Delhi District Court
Income Tax Office vs Legend Surface Developers Pvt Ltd on 21 November, 2024
1 of 24 IN THE COURT OF MAYANK MITTAL ADDL. CHIEF JUDICIAL MAGISTRATE (Spl. Acts) CENTRAL, TIS HAZARI COURTS, DELHI CC No. : 540666/2016 CNR No. : DLCT02-021570-2016 Date of Institution : 29.09.2016 Name of the complainant : Income Tax Office its registered office Through Ms. Suman Bala ITO, Ward-75(2) Income Tax Department Laxmi Nagar, District Centre Delhi-110092 Name of accused : 1. M/s Legend Surface Developers Pvt. Ltd.
126, Green View Apartment, Mandi Road, New Manglapuri, Mehrauli, New Delhi-110030
2. Sh. Darayus Nariman, Director C/o M/s Legend Surface Developers Pvt. Ltd.
126, Green View Apartment, Mandi Road, New Manglapuri, Mehrauli, New Delhi-110030 Offence complained of : U/s. 276B r/w section 278-B of The Income Tax Act, 1961.
Date of Reservation : 23.09.2024
Date of Judgment : 21.11.2024
Plea of accused : Pleaded not guilty
Final Judgment : Accused No.1: Convicted
Accused No.2 : Convicted
Brief facts and reasons for decision of the case:-
1 The present complaint u/s 276B r/w Section 278B of the Income Tax Act for the F. Y. 2009-10 has been filed by the complainant who was Income Tax Offcer, Ward-75(2) and had jurisdiction to the case of M/s Legend Surface Developers Pvt. Ltd. at the relevant point of time, under the Income Tax Laws, in discharge of official duties as per the Sanction / Authorization accorded u/s 279(1) of the Income Tax Act by Dr. Vipin Chandra, Commissioner of Income Tax, TDS- Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
2 of 24 1, New Delhi directing the present assessing officer, Ward-75(2) to file the present complaint.
2 That on the basis of the report generated from the ITD system, it is revealed that the accused had deducted tax at source under various sections of TDS amounting to Rs.45,22,357/- during the relevant financial year to be deposited into the Govt. account within the stipulated period i.e. on or before seven days from the end of the month in which the deduction is made as per the provisions of Income Tax Act r/w Rule 30 of the Income Tax Rules. That a show cause notice for F.Y. 2009-10 u/s 2(35) of the Income Tax Act dated 08.12.2014 was issued to Accused No.2 Darayus Nariman being Director of accused No.1 company, of the intention of treating him as Principle officer of M/s Legend Surface Developers Pvt. Ltd. for the relevant financial year. In response to the show cause notice, the accused through its AR filed reply dated 21.01.2015 for seeking adjournment and case was accordingly adjourned for 09.02.2015.
However, on 09.02.2015, no reply was received, therefore notice / letter dated 12.03.2015 was issued for furnishing explanation on or before 20.03.2015 and same was also remained un-complied with. That after perusing the records and the show cause notice u/s 2(35) of the I T Act, an order u/s 2(35) of the IT Act dated 30.03.2015 was passed holding Sh. Darayus Nariman, Director, as Principal Officer for the relevant financial year as he was connected with management / administration of the deductor company i.e. accused No.1 and thus, was the person responsible and incharge of day to day affairs of the company. That a proposal dated 30.03.2015 for launching of prosecution was referred to the Commissioner of Income Tax(TDS-1), New Delhi. That a show cause notice u/s Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
3 of 24 279(1) of IT Act dated 14.08.2015 was issued to the accused by the CIT (TDS-I). That reply dated 02.09.2015 to the communication dated 14.08.2015 was received by the complainant. Thereafter, sanction u/s 279(1) of the IT Act dated 07.09.2016 was issued/granted. That the tax deducted at source by the deductor from the deductee's account was the trust money with them and they were the custodian of the said amount for and on behalf of Govt. of India. The accused has thus committed the offence punishable u/s 276B r/w 278B of the Income Tax Act.
3 Vide summoning order dated 29.09.2016 the accused were summoned. Upon appearance, copy of complaint and supporting documents were supplied to the accused persons. 4 After recording of pre-charge evidence, charge was framed against accused No.1 & 2 on 01.11.2017 to which accused pleaded not guilty and claimed trial.
