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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.N. LADDHA, J.
Anish Modi – Appellant
Versus
Union of India – Respondent
Criminal Writ Petition No.3962 of 2022
Decided on : 20-12-2023.
Income Tax Act - Prosecution of Non-Executive Director - Sections 276-B, 278-B - Summary of Acts and Sections
Fact of the Case:
The petitioner, a non-executive director, sought to challenge the process and summons issued against him in a Criminal Case filed for non-payment of TDS under sections 276-B and 278-B of the Income Tax Act, 1961.
Finding of the Court:
The Court found that the petitioner was not served with the mandatory notice required under section 2(35)(b) of the Income Tax Act, and the Magistrate failed to consider relevant provisions before issuing the process.
Issues: The main issue was the non-compliance with the statutory requirement of serving notice under section 2(35)(b) of the Income Tax Act and the lack of consideration of relevant provisions by the Magistrate.
Ratio Decidendi: The Court held that the failure to serve the mandatory notice as per section 2(35)(b) of the Income Tax Act was fatal to the prosecution against the petitioner, and the Magistrate's failure to consider statutory provisions rendered the process invalid.
Final Decision: The Criminal Case and the Orders passed thereunder were quashed and set aside only with respect to the petitioner.
JUDGMENT:
Heard the learned Counsel for the parties.
2. Rule. The Rule is made returnable forthwith, with the consent of and at the request of the learned Counsel for the parties.
3. The petitioner (original accused No.8) seeks to challenge the Order dated 18 February 2014 and the Order dated 21 July 2022, whereby the learned Additional Chief Metropolitan Magistrate, 38th Court, Ballard Pier, Mumbai, in Criminal Case No.52/SW/2014 (for short, ‘Criminal Case’) issued the process and the fresh summons against him. He also prays to this Court to quash the Criminal Case filed by respondent No.1 against him for the offence punishable under sections 276-B read with 278-B of the Income Tax Act, 1961 (for short, ‘the I.T. Act’).
4. Mr Vineet Naik, the learned Senior Counsel appearing on behalf of the petitioner, submitted that the petitioner served as an independent, non-executive, and nominee director on the Board of S. Kumar Nationwide Limited (for short, ‘the company’) from 27 June 2007 to 12 November 2011. For the financial year 2008-2009, the company failed to deposit the TDS amount of Rs.2,98,29,252/- to the credit of the Central Government within the prescribed period; however, this amount was subsequently paid by the company in September 2010. He further submitted that the petitioner became aware of the Criminal Case and the orders passed thereunder only on 5 September 2022, when he received a copy of the summons dated 3 August 2022.
5. The learned Senior Counsel submitted that the learned Magistrate issued the process mechanically and without any application of mind against the petitioner. He submitted that the learned Magistrate failed to appreciate that the complaint does not contain any specific averments or unambiguous allegation qua the petitioner’s role in the commission of the alleged offence. His main contention is that the petitioner is not the principal officer under Section 2(35) of the I.T. Act, and he was never served with any notice treating him as a principal officer as required under clause (b) of Section 2(35) to initiate a prosecution under sections 276-B read with 278-B of the I.T. Act.
6. He relied on (i) Madhumilan Syntex Ltd. Vs. Union of India, (2007) 11 SCC 297; (ii) Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi, (1983) 1 SCC 1; (iii) Sham Sunder Vs. State of Haryana, (1989) 4 SCC 630; (iv) S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, (2005) 8 SCC 89; (v) Pooja Ravinder Devidasani Vs. State of Maharashtra, (2014) 16 SCC 1; (vi) Sunita Palita Vs. Panchami Stone Quarry, (2022) 10 SCC 152; (vii) Lalankumar Singh Vs. State of Maharashtra, 2022 SCC OnLine SC 1383; (viii) Ashoke Mal Bafna Vs. Upper India Steel Mfg. & Engg. Co. Ltd., (2018) 14 SCC 202; (ix) State of Haryana Vs. Brij Lal Mittal, (1998) 5 SCC 343; (x) Sunil Bharti Mittal Vs. CBI, (2015) 4 SCC 609; (xi) Iridium India Telecom Ltd. Vs. Motorola Inc., (2011) 1 SCC 74; (xii) Maksud Saiyed Vs. State of Gujarat, (2008) 5 SCC 668; (xiii) National Small Industries Corpn. Ltd. Vs. Harmeet Singh Paintal, (2010) 3 SCC 330; (xiv) Pepsi Foods Ltd. Vs. Special Judicial Magistrate, (1998) 5 SCC 749; (xv) Homi Phiroz Ranina Vs. State of Maharashtra, 2003 SCC OnLine Bom 118; (xvi) Income-Tax Officer Vs. Official Liquidator, 1975 SCC OnLine AP 185; (xvii) Greatway (P) Ltd. Vs. Assistant Commissioner of Income-Tax, 1991 SCC OnLine P&H 1353; (xviii) Income-Tax Officer Vs. Joseph, 1971 SCC OnLine Ker 128; (xix) K. Ramakrishnan and Ors. Vs. Income Tax Department, Madurai and Ors., Crl. O.P.(MD) Nos. 16082 to 16084 of 2018, dated 25.10.2019 (Madras High Court); (xx) M.A. Unneerikutty Vs. Dy. Commr. of Income Tax, 1994 SCC OnLine Ker 92; (xxi) Confident Projects (India) (P) Ltd. Vs. CIT, (2021) 1 HCC (Kar) 285; (xxii) Vivek Goenka Vs. State of Maharashtra, 2003 SCC OnLine Bom 201; (xxiii) Ionic Metalliks Vs. Union of India, 2014 SCC OnLine Guj 10066; (xxiv) Om Prakash Bhatt Vs. State of Maharashtra, 2019 SCC OnLine Bom 3711; and (xxv) A. Harish Bhat Vs. CIT, 2019 SC
Non-compliance with mandatory statutory requirements, such as serving notice under section 2(35)(b) of the Income Tax Act, can invalidate a prosecution.
The main legal point established in the judgment is that the timing of TDS payment, the liability of the petitioners under Sections 276(B) and 278(B) of the Income Tax Act, and the interpretation of ....
Prosecution for delayed TDS deposits under Income Tax Act may be quashed when reasonable causes are established; the recent CBDT circular allows for compounding such offences.
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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 requir....
The deposit of TDS amounts with interest should be considered before initiating criminal proceedings under Sections 276(B) and 278(B) of the Income Tax Act.
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