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2. Prior to July 19, 1969, the company, which was then known as the Punjab National Bank Ltd., was a banking company, and the banking business of the company was transferred to and vested with the Punjab National Bank, a Corporation, wholly owned by the Government, with effect from the aforesaid date by virtue of an ordinance, which was later replaced by the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. The company was paid a sum of Rs. 10.20 crores as compensation for the take-over of its banking business. The company, which has since changed its name and objects, has been carrying on other undertakings. Pursuant to to the acquisition, the company, by a circular of February 28, 1973, gave an option to its shareholders to sell to it shares held by them in it at Rs. 38 per share, inclusive of dividend for the year 1972, in case they did not wish to continue to be its shareholders. It is claimed by the company that before issuing the circular, it had obtained the legal opinion of a former Chief Justice of India to the effect that the amount payable by the company for the purchase of its own shares could not be considered as "deemed dividend", within the meaning of section 2(22) of the Act. It is further claimed that to put the matter beyond doubt, and before issuing the circular, the company addressed a letter to the Central Board of Direct Taxes seeking their confirmation that the amount would not be deemed dividend". The Life Insurance Corporation of India and the Unit Trust of India were the major shareholders the company and on their suggestion, the price was raised from Rs. 38 per share to Rs. 40 per share, exclusive of dividend that might be declared till the date of the payment of the price. Pursuant to the circular, share holders holding a total of 11,98,711.5 shares in the company exercised the option to sell the shares, as a result of which the company resolved to purchase these shares at the aforesaid price, subject to consequent reduction of capital being confirmed by this court. This court eventually gave the necessary confirmation. The Central Board of Direct Taxes, however too no decision with regard to the question in spite of a number of reminders. Meanwhile, the Life Insurance Corporation of India expressed the opinion that there was no question of deduction of any tax in the payment of the price since the payment was to be made to the shareholders on the sale of their shares. It was further the view of the Corporation, that the company need not treat the deference between the sale price and the face value of the shares as "dividend and had no right to deduct tax on such payment at source. This was the view which was generally shared by the shareholders who had exercised the option to sell. It further appears that in the absence of any confirmation from the Board, doubt lingered as to whether the price pay able, or any part of it, could be considered as "deemed dividend and on the suggestion of the Corporation, the company made pay ments on account at Rs. 33-10 per share to the shareholders, who had exercised the option, and the balance of Rs. 6-90 per share, out of the purchase price payable to them, was retained by the company on the specific condition and understanding that the company will be entitled treat it as "tax deducted at source", in case it was ultimately held to be subject to tax, failing which, the retained amount would be paid to the erstwhile shareholders. The Board, however, refused to give any decision in the matter on the ground that there was no provision for any "advance ruling" on a reference. It was in this situation that by an agree ment of January 18, 1975 entered into between the Corporation and the company, it was decided to refer the matter under Order xxxvI rule (I) of the Code of Civil Procedure, 1908, to this court. Accordingly suit was filed in this court under Order xxxvI, rule (I), being Suit No. 98 of 1975, for a decision of the question whether the payment to the share holders, in the circumstances, could be considered "deemed dividend" or not. Notice of the suit was also issued to the income-tax authorities. The suit was, however, adjourned sine die on the objection of the income tax authorities that the question could be decided only in proceedings under the Act, and-not in any suit. In May 1975, the Income tax Officer, Company Circle, required the company by a notice under section 201(lA) 0f the Act to pay a sum of Rs. 82,17,109 along with interest on the ground that the company had "deducted" tax at source to the extent of the above amount from the distribution of "deemed dividend" of Rs. 40 per share but had not paid the amount in Government account within the prescribed time, as required by section 200 of the Act, read with rule 30 of the Rules made under it. In reply to this notice, the company informed the officer concerned that no tax had been deducted at source and that the company had only made on account payment towards the purchase price, and there was, therefore, no question of payment of tax to the Department. As a sequel to this, the company was called upon to show cause why a penalty be not levied under section 221 of the Act for not depositing the tax deducted at source. This was resisted by the company on which the bankers of the company received a notice