5 I have heard the rival contentions advanced by the Ld. SPP for the complainant and also by Ld. Defence counsel. Prior to delving into the contentions advanced on behalf of the parties, let us briefly discuss the testimonies of witnesses examined in complainant's evidence:-
5.1 CW-1 Ms. Suman Bala has deposed that she was posted as ITO, Ward 75(2) from 09.05.2016 till the date of her deposition before the court and during her said posting. That she had filed the present complaint Ex. CW 1/1 against accused No.1 company and its Director Sh. Darayus Nariman for the F.Y. 2009-10 under section 276B read with Section 278B of the Income Tax Act after receiving sanction Ex. CW 1/2 from CIT Dr. Vipin Chandra. CW-1 identify signatures of Dr. Vipin Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
4 of 24 Chandra, CIT (TDS-01) as she seen him writing and signing in official capacity as she worked with him. CW-1 stated that she filed list of witness Ex. CW 1/3 and details of late deposit of TDS Ex. CW 1/4 (colly.) in support of case. She deposted that on verification, it transpired that accused company through accused No.2 had deducted an amount of Rs.45,22,357/- as TDS but had not deposited the same in Government Account within the stipulated period of time as per the Income Tax Act. That a show cause notice under Section 2(35) dated 08.12.2014 Ex. CW 1/5 was issued by the then ITO Sh. Sudarshan Kumar Sood for the relevant financial year and identified his signature as CW-1 had seen him writing and signing in official capacity. That reply dated 21.01.2015 Ex. CW 1/6 was received through AR of accused No.2. Another show cause notice under Section 2(35) of The Income Tax Act dated 12.03.2015 Ex. CW 1/7 was issued by Sh. Sudarshan Kumar, ITO to accused No.2 by speed post.
However, no reply to the said notice was filed on the adjourned date. That order under Section 2(35) of the Income Tax Act dated 30.03.2015 Ex. CW 1/8 was passed by the then ITO Sh. Sudarshan Kumar holding accused No.2 as Principal Officer of accused No.1 company for the relevant financial year. That proposal dated 30.03.2015 Ex. CW 1/9 for launching of prosecution under Section 276B of the Act was forwarded to CIT (TDS-1) by Sh. Sudharshan Kumar. Thereafter show cause notice under Section 279(1) of The Income Tax Act dated 14.08.2015 Ex. CW 1/10 was issued by the CIT on his letter head duly signed by the ITO Prosecution from his office on his behalf and CW-1 identified signature of Sh. Atul Kumar Singh, Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
5 of 24 ITO (Prosecution) and further deposed that it was served by hand as signature of recipient is at point A. That reply dated 02.09.2015 to said show cause notice Ex. CW 1/11 was received which was duly signed by accused No.2. That accused No.1 company through accused No.2 had not deposited the tax deducted at source during the relevant financial year within the time as per Rule 30 of The Income Tax Rules within the stipulated time and had used the said money for the business / personal purposes, which was a trust money with the accused persons and by not depositing the same to the government account within the stipulated time, accused No.1 and No.2 have committed offence punishable under section 276B read with Section 278B of The Income Tax Act.
5.1.1 CW-1 during cross examination by learned Additional Standing Counsel for OL of accused No.1 deposed that she was aware aware that accused No.1 is under liquidation, however, at the time of filing of complaint, company was not under liquidation. CW-1 admitted the suggestion that Ex. CW 1/2, Ex. CW 1/4, Ex. CW 1/5, Ex. CW 1/7 and Ex. CW 1/10 were not sent / served upon to official liquidator. CW-1 stated that she was not aware whether ex-management has supplied the copy of relevant documents in respect of present prosecution to the Official Liquidator attached to hon'ble High Court of Delhi. CW-1 denied the suggestion that she was deposing falsely.
