Delhi District Court
Ito vs M/S Century Communication Ltd. on 17 April, 2015
IN THE COURT OF SH. DEVENDRA KUMAR SHARMA
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts) CENTRAL
TIS HAZARI COURTS, DELHI
ITO vs M/s Century Communication Ltd.
U/s 276CC of Income Tax Act
CC No.25/4 to 31/4
JUDGMENT
(a)Serial no. of the case : 02401R0122372013
02401R0122352013
02401R0122332013
02401R0122322013
02401R0122302013
02401R0122292013
02401R0122242013
(b)Date of commission of offence : Assessment Year 200506 to 201112
(c)Name of complainant : Sh. Manish Gupta,
DCIT, Central Circle13,
Income Tax Department, New Delhi
(d)Name, parentage, residence: 1)M/s Century Communication Ltd.,
Plot No.17B & C, Sect.16A,
Film City, Noida, Uttar Pradesh
2)P.K. Tiwari, c/o above
3)Anand Tiwari, c/o above
4)Abhishek Tiwari, c/o above
5)Meena Tiwari, c/o above
(e)Offence complained of/ proved : U/s 276CC of Income Tax Act
(f)Plea of accused : Pleaded not guilty
(g)Final order : Acquitted
(h)Date of such order : 17.04.2015
Date of Institution of complaint: 12.03.2013
Arguments heard/order reserved: 07.04.2015
Date of Judgment : 17.04.2015
ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 1 of 14
Brief statement of the reasons for the decision:
1. This common judgment will dispose off the following seven complaint cases filed by the complainant Mr. Manish Gupta, the then Deputy Commissioner of Income Tax, against the accused with identical allegations for the offence punishable u/s 276CC of the Income Tax Act (for short the 'Act') pertaining to Assessment Year (AY) 200506 to 201112 that they failed to file the return of income for the relevant Assessment Years within stipulated period despite notice u/s 153A and 142(1) of the IT Act. The details of the complaints are :
Sl. No. CC No. U/s Assessment Year
1 25/4 276CC IT Act 201112
2 26/4 276CC IT Act 201011
3 27/4 276CC IT Act 200910
4 28/4 276CC IT Act 200809
5 29/4 276CC IT Act 200708
6 30/4 276CC IT Act 200607
7 31/4 276CC IT Act 200506
2. Since the allegations made in these complaints as well as evidence led are common in all the complaints, therefore, complaint case no.31/4 for the AY 200506 is taken up as test case.
3. The warp and woof of the case are that a search u/s 132 of the Act was conducted in March, 2011 in the group companies of which aforesaid accused were directors and certain documents were found and seized from the premises of the accused. Thereafter, a notice u/s 153A of the Act was issued and served to the accused asking them to file their return of income within 20 ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 2 of 14 days but they failed to do so despite opportunities. Thereafter, a notice u/s 142(1) of the Act was issued to the accused to file their return of income on or before 24.05.2012 but again they failed to do so. It is further alleged that despite issuance of show cause notices, accused have willfully not filed the return of income within time given in the notices. Thus, accused have committed an offence u/s 276CC of the Act. Hence, present complaint.
4. Accused were summoned. Copies of complaint and of documents were supplied. After precharge evidence, charge was framed against the accused u/s 276CC of the Act, to which they pleaded not guilty and claimed trial.
