Bangalore District Court
The Income Tax Officer vs M/S. B.M. Developers on 19 March, 2024
KABC090000862018
Presented on : 02-04-2018
Registered on : 02-04-2018
Decided on : 19-03-2024
Duration : 5 years, 11 months, 17 days
BEFORE THE SPECIAL COURT FOR ECONOMIC
OFFENCES: AT BENGALURU
Dated this the 19th day of March 2024
:Present:
Sri. VISHWANATH C GOWDAR., B.A.L., LL.M .,
Presiding Officer,
Special Court for Economic Offences,
Bengaluru
C.C.No.75/2018
Complainant: The Income Tax Department,
By its Income Tax Officer (TDS),
Ward-1(1), HMT Bhavan,
Bellary Road,
Bengaluru.
(Reptd. By Sri. CB., Advocate (Spl. P.P)
Vs.
Accused : 1. M/s. B.M. Developers,
#1668/A, G.V. Complex,
2nd Floor, 14th Main Road,
HSR Layout,
Bengaluru - 560 102.
[A partnership firm Reptd. by its
Managing Partner Sri. Gajendra P]
2 C.C.75/2018
2. Sri. Gajendra P,
Managing Partner,
#1668/A, G.V. Complex,
2nd Floor, 14th Main Road,
HSR Layout,
Bengaluru - 560 102.
(Reptd. By Sri. RMK., Advocate)
: JU DG M E NT :
The instant case emanates from the complaint filed by
the complainant alleging that, the accused Nos.1 & 2 have
committed offences punishable U/s.276B r/w Section 278B
of Income Tax Act, 1961 (hereinafter referred to as the "IT
Act").
2. The complainant's case in nutshell is as under:
The accused No.1 is the company registered under the
Companies Act, engaged in the business of construction and
property development. The accused No.2 is claimed to be the
Managing Partner of the accused No.1 company, responsible
for day to day conduct and business of the accused
No.1/company. The Assessing Officer of the complainant
Department issued the notice U/s.2(35) of the IT Act treating
the accused No.2 as the Principal Officer of the accused
No.1/company for the financial year 2013-14. It is further
complainant's case that, the accused No.1 company deducted
the TDS in the financial year 2013-14 on various heads under
Sections 194C, 194J and 194H of the Act and defaulted in
remitting the said TDS to the Central Government account
3 C.C.75/2018
within stipulated period of time as contemplated under Rule
30 of the IT Rules for the tune of Rs.18,04,516/-. The
Commissioner of Income Tax, TDS issued show cause notice
dated 10.02.2017 to accused Nos.1 & 2. The accused Nos.1
& 2 have not chosen to respond to the said notice, so also the
letters addressed to accused affording opportunity of hearing.
The accused No.1 company being statutorily bound to remit
the amount deducted as TDS, the accused No.2 being
responsible for the every act of the accused No.1 company,
have contravened Section 278B and 276B of the IT Act
respectively. The complainant has further alleged that, the
accused No.1 company being represented by its Principal
Officers i.e., accused No.2 having failed to comply with the
statutory provisions as mentioned supra without any
justifiable cause have committed the offences punishable
U/s.276B r/w 278B of the IT Act. Hence, this complaint.
3. Upon receiving the complaint, the sworn statement of
the complainant was dispensed pursuant to the complainant
being public servant as contemplated U/s.200(a) of Cr.P.C.
Thereafter, the cognizance of the offences punishable
U/s.276B r/w 278B of the IT Act has been taken and process
has been issued to the accused Nos.1 & 2.
4. The accused Nos.1 & 2 being served with the
summons, accused No.2 appeared through his counsel and
has been enlarged on bail, pursuant to the bail application
being made by the accused No.2. After having recorded
Evidence before Charge as contemplated U/s.244 of Cr.P.C.,
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in so far as the complainant witnesses on having heard before
the charge, the charge has been framed and read over and
explained to the accused No.2, he pleaded not guilty and
claimed to be tried.
