9911796707
TMI Blog2006 (11) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... the offence punishable under section 276B read with section 279 of the Income-tax Act, 1961, in respect of the financial years 2002-03, 2003-04 and 2004-05. 2. The short point raised by learned counsel appearing for the petitioners is that section 276B is the punishing section for, inter alia, default in depositing the tax deducted at source under various provisions contained in Chapter XVII-B of the Income-tax Act. Essentially, when a "person" fails to pay to the credit of the Central Government, the tax deducted at source by him then he is, by virtue of section 276B, punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine. The reference to "person" in section 276B is with regard to the requirement of such person to pay to the credit of the Central Government the tax deducted at source collected by him. Section 192, which falls under Chapter XVII-B, relates to tax deducted at source in respect of income-tax chargeable under the head "Salaries". There are other similar provisions in respect of dividends (section 194), rent (section 194-I) and other such provisions for different kind of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer', used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means (a) the secretary, treasurer, manager or agent of the authority, company, association or body, or (b) any person connected with the management or administration of the local authority, company, association or body upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof ;" 5. Consequently, relying upon section 2(35)(b), learned counsel for the petitioners submitted, only that person can be regarded as a principal officer who is not only connected with the management or the administration of the company but upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof.Learned counsel for the petitioners pointed out that no such notice has been served on the petitioners indicating the Assessing Officer's intention of treating any one or more of them as the principal officer(s) thereof. He referred to the decision of the Madras High Court in the case of ITO v. Roshni Cold Storage P. Ltd. [2000] 245 ITR 322 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in M. R. Pratap v. V. M. Muthuramalingam, ITO [1984] 149 ITR 798, wherein it was held (headnote) : 'Consequently, the managing director of a company cannot be held liable under section 276B unless the Income-tax Officer has served a notice on him under section 2(35)(b) and informed him of his intention to treat him as the principal officer of the company'. The introduction of section 278B into the statute book with effect from October 1, 1975, by the Taxation Laws (Amendment) Act, 1975, does not alter or take away the mandatory requirement of issuing notice as contemplated under section 2(35)(b) for an offence under section 276B. While inserting section 278B, no corresponding changes have been introduced either under section 2(35)(b) or under section 204(iii) of the Income-tax Act, 1961. Thus, such a statutory notice as contemplated under section 2(35)(b) is mandatory only for offence under section 276B in view of the meaning of 'person responsible for paying', 'if the payer is a company, the company itself including the principal officer thereof' in section 204(iii). For other offences under the Income-tax Act, 1961, such as under sections 276C, 277, 276CC, etc., such a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether any person had been appointed as the principal officer of the petitioner company. In the absence of such an appointment, a director or the managing director of the company could not be prosecuted. It appears that the Assessing Officer was himself at fault and that fault has been tried to be covered by an argument by learned counsel for the respondent that the managing director and the directors will be deemed as agents of the company. However, an agent of the company cannot be equated with the principal officer as defined in section 2(35) of the Act. The prosecution of the persons other than the petitioner-company, would, thus, be bad on this short ground alone.' In view of the above three rulings, the prosecution of the managing director and other directors without issuing notice under section 2(35)(b) is bad in law." 6 . On the other hand, learned counsel for the respondent submitted that the present petition is at the stage after the summoning order has been passed and in such a case no notice asking the petitioners to show cause is necessary. He submits that the provisions of section 2(35)(b) of the Income-tax Act would have applicability only in the cases of reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word "person" under section 277 of the Income-tax Act, 1961. It held that a managing director was a principal officer of a company and that if he signs and verifies a return on behalf of the company which later turns out to be false, he would be liable as he would be covered by the word "person" appearing in section 277. In Rama Narang v. Ramesh Narang [1995] 83 Comp Cas 194 ; [1995] 2 SCC 513, the Supreme Court, inter alia, pointed out the distinction and difference between a managing director and a director of a company. It observed (page 203) : "The Companies Act has, therefore, drawn a distinction between a director and a managing director ; the provisions in the case of the latter are more stringent as compared to that of the former and so it should be because it is the managing director who is personally responsible for the business of the company . . . In the case of a director, who is generally not in charge of the day-to-day management of the company affairs, the law is not as strict as in the case of a managing director who runs the affairs of the company and remains in overall charge of the business carried on by the company." 10. These decisions fortify the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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