Delhi District Court
Vinod Viz vs Income Tax Office (Ito) on 17 January, 2019
IN THE COURT OF SH. VIMAL KUMAR YADAV, SPECIAL JUDGE
CBI, (P.C. ACT)08, CENTRAL DISTRICT
TIS HAZARI COURTS, DELHI
Vinod Viz
S/o Late Sh. K. L.Viz,
R/o 6/3, Kalkaji Extension
New Delhi 110019 .........Petitioner
Versus
Income Tax Office (ITO)
Income Tax Commissioner
Office at: S. P. Mukherjee Marg,
Civic Center, Minto Road,
New Delhi110002 .........Respondent
Crl. Appeal. No. : 400/2018
CNR No. : DLCTOI0138822018
Date of institution : 23.10.2018
Date of reserving order : 17.01.2019
Date of pronouncement : 17.01.2019
JUDGMENT
1. Additional Chief Metropolitan Magistrate (Special Act), Central District, Tis Hazari Courts through the impugned judgment dated 05.9.2018 and the order on sentence dated 25.09.2018 has held guilty, convicted and sentenced the appellant Vinod Viz, along with M/s Viz Construction Company Pt. Ltd., for a period of six months rigorous imprisonment and to pay fine of Rs. 25,000/, in default of which to undergo simple imprisonment for one month for offence(s) under Section 276B read with Section 278 B of Income Tax Act.
2. Aggrieved by the said judgment and oder on sentence appellant Vinod Viz has preferred the instant appeal assailing the CA No. 400/2018 Vinod Viz Vs. ITO Page No. 1 of 7 judgment on various grounds.
3. The indispensable facts which led to the institution of the complaint by the Income Tax Department leading to the conviction of the appellant and filing of this appeal can be summed up in the following manner:
i) That the appellant herein and M/s Viz Construction Pvt. Ltd. failed to deposit the amount of the tax deducted at source with the Income Tax Department in respect of the financial year 200910, as such a lapse being an offence under Section 276B read with Section 278B of the Income Tax act and, therefore, complaint came into existence on 11.03.2016 which was supported by various documents.
ii) Appellant was summoned and precharge evidence was led on behalf of the respondent department.
Appellant did not opt to crossexamine the only witness examined by the respondent department, reserving his right to conduct the crossexamination at post charge stage, which was carried out on behalf of the appellant after framing of the charge. Statement of the accused was recorded U/s 313 Cr.P.C.
Appellant did not opt to lead any evidence in defence and as such, after conclusion of arguments, the appellant was convicted and sentenced through the impugned judgment and order.
4. Appellant has come up with the plea that despite complaint being filed after six years of delay, it lacks the statutory requirement as notice under Section 2(35) of the Income Tax Act, which is a precondition to initiate action against the defaulter under the relevant provisions was not served upon the appellant, therefore, prosecution, in the first place, could not have taken place and in any case, appellant was entitled to be acquitted on the basis of this fact only. In this context counsel for the appellant has drawn the attention of the court to the crossexamination of the only witness examined by the respondent department, visavis notice under Section 2(35) of Income Tax Act Ex. CW1/4, who has stated that proof of dispatch of notice under Section 2(35) of Income Tax Act has been reflected at CA No. 400/2018 Vinod Viz Vs. ITO Page No. 2 of 7 serial no. 6 of the Dispatch Register, copy of which is Ex. PW1/R1. It has been inadvertently taken as the proof of service of the notice under Section 2(35) of Income Tax Act. The witness CW1 Narender Juyal has categorically stated that he has not brought any record to prove the service of notice under Section 2(35) of the Income Tax Act nor any such document has been placed on record. The original Dispatch Register brought by CW1 does not contain address of the company which reflects that no notice was even dispatched the address of the appellant. It has also been categorically stated by CW1 that no proof of service of notice under Section 2(35) of Income Tax Act has been placed on record. On the strength of these facts, Ld. Counsel for the appellant has submitted that on account of non compliance of the statutory requirement of the notice as contemplated under Section 2(35) of Income Tax Act, the appellant could not have been held guilty and sentenced. It is submitted that appellant, therefore deserves to be acquitted of the charge. In order to strengthen his arguments, Ld. Counsel for appellant has placed reliance on the judgments in cases of V.P. Punj Vs. Asstt. CIT, 2001, 119 TAXMAN 543 Delhi, Income Tax Commissioner Vs. Delhi Iron Works (P) Ltd. & Ors. [175(2010) DLT 495).
5. Respondent, on the other hand, came up with the plea that the purpose of notice is to notify a person about the contemplated action and the appellant had knowledge of this fact which can be inferred from the crossexamination of CW1 where CW1 was given a suggestion about the sickness of the wife of the appellate, who informed the Income Tax Department as cause of delay in deposit of the tax deducted at source. Additionally, it is submitted that other communications were received by the appellant at that very address where initial communication of notice under Section 2(35) of the CA No. 400/2018 Vinod Viz Vs. ITO Page No. 3 of 7 Income Tax Act was dispatched, therefore in such circumstances presumption is that the notice was served upon the appellant and, therefore, appellant cannot take advantage of this fact. The appellant has, additionally, also not cared to bring any evidence on record about the information given by him qua the illness and hospitalization of his wife, who unfortunately expired. In such circumstances, stand taken by the appellant has not been substantiated and the respondent has brought on record that there was delay in depositing of the amount of tax deducted at source by the appellant, thus, the impugned judgment and order cannot be interfered with on any count of either facts or law.