5.1.2 CW-1 during cross examination by learned defence counsel for accused No.2 admitted the suggestion that she was posted in Ward No. 75(2) only on 09.05.2016 and that Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
6 of 24 she was not concerned about any work of ward No. 75 (2) prior to her posting from 09.05.2016. CW-1 was put a specific question "What is the date of Ex.CW1/5? To which she replied that the date of Ex. CW1/5 is 08.12.2014 issued by my Predecessor". CW-1 admitted the suggestion that document Ex. CW 1/5 was issued by her Predecessor about one and a half year prior to her joining in the ward No. 75(2) and that she had no knowledge about Ex.CW1/5 prior to her joining in ward No. 75(2). CW-1 further admitted the suggestion that she had no knowledge about Ex.CW1/6 to Ex.CW1/9 prior to her joining in ward No. 75(2) and that Ex.CW1/5 to Ex.CW1/9 were not issued in her presence. CW-1 was put a specific question "Is there any documentary proof in the record for dispatching of the show cause notices from Ex. CW1/5 to Ex.CW1/9? to which she replied that No. Vol. And in voluntarily submitted that accused has filed a reply to the several notices issued by the department which are matter of record". It is further admitted by CW- that no separate notice was sent to the Company or the other director of the company. CW-1 was put a specific question "Were you aware about the accused company was in liquidation before filing the present complaint? to which she replied that she had no knowledge about the liquidation of the accused company prior to filing of present complaint". CW-1 was shown Ex. CW1/11 which is the reply sent by the accused to the department and CW-1 admitted that same about the litigation is mentioned. CW-1 denied that she had no knowledge about the present case filed by the complainant. Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
7 of 24 CW-1 further denied the suggestion that she had made a statement that she had seen Mr. Sudarshan Singh writing and signing the notices. Witness admitted that she did not inquire from the ROC about the person who is managing the administration management of the company for the purpose of determining Principal Officer of the company. However, voluntarily stated that it was the duty of her predecessor. CW- 1 further admitted that the subject matter TDS amount was deposited by the accused persons as per records. CW-1 deposed that she had not verified the document Ex. CW. 2/1 from ROC. However, CW-1 voluntarily stated that she had seen the same in her file and the same may have been downloaded by her predecessor. CW-1 further admitted that she had no knowledge about the document Ex.CW2/1, from where it was downloaded. CW-1 denied the suggestion that the document i.e. Ex. CW2/1 is false and fabricated. It is further denied by CW-1 that she was not authorized to file the present complaint and that she was deposing under the behest of the department to harm the accused persons physically and mentally and that no procedure was followed by her as well as by department and that she had not made any efforts to inquire about the Principal Officer of the accused company and voluntarily stated that same was not in her domain and the order already was passed u/s 2(35) of the IT Act. CW-1 further denied that accused persons have been falsely implicated in the present case and that she was deposing falsely Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
8 of 24 5.2 CW-2 Sh. Sudarshan Kumar, ITO deposed that in the year 2014 he was posted as ITO, Ward 75(2) and on 08.12.2014 Ex. CW 1/5 he had issued notice under Section 2(35) of The Income Tax Act to accused No.2. That accused No.2 had filed a letter dated 21.01.2015 wherein adjournment was sought for 15 days, accordingly proceedings were adjourned till 09.02.2015. however, thereafter none appeared nor any written submissions were filed on behalf of the accused. That another notice under Section 2(35) of The Act dated 12.03.2015 Ex. CW 1/7 was issued to accused No.2, however, no reply was filed by the accused. Thereafter, CW-2 had passed the order under Section 2(35) of The Act on 30.03.2015 Ex. CW 1/8 holding accused No.2 as a Principal Officer of accused No.1 company. That before sending notice under Section 2(35) to accused No.2, CW- 2 had checked the website of ROC wherein the accused No.2 was shown as MD of accused No.1 and he had taken printout of the said page dated 11.03.2015 from MCA website. Ex. CW 2/1, however, learned defence counsel has objected to the same as mode and manner of proof. CW-2 further deposed that he had sent a proposal dated 30.03.2015 Ex. Cw 1/9 to the CIT for according sanction to launch prosecution against the accused. 5.2.1 CW-2 during cross examination by learned Additional Standing Counsel for OL of accused No.1 deposed that he was aware aware that accused No.1 is under liquidation, however, at the time of filing of complaint, company was not under liquidation. CW-2 admitted the suggestion that Ex. CW 1/2, Ex. CW 1/4, Ex. CW 1/5, Ex. CW 1/7 and Ex. CW 1/10 were not sent / served upon to official liquidator. CW-2 stated Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
9 of 24 that he was not aware whether ex-management has supplied the copy of relevant documents in respect of present prosecution to the Official Liquidator attached to hon'ble High Court of Delhi. CW-2 denied the suggestion that she was deposing falsely.