under section 226(3) of the Act the effect that the aforesaid amount was due from the company and required the bankers to pay to the Income-tax Officer concerned forthwith, out of any amount held in any of the accounts of the company. The Income-tax Officer thereafter called upon the company to show cause why the entire amount paid to the shareholders be not treated as "deemed dividend" in terms of section 2(22)(d) of the Act and why the company should not be treated in default for failing to deposit the tax deducted source from the amount paid to the shareholders. The company sent its reply to the notice, inter alia, contending that the payment of the amount could not be termed as deemed dividend as the amount was the purchase price and no amount by way of dividend was paid on the reduction of share capital. Certain other contentions were also raised. The company also relied on a decision of this court reported as [1975] 1 ITR Delhi 410, in which this court had held that the undertaking of the company, comprising of all the assets and liabilities, had been taken over by the Government, and nothing that could be regarded as constituting accumulated profits of the company was left with it, and it was, therefore, urged that there was no "accumulated profit" with the company and no amount could be said to have been paid out of any accumulated profit to erstwhile shareholders, the company having only paid the purchase price out of the compensation received by it and no part of it could be treated as deemed dividend and taxed as such. The Income-tax Officer, however, turned down the plea of the company and by an order made on September 25, 1975, held that the payment made for the purchase of shares to some of the erstwhile shareholders was "deemed dividend" and the company was in default under section 201 of the Act for not depositing the tax, as found due by him. The order was challenged by the company in appeal before the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner of Income-tax partly allowed the appeal and the appellate order was challenged by the company, as well as the Revenue, before the Income-tax Appellate Tribunal. The Tribunal by its order of March 27, 1979, accepted the appeal of the Company and set aside the orders of the Income-tax Officer, and the appellate order of the Appellate Assistant Commissioner of Income-tax on the ground that the proceedings against the company were barred by limitation. The appeal of the Revenue was dismissed. The Tribunal also rejected the Revenue's application for stating a case and referring certain questions of law to this court. This court also rejected the Revenue's application for calling a reference on January 4, 1982. The order of the Income-tax Appellate Tribunal has, therefore, become final unless it was taken in appeal to the Supreme Court by a petition for special leave. Counsel for the respondent claimed that a petition for special leave had been filed in the Supreme Court but it was still to come up for preliminary hearing. Meanwhile, three different Benches of the Delhi Circle of the Income-tax Appellate Tribunal, by their orders of November 21, 1977, February 27, 1982, and April 17, 1982, arising out of independent proceedings in the assessment of incomes of three different shareholders, who had received the amounts pursuant to the sale of their shares, held that the amounts received by them could not be treated as "deemed dividends" but were taxable in their hands as "capital gain" on the sale of the shares and would be liable to be treated accordingly. These orders were not challenged by the Department, and have, therefore, become final. The first of these orders was made before the complaints were filed, while the other two were made during the pendency of the proceedings in the complaints. The complaints, sought to be quashed, which are in identical terms, were filed on or about March 31, 1978, and are grounded on the allegations that the payment to the shareholders, in excess of the face value of the share, was "deemed dividend" within the meaning of section 2(22) of the Act and the amount retained by the company was tax deducted at source on the said dividend, which the company and its principal officers, failed to deposit without reasonable cause or excuse in the Government account and were thus liable to be punished under section 276B of the Act. It is further alleged that the retained amount was a "trust" with the company and the Company neither paid the amount to the credit of the Central Government nor refunded it to the shareholders and has thus "dishonestly misappropriated" the same and "converted" it to its own use. By an order of March 28, 1980, the Chief Metropolitan Magistrate summoned the petitioners for offences under section 276B of the Act and section 409 of the I.P.C., in each of these complaints.

10. Even though the complaints are described as for an offence under section 276B of the Act, there is a specific allegation in para (?) of these complaints that the retained amounts have been "dishonestly misappropriated" and "converted" to its own use by the company. It is probably for this reason that the court seized of the (sic) summoned the petitioners in each of the complaints, not only for an offence under section 276B of the Act, but also for an offence under section 409 of the Indian Penal Code.

