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High Court Of Calcutta
A. K. Dutta
WARREN TEA LTD. - Appellant
Versus
A.L.K.BIHARI CHAND - Respondent
Criminal Revision No. 970 of 1991
Decided On : 09/16/1993
INCOME TAX ACT, 1961 - SECTIONS 276C(1), 277, 279(1) - PROSECUTION - VALIDITY - COMPANY CANNOT BE PROSECUTED FOR OFFENCES UNDER SECTIONS 276C(1) AND 277 - DIRECTORS OF THE COMPANY CANNOT BE PROSECUTED MERELY ON THE ALLEGATION THAT THEY WERE IN CHARGE OF AND WERE RESPONSIBLE TO THE COMPANY FOR THE CONDUCT OF ITS BUSINESS - PROSECUTION OF THE COMPANY AND ITS DIRECTORS WITHOUT THE PREVIOUS SANCTION OF THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER UNDER THE AMENDED SECTION 279(1) OF THE ACT IS INCOMPETENT - REVISION APPLICATIONS ALLOWED - CRIMINAL PROCEEDINGS QUASHED.
Fact of the Case:
The assessee-company filed its return of income for the assessment year 1986-87 on 29/8/1986, duly verified and signed by the accused-petitioner No. 8, Sri P. K. Bose, in the office of the Deputy Commissioner of Income Tax, Special Range-2, Calcutta. The company had shown in the said return an amount of Rs. 6,02,22,478/- only under the heading profit before taxation as per profit and loss accounts for the year ended on 31st March, 1986. The company had claimed deduction for the total amount of Rs. 44,40,706/- under four different heads, as indicated below, under the various provisions of the Income Tax Act. The assessing officer had completed the assessment proceeding and had made assessment for the year 1986-87 under Section 143(3) of the I. T. Act on 31/3/1989 after obtaining various details and explanatory statements from the company upon issue of notice under Section 143(2) of the Act. Being aggrieved by and dissatisfied with the aforesaid order of assessment dated 31/3/1989 passed by the aforesaid assessing officer, the company had preferred appeal there against under Section 249 of the Act before the Commissioner of Income Tax (Appeal) on 23/4/1989. Being aggrieved by and dissatisfied with the aforesaid order of the appellate authority, the company had again preferred appeal before the Income Tax Appellate Tribunal (hereinafter referred to as Tribunal) on 25/5/1990 under Section 253 of the Act, which had eventually been disposed of during the pendency of the instant four proceedings before this Court on 6/1/1992. The Deputy Commissioner of Income Tax concerned, as complainant, had filed the relevant complaint against the accused-company and all the directors thereof on 18. 3. 1991 before the Chief Metropolitan Magistrate at Calcutta for alleged offences punishable under Sections 276c(1) and 277, read with Section 278s of the Act, whereupon the learned magistrate had directed issue of processes against them all upon taking cognizance of the alleged offence.
Finding of the Court:
The company or a corporate body cannot be prosecuted for an offence under the Indian Penal Code where Mens-rea is an essential ingredient on the reasoning that a corporate body cannot be said to have the necessary Mens-rea therefor. On the same analogy, the offences punishable under Sections 276c(1) and/ or 277 of he Income Tax Act, where Mens-rea appears to the an. essential ingredient, the company cannot certainly commit such offence and cannot be prosecuted therefor, as it cannot be said to have the necessary Mens-rea therefor, and, if the company cannot commit any such offence and cannot be prosecuted therefor, its directors can neither be prosecuted therefor merely on the allegation that they were persons in charge of and were responsible to the company for the conduct of its business during the relevant period, without anything more. The prosecution of the company and its directors without the previous sanction of the Chief Commissioner or Director General or Commissioner under the amended Section 279(1) of the Act is incompetent.
Issues: Whether a company can be prosecuted for offences under Sections 276c(1) and 277 of the Income Tax Act, 1961?