5.2.2 CW-2 during cross examination by learned defence counsel for accused No.2 stated that he was posted as ITO from November 2014 to May / June 2015. CW-2 stated that he could not remember if he had issued any notice to the accused person prior to December 2014 but he could tell about the same after looking at the record of the department. However, again said that he had not issued any notice prior to December 2014. CW-2 further stated that he was alone when he had prepared, sign and issued notice under Section 2(35) of The Act to accused. That he was aware about all the directors of the company at the time of issuance of notice dated 08.12.2014 that he had not sent notice under Section 2(35) of the Act to all the directors of company in order to ascertain the principal officer. CW-2 had stated that he had not sent any separate notice to accused No.1 company. CW-2 admitted the suggestion that it is not mentioned on Ex. CW 1/5 as to the mode of dispatch of notice. However, voluntarily stated that reply to the said notice Ex. CW 1/6 was received. Witness had denied the suggestion that he had not sent the notice to the accused and for that reason he had not annexed the proof fo service. That reply to the said notice Ex. CW 1/6 was submitted in the Dak Office and received by Inspector Jitender on 22.01.2015. CW-2 stated that he did not Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
10 of 24 remember if he had read the reply as it was only for the purpose of seeking adjournment and admitted the suggestion that he had not acknowledged the receipt of the said reply. That before passing an order under Section 2(35) of the Act he had sent a reminder in respect of notice under Section 2(35) of The Act. That said reminder was sent on 12.03.2015 and same was sent through registered post. CW-2 stated that he had not filed any postal or tracking report of the reminder Ex. CW 1/7. CW-2 denied the suggestion that he had not send reminder to the said accused persons and for this reason he had not enclosed the proof of service along with the letter. That he had sent the copy of order under Section 2(35) of The Act Ex. CW 1/8 to the accused persons. That the same was sent on 30.03.2015 through registered post. CW-2 admitted that the proof of service of Ex. CW 1/8 is not on record. Witness stated that he could not say if the records relating to proof of service will be available with the Income Tax Department for production before this court. CW-2 denied the suggestion that Ex. CW 1/8 was not sent to the accused. That he had not prepared or issued any other order / notice of this case along with Ex. CW 1/8 on 30.03.2015. CW-2 again said that he did not recall and can make a statement only after perusing the record. CW-2 denied the suggestion that he had sent notices to accused No.1 with malafide intention and to deliberately cause harm to accused person and that he had passed order under Section 2(35) of the Act mechanically and within an intention to harm the accused persons. It is further denied by the witness that he did not have knowledge about Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
11 of 24 the persons connect with the affairs of the company in order to decide its principal officer company for the relevant financial year. That he had see the TDS returns filed by accused No.2 and also perused ROC / MCA records of the company for determining the principal officer. That as per records accused No.2 is the Managing Director of accused No.1 company. That he had not summoned any records from ROC to check details of administrative or managerial person associated with accused No.1 company. CW-2 admitted the suggestion that it is not mentioned in order under Section 2(35) of the Act as to how he came to know that accused No.2 is incharge of administration and management of accused No.2 company. Witness had denied the suggestion that he had no knowledge about the person who is incharge of administration and management of accused No.1 company. That as per his knowledge the complete payment of TDS was deposited after a lapse of one year. That I had not mentioned his notices or orders that TDS payment belatedly deposited with the Income Tax Department that he did not know if his predecessor had sent any notice in the said case. That he did not have knowledge of the fact that the accused company was a party in a case before the Company Law Board. That during his tenure he was not aware if the company had gone into liquidation and denied the suggestion that Ex. CW 2/1 is a false document. CW-2 stated that he did not remember if he had sent the traces report to the Pr. CIT along with his proposal for launching prosecution. That he sent the notice and order under Section 2(35) of the Act in a hurry as he was Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
12 of 24 not aware about the facts of the company management and admitted the suggestion that he had not mentioned about the perusal of record of the company from MCA portal in his order under Section 2(35) of the Act. CW-2 denied the suggestion that he had manipulated Ex. CW 2/1 and that he was deposing falsely.
