative act does not very much exist when it is a question of application of principles of natural justice. In the instant case, we are not very much concerned with the powers of sanction that could be exercised under section 197 of the Code of Criminal Procedure where it is in the absolute discretion of the Government to consider whether sanction to prosecute for an offence should be accorded or not, keeping in view the nature of the offence committed and where no such provision as under section 279 of the Income-tax Act, exists. For example, where sanction is required to prose cute for offences under the Anti-Corruption Act, the Penal Code and such other legislations where there is no provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Commissioner of Income-tax to file complaint are considered, the order spells out that in fact sanction has been accorded, though no such specific words have been used in the order. We are unable to agree with the petitioners' counsel that the sanction is bad for this reason alone. Such a technical approach is impermissible. A perusal of the detailed order shows that in fact the Commissioner of Income-tax did consider the material placed before him on the subject of according sanction, gave reasons for his satisfaction and then authorised the Officer who should file the complaint. The cumulative effect of the consideration of all these facts only leads to an inference that sanction in fact has been accorded to prosecute the persons named in the order. The order as a whole should be looked into and effort should not be made to pick up holes on technical omissions. We, therefore, find that the order is not vitiated on this ground. It was lastly contended that there is no averment in the complaint that the company has contravened any of the, provisions of law and, therefore, unless such an averment is made in the complaint, the other accused persons cannot be made liable. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section is in pari materia similar to section 10 of the Essential Commodities Act which came up for consideration before the Supreme Court. We have read the allegations in the complaint filed before the trial court in the light of the aforesaid decision and do not find ourselves in agreement with the submission made by learned counsel for the petitioners. In fact, the averments in each of the paragraphs which, according to the complainant, reveal the offences committed by the accused persons relate principally to accused No. 1 company and then it is elaborately stated how accused Nos. 2 to 4 are guilty of various contraventions. In particular, it is stated in paragraph 4 of the complaint that, for the assessment year 1985-86 for the period ending on March 31, 1985, the accused No. 1 filed its return of income on November 5, 1985, that it was duly verified and signed by accused No. 2 and the return of income filed by accused No. 1 is accompanied by schedule of fixed assets, financial notes , auditor's report, etc. It is also averred that in order to verify the correctness of the return of the income filed by accused No. 1 notice under section 143(2) was issued by the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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