5. The complainant has examined two witnesses on its
behalf as PW's-1 & 2 and got marked in all eight documents
as Ex.P-1 to Ex.P-8 and got closed its side of evidence. The
statement of the accused No.2 was recored U/s.313 of
Cr.P.C., he denied the incriminating materials in the
testimonies of the complainant witnesses and not chosen to
adduce his defence evidence.
6. Heard the arguments canvassed by the learned Spl.
PP for the complainant and learned counsel for accused
persons. The learned counsel for the accused has also filed
written arguments in support of his arguments.
7. On considering the complaint, evidence on record
and arguments addressed by the either parties, the following
points would arise for the determination of this court namely:
1) Whether the complainant proves beyond all
reasonable doubts as to the accused No.2 being
the Managing Partner of the accused No.1
company, being in-charge of day to day conduct
of the accused No.1 company, being Principal
Officer U/s.2(35) of the IT Act has contravened
the provisions of IT Act and defaulted in
remittance of TDS being deducted in the
financial year 2013-14 to the tune of
Rs.18,04,516/- to the credit of Central
Government within stipulated period and
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thereby accused No.2 has committed an offence
punishable U/s.276B of the IT Act, 1961?
2) Whether the complainant further proves beyond
all reasonable doubts as to the accused No.1
company has contravened the Rule 30 of the IT
Rules and provisions of IT Act and defaulted in
remittance of TDS being deducted in the
financial year 2013-14 to the tune of
Rs.18,04,516/- to the credit of Central
Government within stipulated period and
thereby accused No.1/company has committed
an offence punishable U/s.278B of the IT Act,
1961?
3) What order?
9. The findings of this court on the above said point is
as under:
Point No.1: In the Negative
Point No.2: In the Negative
Point No.3: As per final order
for the following:
REASONS
10. Point Nos.1 & 2 : These points are taken up together
for discussion as the said points are inter-linked to each
other and also in order to avoid repetition of facts, pursuant
to the facts and circumstances are arising out of the
allegations being interconnected to accused, as morefully set
out in the complaint in the case on hand.
11. It is the case of the complainant that, the accused
No.2 being the Managing Partner of accused No.1 company is
responsible for day to day affairs and business of accused
6 C.C.75/2018
No.1 company being statutorily bound to remit the TDS
deducted under the various heads, though deducted the TDS,
failed to remit the the same within the stipulated period of
time as contemplated under rule 30 of the IT Rules to the
credit of Central Government and thereby committed default
as contemplated U/s.201(1) and 201(1A) of the Act for the
tune of Rs.18,04,516/-.
12. The complainant in order to establish the guilt of
the accused Nos.1 & 2 beyond reasonable doubts, got
examined himself arrayed as CW-1 as PW-1. The said PW-1
has reiterated the complaint averments as to default by the
accused No.1 company, so also, the default by the accused
No.2 by virtue of being the Managing Partner, who was
responsible for the day to day affairs of accused No.1
company and thereby the accused No.2 being guilty of having
committed the offences punishable U/s.276B r/w Section
278B of the IT Act, for non-remittance of the TDS pertaining
to the financial year 2013-14 to the tune of Rs.18,04,516/-.
13. In support of his oral testimony, the PW-1 has
produced and got marked one document as Ex.P-1. Ex.P-1 is
the original sanction order dated 12.02.2018 passed by the
Commissioner of Income Tax, TDS, permitting the
prosecution of the accused Nos.1 & 2 for the offences alleged
in the complaint for default pertaining to the financial year
2013-14.
7 C.C.75/2018
14. PW-1 has been subjected to cross-examination by
the counsel for the accused persons, wherein the witness has
categorically admitted as to CW-2/PW-2 being Assessing
Officer issued the notice U/s.2(35) of the IT Act. PW-1 has
specifically admitted as to the accused having deposited the
TDS along with interest and penalty to the Department
belatedly.
15. CW-2 i.e., the then Income Tax Officer, TDS, Ward
No.1(1), Bengaluru is examined as PW-2. This witness has
accounted as to accused No.2 being Managing Partner of
accused No.1 company and being responsible for the day to
day conduct and business of the said accused No.1 company.