6 Accused in its defence evidence examined one witness as under:
6.1 DW-1 Sh. Darayus Nariman stated that the company Legend Surface Developers Pvt. Ltd. was in the process of manufacturing, selling and marketing a patented product RBI Grade-81. One company, namely, RBI Marketing Netherlands BV at that time was holding a worldwide patent in its product RBI Grade-81, a unique and highly effective soil stabilization products. That the company entered into an agreement dated 26.05.2007 for introducing the aforesaid RBI Grade -81 Technology in India through M/s Legend Surface Developers Pvt. Ltd. I was one of the Director alongwith another Director, namely, Mr. Mithra Thomas Dewars who was looking after day to day affairs of the company turned dishonest and he backed out from these responsibilities in the company like looking after the TDS, Income Tax and other works in the company behind DW-
1's back. That during the period of 2009 and due to illegal acts of its Ex-director Mr. Mithra Thomas Dewars and also due to an attempt of hostile take over of the company by Mr. Mithra Thomas Dewars after going against the interest and policies of company, the company was come to a complete stands still. That DW-1 also came to know that the said director Mr. Mithra Thomas Dewars conspired alongwith the competitors of the Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
13 of 24 company and ultimately resign on 09.11.2019 and he filed a company petition on 13.11.2009 bearing company petition No.114/2009 titled as Mr. Mithra Thomas Kanagaratna Dewars Vs. Legend Surface Developers Pvt. Ltd. & Ors. before Company Law Board for oppression and mismanagement. Before filing the aforesaid petition, the above said Director Mr. Mithra Thomas Dewars alongwith the other company competitors got DW-1's license canceled and they informed the same about the cancellation of the company's license to the bank and the bank also froze the company's bank account. That on filing of an application and the response to the aforesaid company petition was dismissed by the Company Law Board vide order dated 30.03.2010 Ex. DW 1/1. That the illegal acts of Mr. Mithra Thomas Dewars lead to shut down of the company and due to which the investors alongwith the DW-1's competitors also filed cases against DW-1 and the company. That during the period of 2009, Mr. Mithra Thoms Dewars and his associates stole all the relevant documents and important files of the company and joined hands with the competitor of the company. The documents which were stolen including statutory documents and laptop etc of the company for which DW-1 also filed a complaint dated 27.01.2010 in PS EOW South District and on DW-1's complaint one FIR No.195/2011 u/s 420/120B IPC was also registered in PS EOW District Crime and Railway Ex. DW 1/B against the aforesaid Director Mr. Mithra Thomas Dewars & Ors. That during the said period somewhere in the year 2010, DW-1 found out some mismanagement in respect to statutory compliances by the aforesaid Director, namely, Mr. Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
14 of 24 Mithra Thomas Dewars but at that time, the company was shut down. After finding out the mismanagement in the company and when the company was not in operation, DW-1 had to make arrangements for payments from my personal resources. That the subject matter amount was also arranged by DW-1 from his personal sources and the same was deposited / transferred to the Income Tax Department. That during the relevant period and due to filing of the cases against DW-1 and Legend Surface Developers Pvt. Ltd. the accounts and other management of the company were come to a standstill and were put on hold due to which some non compliance of statutory compliance including the subject matter were happened in the company which were beyond DW-1's control and stated that he is innocent. 6.1.1 During cross examination DW-1 stated that Mr. Mithra Thomas Dewars, Director was looking after the day to day including statutory compliances. That he had never handled the affairs the company as he had no knowledge of statutory compliances and other technical affairs. That he had only invested some money in the company. That he have never reviewed the business of the company. That the company was a new company and Mr. Mithra Thomas Dewars alongwith other staff personnel were involved in the management of affairs, Mr. Mithra Thomas Dewars used to apprised him about the same and also kept him in the dark on several occasions. That order of company law board ExDW1/A mentioned about the freezing of the assets of the accused No.1 company. That a case was pending before Delhi High Court where the factum of Mr. Mithra Thomas Dewars Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
15 of 24 joining hands with the competitor of accused No.1 company was also mentioned. The said case was numbered as CSOS 489/2010 before the Hon'ble Delhi High Court, he could not produced the certified copy of order in the said case and filed as same was produced on the day of deposition and marked as Ex.DW1/C. DW-1 stated that he had not produced any record of payment of TDS which was done through his personal resources. I have already heard the arguments and perused the record.