5. In order to substantiate the allegations, complainant examined himself as PW1. In his evidence PW1 reiterated the facts of the complaint stating that despite several notices, accused failed to file return of their income for the relevant assessment years. The witness also proved on record the relevant documents like complaint Ex.PW1/1, sanction to launch present prosecution Ex.PW1/2, list of witness Ex.PW1/3, notice u/s 153A of the IT Act as Ex.PW1/4 and its acknowledgment letter by the accused as Ex.PW1/5, letter dated 18.04.2011 showing supply of photo copies of all the seized documents to the accused as Ex.PW1/6, another letter dated dated 21.02.12 sent by complainant to accused as Ex.PW1/7, copy of postal receipt mark B, show cause notice dated 03.02.2012 as Ex.PW1/5, copy of vakalatnama authorizing Sh. C.S. Anand, advocate by the accused to do the needful as Ex.PW1/8, letter/reply dated 29.02.2012 Ex.PW1/9, by the accused confirming receipt of letter ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 3 of 14 Ex.PW1/7, letter dated 25.04.2012 sent by PW1 to accused no.1 as Ex.PW1/11, letters dated 12.04.2012, 28.04.2012 and 04.05.2012 written on behalf of accused to complainant department as Ex.PW1/10, Ex.PW1/12 and Ex.PW1/13, copy of the notice u/s 142(1) of the Act issued to the accused as Ex.PW1/14, inspector's report regarding service of the said notice Ex.PW1/15, letter dated 24.05.2012 written on behalf of accused as Ex.PW1/16 letters/replies dated 16.07.2012 and 19.07.2012 sent by the complainant to the accused as Ex.PW1/17 and Ex.PW1/18, another letter dated 25.07.2012 written by Sh. Abhishek Tewari son of accused to the complainant department as Ex.PW1/19, another show cause notice dated 26/27.12.2012 issued to the Principal Officer of accused no.1 company as Ex.PW1/20, copy of show cause notices dated 26/27.12.2012 issued to accused no.2 to 5 as mark "C to F" its reply as Ex.PW1/21, another reply/letter dated 12.02.2013 written by accused no.2 requesting the complainant for compounding and not launching prosecution as Ex.PW1/22, its reply dated 27.02.2013 as Ex.PW1/27 whereby accused was intimated regarding rejection of compounding application. The witness was cross examined at length.
6. Statements of accused persons were recorded u/s 313 Cr.P.C read with section 281 Cr.P.C separately.
In their statements, accused Abhishek Tiwari, Anand Tiwari and Meena Tiwari denied the material allegations stating that they were directors for the name sake and were never involved in day to day affairs of the accused no.1 ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 4 of 14 company. They have no personal knowledge about the affairs of the company.
In his statement, accused P.K. Tiwari who is also representing accused no.1 company, stated that other accused Anand Tiwari, Abhishek Tiwari and Meena Tiwari were directors for the name sake but they were never involved in day to day business and affairs of the company. The company had employed professionals for carrying out various duties and obligations. Noncompliance of statutory requirement took place on account of reasons beyond their control. The company had suffered raids at the end of Central Bureau of Investigation and consequently, their personal liberty also stood curtailed. Detailed reasons have been communicated to the department regarding delay in compliance but the department has not considered the same.
7. In support of claim and contentions, accused examined one Sh. Sanjeev Gandhi the then CA of the company as DW1.
In his statement, DW1 Sh. Sanjeev Gandhi deposed that during relevant period he was employed with the company in the capacity of Chartered Accountant. He further deposed that accused no.2 was working as Managing Director of the company and placed reliance upon the document i.e Form 32 Ex.DW1/B filed on behalf of the company with the office of ROC which shows that accused no.2 P.K. Tiwari was appointed as Managing Director. The witness further deposed that the income tax returns were originally filed from 200405 to 200910 (financial years) in time but on 11.03.2011, a raid was conducted on the groups of company by the IT Department and they have ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 5 of 14 taken all the records. In response to notice u/s 153A/142(1) of the Act, while preparing the account/returns much of the informations were required from the accused persons but accused no.2 was in JC and was not in a position to disclose the informations. During this period, CBI also raided the premises and had seized many documents and was calling accused no.2 on day to day basis and ultimately he was arrested and was later on sent to JC and because of this reason accused was unable to disclose the informations thereby depriving him from filing the returns in time after issuance of the said notices. Accused no.2 was unable to disclose anything in absence of the necessary documents and therefore, the returns and explanation required by the department could not be filed in time. He has also placed reliance upon copy of order passed by the Commissioner of Income Tax dated 24/27.01.2015 in the appeal filed by accused in another connected matter 'Mahua Media Pvt. Ltd." as Ex.DW1/A. and order of the appeal in the case in hand is awaited.