Ratio Decidendi: A company cannot be prosecuted for offences under Sections 276c(1) and 277 of the Income Tax Act, 1961, as it cannot be said to have the necessary Mens-rea therefor. The directors of the company cannot be prosecuted merely on the allegation that they were persons in charge of and were responsible to the company for the conduct of its business during the relevant period, without anything more. The prosecution of the company and its directors without the previous sanction of the Chief Commissioner or Director General or Commissioner under the amended Section 279(1) of the Act is incompetent.
Final Decision: The revision applications are allowed and the criminal proceedings are quashed.
( 1 ) THE instant Revisional Application, along with three other Applications, being Criminal Revision Nos. 1175, 1176 and 1177 of 1991 under Section 482 of the Code of Criminal Procedure are all directed against the order dated 18/3/1991 passed by the learned Chief Metropolitan Magistrate at Calcutta in case No. C/573 of 1991 directing issue of processes against all the accused-petitioners therein under Sections 276c (l) and 277 of the Income Tax Act praying for quashing the said proceedings on the grounds set forth therein.
( 2 ) M/s. Warren Tea Ltd. (hereinafter referred to as Company) had filed its Return on 29/8/1986 in form No. 1 under Section 139 (1) of the Income Tax Act (hereinafter referred to as Act) relating to its previous year ending on 31st March, 1986 for the Assessment year 1986-87, duly verified and signed by the accused-petitioner No. 8, Sri P. K. Bose, in the office of the Deputy Commissioner of Income Tax, Special Range-2, Calcutta. The Company had shown in the said Return an amount of Rs. 6,02,22,478/- only under the heading profit before taxation as per profit and loss accounts for the year ended on 31st March, 1986. The Company in the said Return had shown various other income from different sources, and had claimed deduction for the total amount of Rs. 44,40,706/- under four different Heads, as indicated below, under the various provisions of the Income Tax Act
1. payments made to various parties
(on voucher, each exceeding Rs. 2,500/) 2. Liabilities towards Bonus, Sales Tax Rs. 1,42,888/- 3. Commission paid on foreign contracts Rs. 32,37,083/- 4. Purchases of complimentaries. Rs. 8,96,870/- Rs. 1,63,925/-
The Company had finally shown an amount of Rs. 2,29,17,870. 00 (rounded up) as its total income upon which it was liable to pay income tax.
( 3 ) THE Assessing Officer had completed the assessment proceeding and had made assessment for the year 1986-87 under Section 143 (3) of the I. T. Act on 31/3/1989 after obtaining various details and explanatory statements from the Company upon issue of notice under Section 143 (2) of the Act. In his aforesaid Assessment Order, he had disallowed certain claims of the Company for deduction of different amounts on different Heads either wholly or in part, and had assessed a total amount of Rs. 2,95,44,923/- as taxable income. While communicating the Assessment Order to the Company on 25/4/1989 (beyond the statutory period), the Assessing Officer, along with the Assessment Order, had issued notices under Sections 274/271 and 273 (1) of the Act initiating penalty proceedings against the company in connection with its Return submitted for the Assessment year 1986-87.
( 4 ) BEING aggrieved by and dissatisfied with the aforesaid order of Assessment dated 31/3/1989 passed by the aforesaid Assessing Officer, the Company had preferred appeal there against under Section 249 of the Act before the Commissioner of Income Tax (Appeal) on 23/4/1989. The Company had thereafter prayed for stay of the penalty proceedings during the pendency of the appeal, which was granted. The said appeal was finally heard and disposed of by the Commissioner of Income Tax, Calcutta, on 26/3/1990 and the appeal was allowed in part with various directions upon the Assessing Officer.
( 5 ) NOT being satisfied with the order of the aforesaid Appellate Authority, the Company had again preferred appeal before the Income Tax Appellate Tribunal (hereinafter referred to as Tribunal) on 25/5/1990 under Section 253 of the Act, which had eventually been disposed of during the pendency of the instant four proceedings before this Court on 6/1/1992. The said appeal by the Company had also been partly allowed in the manner and for the reasons recorded therein, as appearing from Annexure TCT to the supplementary Affidavit filed on behalf of the Company on 13. 5. 1993. While the said appeal was pending before the (Income Tax Appellate) Tribunal, the Assessing Officer had issued
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