7 During final arguments it is submitted by learned SPP that present complaint has been filed by the complainant against the accused persons for financial year 2009-10 as accused No.1 company had not paid the TDS sum of Rs.45,22,357/- within the time stipulated by law. It is submitted that complainant has examined its two witnesses in proving the allegations in the complaint and have proved Ex. CW 1/1 complaint, Ex. CW 1/2 sanction order, Ex. CW 1/3 list of witnesses, Ex. CW 1/4 TRACES report, Ex. CW 1/5 notice dated 08.12.2024, Ex. CW 1/6 reply dated 21.01.2015, Ex. CW 1/7 show cause notice dated 12.03.2015, Ex. CW 1/8 order under Section 2935) of The Income Tax Act, 1961, Ex. Cw 1/9 proposal dated 30.03.2015, Ex. CW 1/10 show cause under Section 279(1) of the Act dated 14.08.2015, Ex. CW 1/11 reply dated 02.09.2015 and Ex. CW 2/1 computer generated print out dated 11.03.2015 from the website of MCA. It is submitted that by proving these documents, the complainant has proved its case beyond reasonable doubt. It is submitted that accused No.2 has led evidence in the present case, however, same could not create any doubt in the proving of guilt beyond reasonable doubt by the Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
16 of 24 complainant. It is further submitted that accused No.1 company is in liquidation and earlier learned Additional Standing Counsel was appearing in the present matter to represent accused No.1 company, however, no evidence has been led on behalf of accused No.1 company by the liquidator nor any arguments have been advanced. A request has been made to convict and punish the accused persons as per the law for not depositing TDS. Learned SPP relied on judgment titled Indo Arya Central Transport Limited & Ors. vs. Commissioner of Income Tax (TDS), Delhi1 & Anr. W.P. (C) No..3964/2017 AND Onora Hospitality Pvt. Ltd. and Ors. vs. Assistant Commissioner, Income Tax Department (TDS), Circle 2(1) (05.04.2019-Karnataka High Court) MANU/KA/2961/201. 8 Learned counsel for accused No.2 has submitted during final arguments that the present complaint is liable to be dismissed because there exists reasonable cause for non deposition of TDS within time stipulated by law and matter false within the purview of Section 278AA of The Income Tax Act, 1961. Further it is submitted that complaint is otherwise liable to be dismissed as no notice under Section 2(35) of The Income Tax Act was ever served on accused No.2 and sanction filed in the present complaint shows non application of mind by the competent authority as sanction was passed without taking into account the payment of TDS after few months and the reply dated 02.09.2015 filed on behalf of accused No.2. It is further submitted that even the TDS, TRACES Ex. CW 1/4 which is the document on the basis of which complaint has been filed, does not connect the TDS Ex. CW 1/4 with the accused No.1 company. Further document Ex. CW 1/4 i.e. TRACES report and Ex. CW 1/2 computer generated document downloaded from the Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
17 of 24 website of MCA is not supported by any certificate under Section 65B of The Indian Evidence Act and as a result of which these documents have not been proved by the complainant as per the Indian Evidence Act. Learned counsel for accused relied on judgment titled ITO vs. M/s. Lanco Infratech Indai Ltd. & Ors.; ITO vs. M/s. Action Bridge Gap Construction Private Limited & Ors. AND ito VS. m/S. a.m. Traders Private Limited & Ors. 9 Before proceeding ahead, it is beneficial to refer to the relevant provisions of Income Tax Act and the cases decided by hon'ble Superior Courts with regard to question and issues which this court has to decide.
Section 2(35) in The Income Tax Act, 1961 (35)"principal officer", used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means--(a)the secretary, treasurer, manager or agent of the authority, company, association or body, or(b)any person connected with the management or administration of the local authority, company, association or body upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof ;
276B. Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B. - If a person fails to pay to the credit of the Central Government,-
(a) the tax deducted at source by him as required by or under the provisions of Chapter XVII-B; or (b) the tax payable by him, as required by or under,-(i)sub-section (2) of section 115-O; or(ii)the second proviso to section 194-B, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.] Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
18 of 24 278AA. Punishment not to be imposed in certain cases.
Notwithstanding anything contained in the provisions of section 276A, section 276AB, or section 276B, no person shall be punishable for any failure referred to in the said provisions if he proves that there was reasonable cause for such failure 10 From the consideration of final arguments and from the perusal of record including the written synopsis filed on behalf of both the sides, it is noted that there is no dispute or confusion with regard to fact that TDS for the F.Y. 2009-10 was not deposited in time by the accused No.1 company. The court shall now take up each and every ground taken up by learned counsel for accused for praying the acquittal of accused No.2 in the present case: -
10.1 Reasonable Cause under Section Section 278AA of The Income Tax Act, 1961:-
It has been submitted that the reason for non deposition of TDS of accused No.1 company was not the willful intention of accused No.2 but was the malafide intention of other director of accused No.1 company Mr. Mithra Thomas Dewars, who was looking after the TDS, Income Tax and Account of the company, who tried and attempt to hostile take over of the company after going against the policies and interest of the company, due to which the company came to a complete standstill during the year 2009-10. It is submitted that due to the same the affairs of company, accounts were also standstill / freezed. It is submitted that Mr. Mithra Thomas Dewars had ultimately resigned on 09.11.2009 and filed a company petition, which was ultimately dismissed by Company Law Board vide order dated 30.03.2010.