8. I have given my thoughtful consideration to the submissions advanced on behalf of parties and gone through the records as well as relevant provisions of law. During the course of arguments, orders dated 25.03.2015 in all the complaint cases filed whereby penalty imposed for delay in filing the return for all the Assessment Years, has been set aside. The complainant department has also confirmed the order after verification.
A) The relevant provisions of section 276CC, 153A and 142(1) of the Act are reproduced below for reference: ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 6 of 14 [276CC. Failure to furnish returns of income. If a person willfully fails to furnish in due [the return of fringe benefits which he is required to furnish under subsection (1) of section 115WDE or by notice given under subsection (2) of the said section or section 115WH or] time the return of income which he is required to furnish under subsection (1) of section 139 or by notice given under [clause (i) of subsection (1) of section 142] or [section 148 or section 153A], he shall be punishable, i. in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; ii. in any other case, with imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.
142. Enquiry before assessment. (1) For the purpose of making an assessment under this Act, the [Assessing Officer] may serve on any person who has made a return [ under section 115 WD or section 139] or in whose case the time allowed under subsection (1) of section 139] for furnishing the return has expired] a notice requiring him, on a date to be therein specified;
[(i) Where such person has not made a return [within the time allowed under subsection (1) of section 139 or before the end of the relevant assessment year] to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or].
[153A. Assessment in case of search or requisition. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) ........
ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 7 of 14 B) It was argued on behalf of the complainant that accused have willfully failed to file the return of income for the relevant AY within time given in the notice despite service of notices and therefore, they may be convicted for the alleged offence. It is further submitted that setting aside of penalty amount for non filing of return within due time has no bearing upon the merits of the case filed for noncompliance of notices u/s 153A of the IT Act.
Learned defence counsel, on the other hand, argued that due to circumstances beyond their control, the return of income could not be filed by the accused within time in compliance of aforesaid notices. It is further argued that the penalty amount in all the connected matters which have been filed on the same facts, has been deleted by the CIT(Appeal) and reliance is placed upon the order Ex.DW1/A. It was further submitted that even now assessment order has also been set aside on the ground that no reasonable opportunity was given and therefore, present complaint is liable to be dismissed. In support of claim and contentions, he also placed reliance upon the judgments reported in "(i)N.L. Sahni & Ors. Vs R. Singh Assistant Commissioner of Income Tax & Anr (2001) 171 CTR (Del) 459 (ii) Rameshwar Prasad Sunderlal & Ors. vs. Union of India (2006) 203 CTR (MP) 287 and (iii) Woodword Governors India (P) Ltd. vs. Commissioner of Income Tax & Ors (2001) 168 CTR (Del) 394".
C) Present complaints were filed by the complainant u/s 276CC of the Act for non filing the return of income for the relevant Assessment Years within time given in the notices despite service of notice u/s 153A of the Act Ex.PW1/4 and u/s ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 8 of 14 142(1) of the Act Ex.PW1/14. In view of section 139(1) of the Act, every person, if his total income during the previous year exceeds the maximum amount which is chargeable to incometax, is bound to furnish a return of his income in the prescribed form verified in the prescribed manner before the expiry of four months from the end of the previous year or before the 30 th day of June of the assessment year which ever is later and otherwise within the period prescribed in notices failing which to show reasonable cause for non filing of return.