He has also deposed regarding having issued the notice dated
28.11.2016 generated by Central Processing Centre (CPC)
treating the accused No.2 as a Principal Officer. He has also
accounted as to accused No.1 company for having defaulted
in remittance of TDS within statutory period with respect to
the financial year 2013-14. It is also deposed regarding the
accused No.2 having not chosen to respond to the notice
treating him as Principal Officer as well as to the show cause
notice dated 10.02.2017 issued by Commissioner of Income
Tax (CIT). Ex.P-2 is the attested copy of notice generated by
CPC duly signed by the witness U/s.2(35) r/w Section 276B
& 278B of the IT Act. Ex.P-3 is the attested copy of TDS
statement pertaining to accused No.1 company for the
financial year 2013-14. Ex.P-4 is the attested copy of notice
dated 08.02.2017 addressed to accused No.2 U/s.2(35) of the
8 C.C.75/2018
IT Act. Ex.P-5 is the attested copy of speed post
acknowledgement pertaining to communication made to
accused No.1 company. Ex.P-6 to Ex.P-8 are the attested
copies of notices dated 10.02.2017, 15.09.2017 and
25.09.2017 with respect to the proceedings pending before
the office of CIT, TDS in connection to default in remittance of
TDS pertaining to financial year 2013-14.
16. PW-2 has been subjected to cross-examination by
the counsel for the accused persons, wherein he has deposed
as to apart from obtaining statement under TRACES portal
from the Income Tax Department website, he has not
obtained any document from the accused No.1 company in
order to ascertain the accused No.2 being responsible for the
day to day affairs and management of accused No.1 company.
The witness has pleaded ignorance regarding as per rule 30 of
IT Rules within 30 days of default in remittance of TDS, the IT
Department being supposed to issue notice as per Ex.P-2. It
has been specifically admitted as to as per Ex.P-2, the notice
has been issued after lapse of 30 days as per rule 30 of the IT
Rules from the date of default. The witness has also admitted
as to the accused No.1 company having remitted default TDS
amount to the Department.
17. The accused have not chosen to adduce their
evidence in support of their contentions.
18. The learned Spl. PP relying upon the oral and
documentary evidence emphatically argued that, the delay in
9 C.C.75/2018
remittance of TDS for the financial year 2013-14, being
subsequently remitted by accused No.1 company will not
absolve the accused No.2 from his responsibility by virtue of
being the Principal Officer of the accused No.1 company
U/s.2(35) of the IT Act. The Spl. PP has vehemently argued
that, the default in complying the terms of the show-cause
notices and notice as per Ex.P-2, Ex.P-4, Ex.P-6 to Ex.P-8
respectively, the same not being replied by the accused
precludes from denying accused No.2 not being the Principal
Officer U/s.2(35) of the IT Act and amongst these arguments,
it has been sought to convict the accused Nos.1 & 2.
19. The counsel for the accused Nos.1 & 2 profusely
argued that, the accused No.2 has not willfully disobeyed the
provisions of IT Act in remittance of TDS and as such it has
been argued as to the accused Nos.1 & 2 are entitled to be
acquitted of the offences punishable U/s.276B r/w Section
278B of the IT Act. The learned counsel for the accused
persons has also emphasized that the accused No.1 company
is following mercantile system of accounting, wherein, the
TDS will be remitted on actual payment to the concerned
head and not on the basis of entries in the books of accounts.
The counsel for the accused persons has also argued that, no
any iota of documents have been submitted to establish the
accused No.2 being responsible for the day to day conduct
and business of accused No.1 company, as such, it is
emphasized the accused No.2 cannot be made liable for the
act of the accused No.1 company so also cannot be made
10 C.C.75/2018
liable for prosecution for having committed the offences
punishable U/s.276B r/w Section 278B of the IT Act.
Amongst these arguments, sought to acquit the accused
Nos.1 & 2.
" Evaluation and Analysis of Evidence"
20. On over all examination of the complaint, evidence
on record and arguments, this court certainly as to consider
the involvement of accused No.2 in the day to day affairs of
accused No.1 company and the accused No.1 company
having defaulted in remittance of TDS amount though it was
deducted under the various heads as stated in the complaint.
Thereby accused No.2 being vicariously liable for the act of
the accused No.1 company on account of being the Managing
Partner of the said accused No.1 company.