It is submitted that the said director and his associates stall all Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
19 of 24 the relevant documents and files of company which includes minutes of meetings of Board of Directors, minutes of meeting of shareholders, register of Members, register of Directors and their shareholding, register of contract and laptop etc. for which accused No.2 has filed complaint in PS EoW, South District, on which an FIR No.195/2011 under Section 420/120B of IPC was also registered in PS EoW, District Crime & Railway against Mr. Mithra Thomas Dewars and others. It is submitted that on the basis of above said grounds, TDS could not be deposited in time by the accused No.1 company and which is a reasonable cause under Section 278AA of The Income Tax Act, 1961. From the submissions of learned counsel for accused No.2, it appears that accused No.1 company and accused No.2 had faced a hard time during the year around 2009-10. However, the dispute between the directors of the company per se does not amount to reasonable cause within the meaning of Section 278AA of The Income Tax Act, 1961. Though it is submitted during submissions and mentioned in the written submissions that operation of accused No.1 company were came to standstill / freezed, however, same is not substantiated with any evidence by accused No.2 during the defence evidence led by him. Further the fact that accused No.1 company had deducted TDS for F.Y. 2009-10, itself shows that company was operational and had given salary to its employees and also incurred expenses for its functioning. The fact of stealing of documents / registers / laptop does not prevent the accused No.1 company in depositing the TDS as none of these documents / Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
20 of 24 registers are required for deposition of TDS as same is to be deposited through online portal.
For the reason discussed above, the court does not find that case of accused No.2 falls within the scope of Section 278AA of The Income Tax Act, 1961.
10.2 Service of notice under Section 2(35) of The Income Tax Act:-
It has been submitted on behalf of accused No.2 that accused No.2 was never served with notice under Section 2(35) of The Income Tax Act, 1961 with the intention of department to treat him the Principal Officer of accused No.1 company. It is submitted that out of two notices Ex. CW 1/5 and Ex. CW 1/7, none of these documents have been served to accused No.2 nor any proof of service has been filed in the present case. It is submitted that document Ex. CW 2/1 which is document generated from the website of MCA is false and fabricated and no certificate under Section 65B of the Indian Evidence Act has been filed to support the same. It is submitted that in the absence of proof of notice under Section 2(35) of The Income Tax Act, 1961 and of the fact that accused No.2 was Managing Director of accused No.1 company, accused No.2 can not be treated as Principal Officer of accused No.1 company. It is submitted that on this basis also accused No.2 is required to be acquitted. From the perusal of record shows that show cause notice under Section 2(35) of The Income Tax Act, 1961 dated 08.12.2014 Ex. CW 1/5 was issued in the name of accused No.2. However, same is not accompanied with any proof of service. The complainant has filed and relied on a letter dated 21.01.2015 Ex. Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
21 of 24 CW 1/6 allegedly written on behalf of accused No.2 by the AR of accused No.2 so as to assert that Ex. CW 1/5 was served on accused No.2. However, as Ex. CW 1/6 is not accompanied with any authority letter issued by accused No.2 or any responsible officer of accused No.1 company, the court has to believe the submissions advanced on behalf of accused No.2 that Ex. CW 1/6 can not be taken or proved to be have been issued by the authority of accused No.1. As far as Ex. CW 1/7 is concerned, though postal post bar code has been pasted on the same, however, there is no postal receipt or tracking report on record from which it can be inferred that same was served on accused No.2. However, it is important to point out that CW-2 Mr. Sudarshan Kumar has testified during his evidence that he had checked the website of ROC, wherein accused No.2 was shown as MD of accused No.1 company. CW-2 had at that stage produced a computer generated print out from the website of MCA, which shows that accused No.2 was MD of accused No.1 company, which was exhibited then as Ex. CW 2/1. Though learned counsel for accused No.2 has objected to mode of proof Ex. CW 2/1, however, even otherwise from Ex. CW 2/1, CW-2 Sh. Sudharshan Kumar has deposed about the fact of his checking the record of MCA before filing the complaint and verifying the status of accused No.2 as MD of accused No.1 company, the said fact does not require any certificate under Sectin 65B of The Indian Evidence Act for its proof. On the said fact being deposed by CW-2 during his examination in chief, the burden was on accused No.2 to bring sufficient evidence, which might have been the record of ROC so as to prove that he was Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
22 of 24 not Managing Director of accused No.1 company at the relevant point of time. However, no such evidence has been led on behalf of accused No.2. In view of above said status of evidence, led in this case, it is believed that accused No.2 was MD of accused No.1 company at the relevant point of time. There is no dispute or confusion with regard to fact that a Managing Director is not required to be served a notice under Section 2(35) of The Income Tax Act, 1961 and in the absence of service of notice under Section 2(35) of The Income Tax Act, 14961 to MD of the company, the proceeding under Section 276B of The Income Tax Act, 1961 shall not fail.