D) The defence of the accused is that there is no willful default on the part of the accused as two directors i.e accused no.2 and 3 were in the custody of CBI from 17th July, 2012 to 17th October, 2012 and from 17th July to 31st October, 2012 respectively. Due to circumstances beyond their control, the return of income could not be filed by the accused within time for the relevant Assessment Years. The accused have raised same defence in the appeal before the CIT (A) in other six connected cases of "Mahua Media Pvt. Ltd"
which have been filed by PW1 with identical allegations and same has been considered and appeal has been allowed. In the said appeal/order Ex.DW1/A, the CIT(A) has held that there was a reasonable cause for nonattendance during the course of assessment proceedings and AO should have adopted a liberal approach in this regard. Furthermore, vide order dated 25.03.2015, the CIT (A) has allowed the appeals filed by the accused in the present matters accepting that non compliance of notices u/s 142 of the Act was not intentional but because of reasonable cause and deleted the penalty. Relevant para of ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 9 of 14 the order dated 25.03.2015 passed by CIT(A) is reproduced below: "In the instant case, it is found that there was a reasonable cause for nonattendance during the income tax proceedings as it can be understood that main directors Sh. P.K. Tiwari and Sh. Anand Tiwair of the company were under custody from 17.07.2012 to 17.10.2012 and 17.07.2012 to 31.10.2012 respectively and consequently in mental agony and trauma.
In view of the above discussion, I found that penalty levied amounting to Rs.60,000/ u/s 271(1)(b) of the Act is not sustainable, accordingly, this penalty is deleted."
9. Deletion of penalty by the CIT(A) has not been disputed by the learned counsel for complainant. Since the penalty order/the basis of prosecution has been set aside by the CIT(A), present prosecution cannot continue in view of the law laid down by the Hon'ble Supreme Court in "(2004) 271 ITR 3134 (P&H) Arvind Jain v C.I.T. (Investigation)". It is further held in the judgment reported as "(1987) 168 ITR 33 (Delhi) Dr. R.P. Gupta vs I.A.C. (Assessment)". Relevant para of the judgment reads as under: Prosecution - Assessment set aside by CIT(A) Entire substratum of the complaint having been taken away by setting aside of assessment order, complaint cannot continue and has to be quashed.
Held The distinction between ss. 250(4) and 251(1)(a) is that whereas under s. 251(1)(a) the initial assessment is set aside and is no longer alive till it is made afresh by the ITO after compliance of the directions given by the appellate authority, under subs.(4) of s.250 the initial assessment is not set aside and is kept alive and only the result of further enquiry is called for by the appellate authority from the assessing authority. When the entire assessment order pertaining to the petitioner which contained objectionable items on the basis of which the complaint was lodged by the respondent against the petitioner, was set aside in its entirety vide order dt. 3rd March, 1986 passed by the CIT(A), the ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 10 of 14 respondentDepartment officer is now left with no basis or material on the basis of which he can prosecute the petitioner regarding that complaint. It is an entirely different proposition that when the fresh assessment regarding the income of the petitioner is made in compliance with the directions made in the order dt. 3rd March, 1986 and if something objectionable pertaining to the same against the petitioner is detected, there would be no impediment in the way of the Department to file a fresh complaint, if so advised, against the petitioner, but as at present the entire substratum of the present complaint having been taken away by the setting aside of the assessment order, the present complaint cannot continue and has to be quashed.
10.Further, it has been held by the Hon'ble Supreme Court in the case reported in "(2004) 2 Supreme Court Cases 731, K.C. Builders and Another vs Assistant Commissioner of Income Tax" that once penalties imposed on the assessee are cancelled, the prosecution can not continue. Relevant para of the judgment is reproduced below: "In the instant case, the penalties levied under section 271(1)(c), were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal, in I.T.A. No.s 31293132. It is settled law that levy of penalties and prosecution under section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under section 276C is automatic.
In our opinion, the appellants can not be made to suffer and face the rigorous of criminal trial when the same can not be sustained in the eyes of laws because the entire prosecution in view of a conclusive finding of the Incometax Tribunal that there is no concealment of income becomes devoid of jurisdiction and under section 254 of the Act, a finding of the Appellate Tribunal supersedes the order of the Assessing Officer under section 143(3) more so when the Assessing Officer cancelled the penalty levied.