16. The question at (a) above must be answered in the negative. There is no provision in the Act which may be construed as expressly or impliedly barring institution of a complaint for an offence under section 276B of the Act in the absence of any determination of a liability by an authority under the Act, which may be the basis of allegations constituting the offence. Section 293 of the Act bars any suit to "set aside or modify any assessment" made under the Act. The complaints are admittedly outside the scope of this section. In any event, even if the principle of the section was to be applied to criminal proceedings, the complaints will still be outside the mischief of the section because there is no "assessment order" which is sought to be "set aside or modified" by the prosecution. Moreover, what section 276B makes penal is not the violation of an order or a direction made under the Act. It seeks to penalise failure to deduct or, if deducted, failure to pay tax, as required, inter alia, by the provision of section 194 of the Act. The deduction under section 194 has to be made, unless excepted by the two provisos to it, in anticipation of any assessment and irrespective of whether the recipient ultimately be liable to pay tax or not. It is an anticipatory deduction which is to be made and, if made, to be deposited. The deduction is, no doubt, to be made only if the payment falls within the terms of any of the sub-clauses(a) to (e) of clause (22) of section 2 of the Act, but here again, the deduction, if at all, has to be made by the person making the payment, on the basis of his bona fide understanding, and if made, to pay in the Government account in anticipation of, as indeed, and independent of the eventual determination of liability of the recipient to pay the tax, on the amount sought to be paid to the assessed. If the person making the payment fails to make the deduction or if having made the deduction fails to deposit, it also attracts section 201 of the Act, which renders the person liable "to be deemed to be an assessed in default in respect of the tax" but sub-section (I) of that section further provides that this liability is "without prejudice to any other consequences which he or it may incur". This clearly shows that the power under the Act to treat the person, who ought to have made the deduction, or to have made the payment, if deducted, as the case may be, as an assessed in default is independent of and without prejudice to any other consequence, which obviously would include, if not merely contemplate, prosecution for an offence under section 276B of the Act.

21. I have dealt with the various contentions raised on behalf of the parties at the hearing but that is not the end of the matter because while drawing up the judgment, it occurred to me that there were quite a few other facts of the prosecutions, which were controversial and would, there fore, deserve consideration. Petitioner No. 1 is a corporate body. Section 276B of the Act, as well as section 409 of the Indian Penal Code, make the offences under these provisions punishable with a sentence of imprisonment and with fine. Under section 276B, the sentence of imprisonment shall not be less than six months. It is well settled that a corporate body could not be given corporeal punishment, and if it cannot be punished, would its prosecution be competent ? If the prosecution of a juristic person may thus be incompetent, could its principal officer or other officers be made vicariously liable under section 278B of the Act without a finding that the company was liable to be punished ? Could the finding that the company was guilty of an offence and liable to be punished be given in such a prosecution in the absence of the company, if the proceedings against the company are not competent ? Under section 279 of the Act, prosecution could be filed only at the instance of the Commissioner of Income-tax. The section, however, regulates prosecution for offences under the the Act but not offences under the Indian Penal Code, with the result that sanction of the Commissioner was prima facie unnecessary for a complaint of an offence other than an offence under the Act. The complainant is, however, a public servant. He has not filed the complaints as a private person. Certain duties have been assigned to him as a public servant under the Act. Unless filing prosecution could be considered to be part of his official duty, any prosecution by him for an offence, other than an offence under the Act, must also need the sanction of the authority, under whose control and supervision he discharges his official duties. The authorisation and direction to the complainant, in the present case, is confined to the terms of section 276B and could not extend to an offence under section 409 of the Indian Penal Code, or for that matter to any other offence. Would the complaints, to the extent they contain ingredients of an offence under section 409, Indian Penal Code, be incompetent for that reason, and if that be so, could the Magistrate take cognizance of an offence under section 409 on such a complaint ? If the prosecutions are liable to be quashed, could this court impose the conditions on the company, such as payment of the retained amount to the shareholders or to the Government ? Would it be open to the court to direct the company to pay interest on the retained amount as a condition of an order quashing the proceedings ? If the court is competent to impose these conditions and the company is directed to make the payments to the shareholders or to the Government, could it create complications for the company in view of the pendency of the petition for special leave in the Supreme Court ? In view of these and certain other controversies, I had the petition listed for further hearing.