6. I have considered the submissions made by the contesting sides and have perused the record as well.
7. On the aspect of delay in filing the complaint, the Ld. Counsel for appellant did not raise any issue although it appears that there is no limitation in law presumably, because of the offence being continuing in nature as well as the TDS is not dispatched. The limitations, if any, may commence from the date when the amount was deposited. And for that matter it has not been pressed, as such this aspect is not required to be gone into further.
8. The only issue raised is that of the notice, as contemplated under section 2 (35) of the Income Tax Act, has not been served upon the appellant. In this context, Counsel for the appellant has also pointed out that there is a mixup in the judgment as it has been observed that Ex.CW1/4 was served upon the accused whereas in the cross examination of CW1, it has been deposited by him in the context of service of the said notice that CW1/5 was served upon the appellant, as reflected at item No. 36 in the copy of the Dispatch Register CW1/R1. The Dispatch Register although reflects the name CA No. 400/2018 Vinod Viz Vs. ITO Page No. 4 of 7 Viz Constructions Pvt. Ltd, but no address has been mentioned in it as to where the said communication was to be delivered. There is no evidence to the effect that the communication was in fact delivered or served upon the appellant especially when appellant asserts that it was not served upon him and that being the case, it cannot be treated to have been proved by the respondent/complainant that the appellant was conveyed the intentions to treat him as Principal Officer of the Company, and that being mandatory, therefore the prosecution doesn't seem to be in consonance with the law. In this context, reference can be made to Sushil Suri and Ors. Vs. State & Ors. (2008) 303 ITR 86 (Delhi) it was held that before a prosecution under Section 276B of the Act can be launched against the Director he should have been notified that department/AO has intention of treating him as "principal officer" of the company. In absence of such notice under section 2 (35) (b) of the Act, prosecution against the Director cannot be continued and is bound to fail.
In Madhumilan Syntex Ltd. and Ors. Vs. Union of India, IV (2007) SLT 14=II (2007) CCR 116 (SC)=(2007) 290 ITR 199 (SC), the Supreme Court has held as under:
"To treat the directors of a company as "principal officers" there is no need to issue a separate notice or communication to them that they are to be treated as "principal officers", before the issuance of the show cause notice under Section 276B read with Section 278B. It is sufficient that in the showcause notice under Section 276B read with section 278B, it is stated that the directors are to be considered as principal officers of the company under the Act and such a complaint is entertainable by the Court provided it is otherwise maintainable.
(Emphasis supplied)
9. In Greatway (P) Ltd. & Ors. Vs. Asstt. CIT, [1993] 199 ITR 391 (P&C), Punjab and Haryana High Court has held that in the CA No. 400/2018 Vinod Viz Vs. ITO Page No. 5 of 7 absence of appointment of a principal officer by issuing a notice by the AO, the prosecution, if any, could only be launched against the petitioner company. Similar is the view expressed in ITO Vs. Roshini Cold Storage (P) Ltd. and Ors., (2000) 245 ITR 322 (Mad). In this case Madras High Court held that in case Income Tax Officer sought to prosecute the director along with company for an offence under Section 276B of the Act then it was incumbent upon him to issue a notice under Subclause (b) of Section 2 (35) of the Act expressing his intention to treat the director as "principal officer" of the company and in absence thereof, director shall be entitled to the acquittal.
10. Thus, it can be inferred from the above that before initiating a prosecution under section 276B of the Act against the director of a company, notice under section 2(35) of the Act has to be issued by the Assessing Officer clearly indicating and expressing his intention to treat such director of the company as "principal officer". In the instant case, the said intention and decision could not be conveyed to the appellant, which was mandatory.
11. It is primarily for the prosecution/the complainant to establish its case and therefore the entire responsibility was on the respondent to prove its case. The inferences and presumptions cannot substitute the evidence, nor the responsibility or the onus shift towards anyone else except the prosecuting agency. In these circumstances, when CW1 has categorically admitted that the proof of dispatch/service of CW1/4 is not there on record, therefore it cannot be held that the appellant was notified with the intention of the respondent to treat him as the Principal Officer of the Company.
12. However, the record reflects that the evidence is there which couldn't be brought by the respondent. The Ld. Trial Court has came to a conclusion based upon the testimony of CW1 whereas the CA No. 400/2018 Vinod Viz Vs. ITO Page No. 6 of 7 CW1 has not stated about the service of the notice under section 2 (35) of the Income Tax Act, therefore in the absence of the foundation, the edifice can't be raised and if raised, cannot be sustained and is bound to collapse as is the case here. In view of the aforesaid facts and circumstances and the findings in the above referred judgments, the impugned judgment cannot be sustained and therefore the same is set aside. Keeping in view that the respondent has the requisite documents, showing the proof of service of the notice under section 2 (35) of the Income Tax Act, therefore considering the entire gamut of facts and circumstances, the matter is remanded back to the Ld. Trial Court to give an opportunity to the respondent to bring on record the proof of service of notice. Needless to say that the appellant shall have also an equal opportunity to not only cross examine but to bring evidence if he so desires on this issue. Thereafter, the Ld. Trial Court shall consider the matter afresh and proceed according to law. Parties are directed to appear before the Ld. Trial Court on 30.01.2019.
13. With these observations and directions, the criminal appeal stands disposed of.
14. Copy of the judgment alongwith Trial Court record be sent back. File of the Criminal Appeal be consigned to Record Room.
Digitally signed by VIMAL VIMAL KUMAR KUMAR YADAV Announced in the open court YADAV Date: 2019.01.19 10:34:50 +0530 today i.e. 17.01.2019 (VIMAL KUMAR YADAV) Special Judge (PC Act), CBI08 Central District, THC, Delhi CA No. 400/2018 Vinod Viz Vs. ITO Page No. 7 of 7