21. An anxious examination of the complaint, the
evidence on record so also the documents relied upon by the
complainant, except the complaint allegations, there is no any
iota of evidence or documents to establish the accused No.2
being the Principal Officer U/s.2(35) of the IT Act. Pursuant
to the accused No.2 having denied his role in the day to day
affairs of the accused No.1 company, in absence of cogent
evidence to demonstrate as to accused No.2 being the
Managing Partner being responsible for day to day affairs, the
court cannot solely rely upon TDS statement as per Ex.P-3 as
well as notices and show cause notice as per Ex.P-2, Ex.P-4
and Ex.P-6 to Ex.P-8 addressed to accused No.2 and also
11 C.C.75/2018
cannot consider the arguments of Spl. PP as to the accused
No.2 having not responded by way of reply to the Ex.P-2,
Ex.P-4 and Ex.P-6 to Ex.P-8. This view of the court is
supported by the decision of Hon'ble Apex Court reported in
(2010)3 SCC 330 in National Small Industries Corporation
Ltd., V/s. Harmeet Singh Paintal and others . So also, as per
the decision of the Hon'ble High Court of Madras reported in
(2018)92 Taxmann.com 308 (Madras) in Kalanithi Maran V/s.
Union of India, New Delhi .
22. The testimony of the PW-1, who is the complainant
having accounted regarding his predecessor in office having
issued the show notice U/s.2(35) of the Act to the accused
No.2 has not withstood the test of cross-examination. The
testimony of the PW-1 does not inspires the confidence of the
court in order to gather the accused No.2 being the Principal
Officer as contemplated U/s.2(35) of the IT Act. Furthermore,
PW-2 having admitted as to except the TDS statement as per
Ex.P-3, no any document has been obtained to show accused
No.2 as a person responsible for the day to day affairs of the
accused No.1 company is crucial to determine the crux in the
case on hand. The relevant portion of the testimony of the
PW-2 is extracted below:
"Apart from having obtained TRACES statement in
the website, I have not obtained any documents
from the accused No.1/firm in order to gather
accused No.2 being responsible for day to day
12 C.C.75/2018
affairs of accused No.1/firm pursuant to being
Managing Partner"
23. It is pertinent to note the complaint ought to have
been lodged within 30 days from the date of sanction as per
the SOP of the IT Department. In the case on hand, the
sanction as per Ex.P-1 was accorded on 12.02.2018. The
complaint has been filed on 27.03.2018. That being the case,
the instant complaint suffers from discrepancy in so far as
which limb of Section 276B(a) of the IT Act has been
contravened, certainly on an anxious examination of the SOP
which very much contemplates within 30 days of receiving the
approval U/s.279(1) of the IT Act, the complaint should be
lodged. This very much transpires that, the complaint in the
case on hand has been lodged very much after lapse of 30
days as contemplated under SOP. Furthermore, the sanction
as per Ex.P-1 is also silent as to contravention with respect to
particular limb of Section 276B(a) of the Act and so also the
show cause notice as per Ex.P-6 is very much silent in these
aspects. That being the case, the accused is very much
entitled to benefit in so far as the violation of SOP by the
complainant and also with respect to the sanction order not
being disclosing the contravention.
" Conclusion"
24. It is settled position of law that, the complainant is
bound to demonstrate the guilt of the accused beyond all
reasonable doubts without giving a scope or room for doubts
13 C.C.75/2018
in so far as the complainant's case. The complainant has
very much failed to establish the crucial aspect of the accused
Nos.2 being the Principal Officer of accused No.1 company as
contemplated U/s.2(35) of the IT Act. The testimony of the
Assessing Officer/PW-2 has also not withstood the test of
cross-examination in so far as the accused No.2 being solely
responsible for the day to day affairs of accused No.1
company. That being the case, this court is justified to hold
that, the complainant has miserably failed to bring home the
guilt of the accused No.2 beyond all reasonable doubts. It is
needless to point out that, the complainant's case is tainted
with substantial improvements, omissions and
contradictions.
