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2025 Supreme(Online)(Del) 10002

IN THE HIGH COURT OF DELHI AT NEW DELHI
Amit Mahajan, J
DR MANOJ KHANNA – Appellant
Versus
INCOME TAX OFFICE – Respondent
CRL.M.C.-7461/2025

Advocates:
For the Appellants/Petitioners: Mr. Yogesh Jagia, Mr. Amit Sood, Mr. Tarun Dev
For the Respondents: Mr. Siddhartha Sinha

Pre-trial quashing requires material of sterling quality; vicarious liability under Section 278B of Income Tax Act and presumption under Section 278E make disputed facts triable; subsequent payment does not extinguish criminal liability.

Headnote:(A) Income Tax Act, 1961 - Sections 276B, 278B and 278E - Bharatiya Nagarik Suraksha Sanhita, 2023 - Section 528 - Code of Criminal Procedure, 1973 - Section 482 - Pre-trial quashing - Standard for quashing at pre-trial stage requires material of sterling and impeccable quality that would rule out accusations without trial - Rajiv Thapar and Ors. Vs. Madan Lal Kapoor, (2013) 3 SCC 330, para 29. (Paras 18-19)

(B) Income Tax Act, 1961 - Section 278B - Vicarious liability - Every person in charge of and responsible to the company for conduct of business is deemed guilty - Section 278E raises statutory presumption of culpable mental state - Presumption can be rebutted only at trial. (Paras 29-30)

(C) Income Tax Act, 1961 - Section 276B - Failure to pay deducted TDS - Subsequent deposit does not obliterate criminal liability unless statute so provides - Delay in deposit, even if eventually paid, constitutes an offence. (Para 28)

Facts of the case:
A complaint under Section 200 CrPC was filed by the Income Tax Department alleging that the petitioner, as Managing Director of the accused company, along with another director, failed to deposit TDS of Rs. 2,09,13,002/- deducted during the Financial Year 2017-18 within the stipulated time. Show cause notices were issued, replies admitted delay, and sanction order dated 18.05.2022 was passed. The Trial Court took cognizance and issued summoning order dated 21.10.2024. The petitioner sought quashing, arguing that the co-accused was solely responsible for TDS matters and that the TDS was eventually paid belatedly.

Findings of Court:
The Court held that the petitioner was the Managing Director and a person in charge of the company. The default in deposit is undisputed. The defence that the co-accused admitted sole responsibility raises a disputed factual issue which cannot be adjudicated at the pre-trial stage. The material produced by the petitioner is not of sterling and unimpeachable quality to warrant quashing. The statutory presumption under Section 278E and vicarious liability under Section 278B require trial. Subsequent payment does not extinguish liability. The petition is dismissed.

Issues: Whether the petitioner can be exonerated at the pre-trial stage based on the co-accused's admission of sole responsibility? Whether subsequent deposit of TDS after default absolves the petitioner of criminal liability?

Ratio Decidendi: At the pre-trial stage, the High Court cannot conduct a mini-trial or appreciate disputed facts. The material must be of such sterling quality that it would rule out the accusations. Here, the petitioner’s role as Managing Director, the statutory presumption, and the disputed nature of who was responsible for the default all require trial. The petition fails. Result : Petition dismissed.

AMIT MAHAJAN, J. (Oral)

1. The present petition has been filed under section 528 of the Bharatiya Nagarik Suraksha Sanhita (‘BNSS’), read with Section 482 of the Code of Criminal Procedure (‘CrPC’) seeking quashing of the Complaint Case bearing No. 119/2024 initiated for the offences under section 276B read with section 278B and 278E of the Income Tax Act 1961 (‘the Act’) and the summoning order dated 21.10.2024 passed therein, qua the Petitioner.

2. Succinctly stated, a compliant under section 200 of the CrPC was filed by Deputy Commissioner of the Income Tax Department alleging that Accused no. 2/Sh. Sanjeev Mahajan and Accused no. 3/Petitioner- Dr. Manoj Khanna were the Principal Officers/Directors of the Accused no. 1/Company- M/s. Enhance Aesthetic & Cosmetics Studio Pvt. Ltd. & Ors., during the Financial Year 2017-18. Sh. Sanjeev was the wholetime director of the company and the Petitioner was the Managing Director.

3. It was stated that the Accused no. 1/Company is the holder of TAN No. DELE06583D and during the financial year 2017-18, the company had made payments to various persons and had deducted TDS. The total amount of TDS deducted by the accused persons was Rs. 2,09,13,002/- but the said amount of TDS was not deposited into the Government treasury within the stipulated time limit as per the Act.

4. Consequently, the DCIT, Circle - 74(1) issued notice of default dated 05.11.2019 intimating the accused regarding the default committed and the Show Cause Notice dated 09.12.2019 was also issued to Accused no. 2 and the Petitioner.

5. It is stated that Accused no. 2 filed the reply vide letters dated 10.12.2019 and 12.12.2019 wherein he admitted the delay in filing TDS. Vide Letter dated 20.12.2019, Accused no. 2 again admitted the delay in filing TDS.

6. Vide Orders dated 22.12.2019 and 13.01.2020, passed under section 2(35) of the Act, the DCIT, Circle - 74(1) held Sanjeev Mahajan and Petitioner/Manoj Khanna as Principal Officers/Responsible Officers of Accused no. 1/Company.

7. After the case was referred to CIT(TDS), several notices were issued and opportunity of being heard was granted the accused persons. Consequently, the CIT(TDS) after examining the documents on record passed the sanction order dated 18.05.2022 against all the accused for prosecution.

8. The learned Trial Court took cognizance of the complaint filed by the Respondent and passed impugned summoning order dated 21.10.2024, thereby summoning all the accused persons including the Petitioner herein.

9. Aggrieved, the Present petition has been filed seeking quashing of the complaint case as well as the summoning order.

10. The learned Counsel for the Petitioner submits that the Petitioner has been wrongly summoned in the present case and the complaint along with the consequential proceedings emanating therefrom are liable to be quashed.

11. He submits that the Accused No.2/Sanjeev Mahajan was the CEO and Director of the Company, and was solely responsible for managing affairs of the company and deducting and depositing TDS, which has been admitted by Accused No.2 in his contemporaneous replies placed on record.

12. He submits that the summons have been issued without appreciating that the Petitioner was not responsible for deduction of tax at source and deposit thereof.

13. He also submits that it is not a case where TDS has not been paid, rather the same has been paid belatedly.

14. Per Contra, the learned Counsel for Respondent vehemently opposes the grant of any relief to the Petitioner and submits that it is an admitted position that the Petitioner was the Managing Director of the accused Company and responsible for the day-to-day functions of the company.

15. He further submits that the Sanctioning Authority has passed a detailed Sanction Order after recording it’s satisfaction that there existed sufficient material to establish commission of an offence under the Act, and that the Petitioner, being in charge and responsible for the conduct of the business of

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2025 Supreme(Online)(Del) 10002

IN THE HIGH COURT OF DELHI AT NEW DELHIAmit Mahajan, JDR MANOJ KHANNA – AppellantVersusINCOME TAX OFFICE – RespondentCRL.M.C.-7461/2025

Pre-trial quashing requires material of sterling quality; vicarious liability under Section 278B of Income Tax Act and presumption under Section 278E make disputed facts triable; subsequent payment does not extinguish criminal liability.

Cases Referred (1)

IN THE HIGH COURT OF DELHI AT NEW DELHI
Amit Mahajan, J
DR MANOJ KHANNA – Appellant
Versus
INCOME TAX OFFICE – Respondent
CRL.M.C.-7461/2025