In view of above said discussion, no merit is found in this submission advanced on behalf of accused No.2 that for non service of notice under Section 2(35) of The Income Tax Act, 1961 the complaint should be dismissed qua accused No.2. 10.3 No connection of TRACES Report Ex. CW 1/4 with accused No.1 company and non filing of certificate under Section 65B of The Indian Evidence Act:-
It is submitted that from the perusal of TRACES report of TDS Ex. CW 1/4, it can not be believed that same relates to accused No.1 company. Further it is submitted that none of two witnesses examined on behalf of complainant has deposed that Ex. CW 1/4 pertains to accused No.1 company. It is further submitted that even otherwise TRACES report Ex. CW 1/4 can not be said to have been proved in the absence of certificate under Section 65B of The Indian Evidence Act, Ex. CW 1/4 being a computer generated document. It is vehemently submitted that document Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
23 of 24 Ex. CW 2/1 also can not be said to be proved in the absence of certificate under Section 65B of The Indian Evidence Act.
The perusal of record shows that TRACES report of TDS Ex. CW 1/4 is in tabular form mentioning the name of complainant department, however, the same does not find mention of name of either of accused. Surprisingly, even complainant's witness CW- 1 Ms. Suman Bala and CW-2 Mr. Sudarshan Kumar also did not stated during their evidence that TRACES report Ex. CW 1/4 pertains to accused No.1 company. In view of the same, it could not be proved on behalf of complainant that TRACES report Ex. CW 1/4 pertains to accused No.1 company. Further the TRACES report Ex. CW 1/4 is not filed in original but is a computer generated document, which has been attested as true copy by complainant / CW-1. The print out of MCA record Ex. CW 2/1 is also a computer generated record. As per Section 65B of The Indian Evidence Act, the secondary evidence of electronic record can be proved only on furnishing a certificate under Section 65B of The Indian Evidence Act mentioning therein the details and information as mentioned in Section 65B of The Indian Evidence Act. In the absence of certificate under Section 65B of The Indian Evidence Act, neither the TRACES report Ex. CW 1/4 nor MCA record Ex. CW 2/1 could be proved by the complainant as per the rules of Evidence.
Though it is established on behalf of accused No.2 that CW 1/4 and Ex. CW 2/1 could not be proved by the complainant due to want of certificate under Section 65B of The Indian Evidence Act, however, the technical default in non proving Ex. CW 1/4 and it alleged connection with accused No.1 does not hit at the Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.
24 of 24 evidence brought by the complainant to prove its case beyond reasonable ground as the admitted position on behalf of accused has always been that there was default in deposition of TDS on accused No.1 company, however, due to reasons cited by accused No.2 during his defence evidence and also mentioned in the written submissions, the TDS could not be filed by the accused No.1 company in time. For reasons mentioned above, the non proof of Ex. CW 2/1 for want of certificate under Section 65B of The Indian Evidence Act also does not come to the rescue of accused persons as CW-2 has deposed about the exercise undertaken by him for verification of status of accused No.2 in accused No.1 company, which was not challenged as such in cross examination of CW-2.
11 On the basis of above discussion complainant has been able to prove the default of accused persons under Section 276B read with 278B of The Income Tax Act, 1961 for non payment of TDS within time stipulated by law and accordingly, accused No.1 company and its Principal Officer i.e. accused No.2 are convicted for offence under Section 276B/278B of The Income Tax Act, 1961.
Announced in Open Court
Digitally signed by
on 21st November 2024 MAYANK MAYANK MITTAL
MITTAL Date: 2024.11.21
17:37:52 +0530
MAYANK MITTAL
ACJM(Special Acts), CENTRAL
TIS HAZARI COURTS DELHI
This judgment consists of 24 pages
and each and every page of this
judgment is signed by me.
Ct. No. 540666/2016 ITO vs. M/s. Legend Surface Developers Pvt. Ltd.