25. It is also justifiable to note that as per the Section
276B of the IT Act only contemplates "fails to pay " wherein
the overall meaning on plain reading of aforesaid provision
contemplating "total or complete failure to pay" but "not
failure to pay within the prescribed time" . In this
background, the accused No.1 having remitted the TDS with
interest U/s.201(1A) of the Act belatedly to the complainant
Department with respect to default in remittance of TDS,
certainly inclines the court to accept the arguments as
advanced by the counsel for accused in so far as aforesaid
interpretion of Section 276B of the Act. This view of the court
is supported by the following authorities viz.,
(1) (2007) 162 Taxmann.337 (SC) in the case of CIT
V/s. Tara Agencies
14 C.C.75/2018
(2) (2007) 2 SCC 230 in the case of Raghunath Rai
Baraja and another V/s. Punjab National Bank
and others
(3) (1996) 1 SCC 108 in the case of State Level
Committee and another V/s. Morgardshammar
India Ltd.,
26. The other arguments set out by the accused No.1
company during the course of arguments as well as in the
written arguments, as to accused No.1 company following
Mercantile System of Accounting, wherein, the entries are
made on accrual basis and not on the actual payment basis.
As such, TDS returns were prepared on accrual basis, though
there were no actual payments and deductions as shown in
the books of accounts. This arguments cannot be considered
in absence of the necessary cogent oral and documentary
evidence, pursuant to this particular aspect being only
submitted during the course of arguments without necessary
defence in the course of trial.
27. In light of the discussion made supra, pursuant to
the complainant having miserably failed to bring home the
guilt of the accused No.2, by virtue of being Managing Partner
of accused No.1 company, the accused No.1 company being
juristic person, in absence of convincing and positive evidence
incriminating accused No.1 company having defaulted in
compliance of Rule 30 of the IT Rules by remitting the
deducted TDS amount under the various heads within
statutory period cannot be made liable to having committed
the offence U/s.278B of the IT Act. In light of the reasons
15 C.C.75/2018
assigned supra, this court without any hesitation proceeds to
answer Point Nos.1 & 2 in the Negative .
28. Point No.3: In view of the above findings of this
court on Point Nos.1 & 2, this court proceeds to pass the
following:
ORDER
By exercising the power conferred under section 248(1) of Cr.P.C., the accused Nos.1 & 2 are acquitted of the offences punishable under section 276B r/w Section 278B of the Income Tax Act, 1961.
Consequently, accused Nos.1 & 2 are set at liberty.
The corresponding bail bonds of accused No.2 stands canceled.
(Dictated to the Stenographer directly on computer, typed by him, corrected and then pronounced by me, in open court on this the 19th day of March 2024) (VISHWANATH C GOWDAR) Presiding Officer, Spl. Court for Economic Offences, Bengaluru.
16 C.C.75/2018ANNEXURE:
List of the witnesses examined on behalf of the Complainant:
PW-1 : Rishi Kumar Verma
PW-2 : Amar Kumar Tudu
List of the Documents exhibited on behalf of the Complainant:
Ex.P-1 : Original Sanction Order. Ex.P-2 : Attested copy of Notice. Ex.P-3 : Attested copy of TDS Statement. Ex.P-4 : Attested copy of Notice. Ex.P-5 : Attested copy of Speed Post Acknowledgement. Ex.P-6 to 8: Attested copies of Show Cause Notices.
List of witnesses examined on behalf of the Accused:
- Nil -
List of Documents examined on behalf of the Accused:
- Nil -
Presiding Officer, Spl. Court for Economic Offences, Bengaluru.17 C.C.75/2018
19.03.2024 Complt: Sri. CB A: 1 & 2: RMK For Judgment Spl.,PP for the complainant present.
Accused No.1 company.
Accused No.2 present.
Judgment pronounced in the open court (vide separate order) ORDER By exercising the power conferred under section 248(1) of Cr.P.C., the accused Nos.1 & 2 are acquitted of the offences punishable under section 276B r/w Section 278B of the Income Tax Act, 1961.
Consequently, accused Nos.1 & 2 are set at liberty.
The corresponding bail bonds of accused No.2 stands canceled.
PRESIDING OFFICER.