In our view, once the finding of concealment and subsequent levy of ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 11 of 14 penalties under section 271(1)(c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order under section 154 of the Act as per the directions of the Tribunal. As already noticed, the subject matter of the complaint before this court is concealment of income arrived at on the basis of the findings of the Assessing Officer. If the Tribunal has set aside the order of concealment and penalties, there is no concealment in the eyes of law and, therefore, the prosecution can not be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Incometax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal. When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants can not survive for further consideration. In our view, that the charges have been framed and the matter is in the stage of further cross examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned magistrate and the High Court is fallacious. In our view, if the trial is allowed to proceed further after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of the Tribunal exhibited as the passing of the order as aforementioned is unsustainable and unquestionable."
11.In the present case, notice u/s 142 of the Act was issued subsequently after the notice u/s 153A of the Act further giving time to accused to file return on or before 24.05.2012. The said notice u/s 142 of the Act Ex.PW1/14 was not complied with. Therefore, penalty was imposed which was later on set aside. As per report filed on record dated 15.04.2015 by the complainant, no further appeal can be preferred. Thus noncompliance of notice u/s 153A of the Act i.e Ex.PW1/4 got merged due to issuance of subsequent notice Ex.PW1/14. Thus, in effect the stand of accused stood accepted by the complainant of having reasonable cause for nonfiling/noncompliance of notices. ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 12 of 14
12.Furthermore, as per the provision of section 140 of the Act, primary duty to file the return is of Managing Director. In the present case, Mr. P.K. Tiwari is the Managing Director of accused no.1 company and it is well settled law that vicarious liability can not be saddled upon all the Directors. Law in this regard has been summarized by our own High Court in case titled as "Sudeep Jain vs M/s ECE Industries Ltd in Cri. M.C. No. 1822/2013, order dated 06.05.2013." While discussing the liability of the director and it was observed that vicarious liability on the part of a person must be pleaded and proved and not inferred. Vicarious liability cannot be imputed merely on the ground that other accused were also director of the company. Same view has been taken by the Hon'ble Apex court in "National Small Industries Corp. Ltd. vs. Harmeet Singh Paintal and Anr., 2010 (2) SCALE 372". Relevant para of the judgment is reproduced below:
24. ... if the accused is not one of the persons who falls under the category of "persons who are responsible to the company for the conduct of the business of the company" then merely by stating that "he was in charge of the business of the company" or by stating that "he was incharge of day to day management of the company" or by stating that "he was incharge of, and was responsible to the company for the conduct of the business of the company", he can not be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person liable under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore, responsible under Subsection (2) of Section 141 of the Act".
13.In view of the foregoing discussions, facts and circumstances and law laid ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 13 of 14 down by the Hon'ble Apex Court and Hon'ble High Court it is held that the present complaint cannot continue in the present form after deletion of the penalty order by the CIT(A). Consequently, present complaint bearing CC No. 31/4 for the AY 200506 is dismissed.
Since, other complaints have also been filed with the identical allegations against accused persons for the offence punishable u/s 27CC of the Act, hence, remaining complaint cases bearing CC No.25/4 to 30/4 respectively for the AY 200607 to 201112 respectively are also dismissed and all accused persons stand acquitted in these cases. However, bail bonds of accused already on record is extended in terms of section 437A for a period of six months. A copy of this judgment be also placed in other complaint cases. File be consigned to the record room after due compliance. Judgment be sent to the server www.delhidistrictcourt.nic.in.
(DEVENDRA KUMAR SHARMA) ACMM(Special Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 17.04.2015 (Total number of page 14) (One spare copy attached) ITO vs M/s Century Communication Ltd. U/s 276CC IT Act CC No.25/4 to 31/4 14 of 14