Madras High Court
K. Subramanyam vs Income-Tax Officer on 22 January, 1991
Equivalent citations: [1993]199ITR723(MAD)
JUDGMENT Swamidurai, J.
1. This is a petition for quashing the proceedings in C. C. No. 365 of 1987 on the file of the learned Additional Chief Metropolitan Magistrate, Economic Offences-I, Egmore, Madras-8.
2. The third accused is the petitioner. He along with K. Subramanyam and Co., and K. Arumugasamy, were charged for offences punishable under sections 276C(1)(i) and 277 of the Income-tax Act and also under sections 193, 196 and 420 read with section 511, Indian Penal Code.
3. In para 3 of the complaint, there is a reference that the second and third accused are responsible to the first accused firm for the conduct of the business under section 276B of the Income-tax Act. Apart from that there is no other allegation as against the third accused that he has committed or that the is responsible for the commission of such offences. There is no mention even in the complaint that the third accused made any false entries or made any false statement before the income-tax authorities. Section 278B of the Income-tax Act reads as follows :
" 278B. (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..."
4. Therefore, there is no allegation in the complaint that the petitioner at the time of the commission of the offence was in charge of and responsible to the company for the conduct of the business. What is alleged in the complaint is that the second and third accused are responsible to the first accused firm for the conduct of the business. The complaint does not show that at the time the offence was committed, the third accused was in charge of and was responsible to the company for the conduct of the business. It is only "and" and not "or". The prosecution has to make out the allegation first that the third accused was in charge of and was responsible to the firm. But the words "in charge" were absent in the complaint. These two ingredients have to be alleged and then proved by the prosecution. When there is no allegation in the complaint itself, they cannot improve it by letting in evidence later on.
5. Learned counsel for the petitioner cited a decision of the Supreme Court reported in Girdhari Lal Gupta v. D. N. Mehta, , in which their Lordships of the Supreme Court observed in para 6 as follows (at page 2163) :
"What then does the expression 'a person in charge and responsible for the conduct of the affairs of a company mean' ? It will be noticed that the 'company' includes a firm or other association, and the same test must apply to a director-in-charge and a partner of a firm in charge of a business. It seems to us that in the context a person 'in charge' must mean that the person should be in overall control of the day-to-day business of the company or firm. This inference follows from the wording of section 23C(2)."
6. There is no allegation that the third accused/petitioner herein had control of the day-to-day business of the company or firm on the particular date. Learned counsel for the petitioner also relied upon the judgment reported in Javer (D. K.) v. State [1985] L. W. Crl. 45 (Singaravelu J.). The learned judge in the above-quoted judgment observed that "a perusal of the complaint shows the allegation so far as these petitioners are concerned are vague and they are impleaded just because they are directors of the company. It is not even averred in the complaint as to the part played by the petitioners in the business. There are not even allegations regarding the part played by these petitioners in the business except that they are mere directors. None of them is managing director, and the managing director, if any, has not been impleaded as an accused. In these circumstances, the prosecution against the petitioners, who are mere directors, is not sustainable."
7. In the instant case, there is no specific allegation as against petitioner in the complaint itself for invoking the provisions under section 278B of the Income-tax Act. In this view, the proceedings in C. C. No. 365/87 are quashed as against the third accused/petitioner herein. The petition is allowed.