Point of Law:Dishonour of cheque – Criminal proceeding quashed - 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.

ORDER :

The petitioner is accused No.4 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.

2. The complaint against the petitioner is as follows:

M/s Andhra Hospitals Eluru Private Limited, a company incorporated under the Companies Act, had deducted a sum of Rs.41,49,161/-as tax deduction at source for the assessment year 2017-18. However, this amount was not credited to the Central Government Account within the stipulated time.

3. Section 276B of the Income Tax Act reads as follows:

“276B. Failure to pay tax to the credit of Central government under Chapter XIID or XVIIB.—If a person fails to pay to the credit of the Central Government,---

(a) the tax deducted at source by him as required by or under the provisions of Chapter XVIIB; or

(b) the tax payable by him, as required by or under,----

(i) sub-section (2) of section 115-O; or

(ii) the second proviso to section 194B, he shall be 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.

4. The Income Tax Officer (T.D.S.), T.D.S.Ward-1, Vijayawada on the allegation that an offence has been committed under Section 276B of the Income Tax Act had filed C.C.No. 80 of 2019 against the said Andhra Hospitals Eluru Private Limited and three other persons, including the Petitioner herein, by describing them as Directors of the Company.

5. The petitioner has now approached this Court by way of the present criminal petition for quashing C.C.No.80 of 2019 on the file of the IV Additional District Judge-cum-Special Judge, Economic Offences Court at Visakhapatnam.

6. Sri V.V.Anil Kumar, learned counsel for the petitioner, submits that the said complaint requires to be quashed against the petitioner on two grounds:

1) Firstly, The Petitioner is not a Director of the company as she had resigned as a Director of the company with effect from 17.02.2016, which is before the assessment year 2017-18. In support of this contention, the petitioner has produced the Form-DIR-12 filed with the Registrar of the companies showing that the petitioner had resigned and ceased to be a Director of the company as on 17.02.2016.

(2) Secondly, when an offence is committed by a company, the Directors or other officers of the Company are deemed to be guilty and liable for punishment, under the Income Tax Act, Section 278B, in the following circumstances only:

“278B. Offences by companies.—

(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 shall 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.

(3) Where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, without prejudice to the provisions contained in sub-section (1) or sub-section (2), such company shall be punished with fine and every person, referred to in sub-section (1), or the director