Telangana High Court
Smt. Meghana Trivedi, Hyd. 2 Othrs., vs State Of Ap., Rep. Pp And Anr., on 8 September, 2022
Crl.Petition No.13712 of 2013
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THE HONOURABLE SRI JUSTICE K.SURENDER
CRIMINAL PETITION No.13712 OF 2013
O R D E R:
This Criminal Petition is filed by the petitioners who are arrayed as Accused Nos.3, 5 and 7 under Section 482 of the Code of Criminal Procedure, 1973 (for short 'Cr.P.C.') seeking to quash the proceedings against them in C.C.No.240 of 2013 on the file of Special Judge for Economic Offences at Hyderabad.
2. The brief facts of the case are that the petitioners are Accused Nos.3, 5 and 7 who are the partners in M/s.Neeta Chemical Agencies partnership firm which is Accused No.1. The complaint was filed by the Assistant Commissioner of Income Tax stating that Accused No.1 is a registered firm engaged in the business of purchase and sale of chemicals. Accused No.2 is the Managing Partner, these petitioners and two others are partners of the said firm who are responsible for the day to day affairs of the firm for conduct of its business. The accused No.1 firm filed income tax returns for the assessment year 2006-2007 on 12.10.2006 declaring a total income of Rs.5,15,419/-. The said return was signed by Accused No.2 which was processed under Section 143(1) on 12.01.2007 and the same was selected for scrutiny, for Crl.Petition No.13712 of 2013 2 which reason a notice under Section 143(2) was issued on 23.10.2007. In the Profit and Loss account furnished by Accused No.1 company, the purchases were shown @Rs.25,30,98,416/- against the sale of Rs.25,76,94,405/-. The books of accounts when checked by the income tax authorities found that during the assessment year 2006- 2007 the transactions amounted to 13,50,35,179/- and no profit was made on such transactions. However, the Accused No.1 firm declared an additional income of Rs.34,70,404/- on such transactions. It is further the case that the investigation wing conducted survey under Section 133A in the business premises of Accused No.1 and sworn statements of Accused Nos.2 and 4 were also recorded. The Assessing Officer of Income Tax had levied a penalty of Rs.11,68,137/-. It is further stated in the complaint that the said amount of penalty was paid and no appeal was preferred against the said penalty.
3. Heard learned counsel for the petitioners and learned Assistant Public Prosecutor for the respondent-State. Perused the record.
4. Learned counsel for the petitioners would submit that except stating that these petitioners were partners in Accused No.1 firm, there is no allegation that they had anything to do with the running of Accused No.1 company. He relied upon the judgments of the Hon'ble Crl.Petition No.13712 of 2013 3 Supreme Court in Cases of National Small Industries Corporation Limited vs. Harmeet Singh Paintal and another1 and Shailendra Swarup vs. Deputy Director, Enforcement Directorate2 and prayed for quashing the proceedings against the petitioners.
5. In view of the aforesaid and on perusal of record, Section 278B makes the persons responsible in running the company vicariously liable.
6. Section 278B of The Income Tax Act, 1961 read as follows:
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, 1 (2010) 3 Supreme Court Cases 330 2 (2020) 16 Supreme Court Cases 561 Crl.Petition No.13712 of 2013 4 manager, secretary or other officer of the company referred to in sub- section (2), shall be liable to be proceeded against and punished in accordance with the provisions of this Act.
[Explanation. - For the purposes of this section,-
(a) "company" means a body corporate, and includes-
(i) a firm; and
(ii) an association of persons or a body of individuals whether incorporated or not; and
(b) "director", in relation to-
(i) a firm, means a partner in the firm;
(ii) any association of persons or a body of individuals, means any member controlling the affairs thereof.]
7. In the complaint except stating that these petitioners were partners in the Accused No.1 firm and bald allegations stating that they were responsible for the day to day affairs of the firm are not narrated in what manner the petitioners were responsible. Even according to the complainant when the premises were searched these petitioners were not found in the premises and it was Accused Nos.2 and 4 who were present and their statements were recorded after going through the account books.
8. The Hon'ble Supreme Court in case of Shailendra Swarup referred to above found that "the expression used in Section 68 of the FERA that "every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business", cannot be read to mean that whosoever was Crl.Petition No.13712 of 2013 5 a Director of company at the relevant time when the contravention took place, must be deemed to be guilty of contravention".
9. The said provision is similar to Section 278B which is states that every person who was in charge and was responsible to, the company for the conduct of the business shall be deemed to be guilty. However, Section 278B(2) states that unless it is proved that the offence has been committed with the consent or connivance or is attributable to any neglect on the part of any person in charge such person shall be deemed to be guilty of the offence.
10. The complaint nowhere states that these petitioners are in any manner responsible for the accounts that were maintained or that they have any say in the day to day business of Accused No.1 company.
11. In the said circumstances, when there are no specific allegations leveled against these petitioners, these petitioners who though are partners in the said firm cannot be prosecuted only for the reason of they being partners.
12. In view of the above discussion, the proceedings against these petitioners/Accused Nos.3, 5 and 7 are liable to be quashed.
Crl.Petition No.13712 of 2013 6
13. Accordingly, the Criminal Petition is allowed and the proceedings in C.C.No.240 of 2013 on the file of Special Judge for Economic Offences at Hyderabad against the petitioners are hereby quashed.
Miscellaneous Petitions, pending if any, shall stand closed.
_____________ K.SURENDER, J Date: 08.09.2022 ns