The prosecution of the directors of a company for offences under Sections 276C and 277 of the Income-tax Act, 1961 cannot be sustained in law in the absence of a specific averment that they were in charge of and responsible for the conduct of the business of the company at the time of the alleged offence.

Nagendra Rai, J.

1. Both the applications arise out of the same matter and are being disposed of by this common judgment.

2. The petitioners in both cases have challenged the order dated February 1, 1994, passed in Complaint Case No. 1 of 1994 taking cognizance under Sections 276C and 277 of the Income-tax Act, 1961, against them.

3. The Union of India through the Deputy Commissioner of Income-tax, Special Range, Jamshedpur, filed a complaint petition before the Special Judicial Magistrate, Jamshedpur, alleging, inter alia, that the accused company is a private company and is an assessee within the meaning of Sec. 2(7) of the Income-tax Act, 1961. Two returns of loss were filed by the assessee-company first on December 28, 1989, disclosing total loss of Rs. 91,69,770 and the second revised return was filed on October 19, 1990, showing total loss at Rs. 10,77,040. The assessment was completed under Sec. 143(3) of the Act determining the total income at nil. Two additions, the first one of Rs. 74,850 on account of discrepancy in stock and the second one of Rs. 1,25,000 on account of disallowances of motor car expenses, were made. Before making these additions, sufficient opportunity was given to the assessee-company but it did not offer any satisfactory explanation in this regard, the order of assessment was upheld in the appeal by the Commissioner of Income-tax (Appeals), Jamshedpur, on November 7, 1991. The penalty proceeding was also initiated under Sec. 271(1)(c) of the Act and the same was also confirmed by the Commissioner of Income-tax (Appeals), Jamshedpur. In view of the finding arrived at in the assessment order it is manifest that the accused company and its directors had wilfully and deliberately attempted to evade the tax liability by furnishing inaccurate particulars of income-tax and making false verifications in the return. Thus, they committed the offence punishable under Secs. 276C and 277 of the Act.

4. It was further alleged in the complaint petition that after grant of sanction under Sec. 279 of the Act by the Commissioner of Income-tax for prosecution of the aforesaid accused persons for the offence under the aforesaid sections on November 20, 1992, the complaint petition is being filed.

5. On the basis of the aforesaid complaint, as stated above cognizance has been taken under the aforesaid sections, which has been challenged in the present case.

6. It appears that the company has not filed the application for quashing. In Criminal Miscellaneous No. 1113 of 1994(R) one of the ex-directors, namely, Sardar Gurdev Singh, and in Criminal Miscellaneous No. 1656 of 1994(R) five ex-directors are petitioners.

7. Before adverting to the submission advanced at the Bar I would like to state some more facts which are borne out from the records of this case and with regard to which there is no dispute between the parties. The assessment order was challenged by the petitioners in appeal which was upheld. Thereafter, the petitioners preferred the appeal before the Income-tax Appellate Tribunal and the Appellate Tribunal remanded the matter with regard to addition on account of discrepancy in stock. The Tribunal also deleted the disallowance of Rs. 1,00,000 and allowed addition of only Rs. 25,000 on account of disallowance of motor car expenses. After remand the assessing authority upheld his earlier order with regard to addition on account of discrepancy in stock. The penalty proceeding was also initiated under Sec. 271(1)(c) of the Act by the assessing authority and penalty was imposed which was upheld in appeal. However, the Income-tax Appellate Tribunal has remanded the matter but there is nothing on the record to show as to what has happened to the penalty proceeding after remand by the Income-tax Appellate Tribunal.

8. Learned counsel for the petitioners has contended that as the order of the assessing authority has been modified by the Income-tax Appellate Tribunal in appeal with regard to addition on the o