ORDER

Special Leave granted. Heard the learned counsel for the parties.

2. The appellant, who is an Assistant Commissioner of Income Tax, filed a complaint in the Special Court for Economic Offences at Bangalore alleging commission of an offence under Section 276B, read with Section 278B, of the Income Tax Act, 1961 ( Act for short) by M/s Borewell & Co., a registered partnership firm (the respondent No. 1) and its three partners (the respondent Nos. 2 to 4). The Special Court took cognisance of the offence alleged and issued process against the respondents for their attendance. After entering appearance they filed an application praying for their discharge under Section 245(2) of the Code of Criminal Procedure. The Special Court allowed the application on the ground that before granting sanction for their prosecution under Section 279(1) of the Act, the Sanctioning Authority did not give the respondents a personal hearing. The other grounds raised by the respondents for their discharge were however kept open. Assailing the order of discharge the appellant filed a revision petition in the High Court which was dismissed by the impugned order. Hence this appeal.

3. In upholding the order of discharge, the High Court did not deal with the ground that found favour with the Special Court but held - relying upon its earlier judgment in P.V. Pai v. R.L. Rinawna1 - that the prosecution of respondent No. 1 under Section 276B was not maintainable for if ultimately the Special Court found it to be guilty it (the Court) could not legally impose a substantive sentence upon it which was mandatory thereunder. As regards the other respondents, though the High Court found that the prosecution against them was maintainable for the above offence, it still upheld their discharge.

4. To answer the question whether a company, being a juristic person and thus incapable of being sentenced to imprisonment can be prosecuted - and for that matter convicted - for committing an offence under the Act which provides for compulsory imprisonment and fine, it will be necessary to refer to the provisions of the Act with which we are concerned in this appeal.

5. Section 276B lays down that if a person fails to pay to the credit of the Central Government, the tax deducted at source by him as required by or under the provisions of Chapter XVII-B {which includes Section 194 C (2) for violation of which the prosecution in the instant case was lodged} he shall be punished with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine. Section 278B reads as under :

278B. (1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Provided that nothing contained in this sub-section render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.-For the purposes of this Section-

(a) "company" means a body corporate, and includes-

(i) a firm; and

(ii) an association of persons or a body of individuals whether incorporated or n