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1. The above criminal appeals have been directed against the judgment dated March 9, 1987, made in respectively E. O. C. C. No. 1374 to 1380 of 1985 and E. O. C. C. No. 1381 and 1382 of 1985 by the Court of Additional Chief Metropolitan Magistrate, Egmore, Madras, finding the accused therein not guilty of the offences under Section 276B and Section 276B read with Section 278B of the Income-tax Act, 1961, and under Sections 120B, 420 and 511 of the Indian Penal Code in the case concerned with C. A. No. 524 of 1987 and under Section 276B and Section 276B read with Section 278B of the Income-tax Act, 1961, regarding the case concerned with C. A. No. 525 of 1987, Since the parties and the nature of the offences are one and the same both the above appeals have been jointly heard and common judgment is delivered herein.

(iii) that the respondent/accused No. 1-company, Roshni Cold Storage (P.) Ltd., has been incurring heavy losses from the date of its incorporation and hence there was reasonable cause and excuse for the delayed remittance of the tax deducted at source which fact was admitted by the Department.

Ground No. 1 : The statutory notice as required under Section 2(35) of the Income-tax Act, 1961, was not issued to respondents Nos. 2 to 5/ accused Nos. 2 to 5 treating them as the principal officers of the accused No. 1-company before launching the prosecution for an offence under Section 276B of the Income-tax Act, 1961. Such a notice as contemplated under Section 2(35)(b) of the Income-tax Act, 1961, is a mandatory requirement in view of the meaning of "person responsible for payment" under Section 204. Section 194A imposes liability to deduct tax at source on the credit or payment of interest other than "interest on securities". Section 194A(4) uses the expression "the person responsible for making payment". Under Section 204(iii), the expression "person responsible for paying" means--. . ."if the payer is a company, the company itself including the principal officer thereof". The contravention of Section 194A is made an offence punishable under Section 276B. If the offence is committed by the company, the prosecution for the offence under Section 276B has to be launched against the company itself and its principal officer. The expression "principal officer" is defined under Section 2(35) wherein under Sub-clause (a) the persons mentioned therein become liable for any violation as the principal officer. The managing director or director is not included within the ambit of Sub-clause (a) of Section 2(35). In the case of the Income-tax Officer seeking to prosecute the managing director or director along with the company for an offence under Section 276B, then he has to issue a notice under Sub-clause (b) of Section 2(35) expressing his intention to treat the managing director or director as the principal officer of the company. It is an admitted fact that no notice as required under Section 2(35)(b) was issued to respondents/accused Nos. 2 to 5 and their acquittal on this ground is supported by the ruling rendered by this court in M.R. Pratap v. V. M. Muthuramalingam, ITO [1984] 149 ITR 798, wherein it was held (headnote) :

"Consequently, the managing director of a company cannot be held liable under Section 276B unless the Income-tax Officer has served a notice on him under Section 2(35)(b) and informed him of his intention to treat him as the principal officer of the company."

The introduction of Section 278B into the statute book with effect from October 1, 1975, by the Taxation Laws (Amendment) Act, 1975, does not alter or take away the mandatory requirement of issuing notice as contemplated under Section 2(35)(b) for an offence under Section 276B. While inserting Section 278B, no corresponding changes have been introduced either under Section 2(35)(b) or under Section 204(iii) of the Income-tax Act, 1961. Thus, such a statutory notice as contemplated under Section 2(35)(b) is mandatory only for offence under Section 276B in view of the meaning of "person responsible for paying", "if the payer is a company, the company itself including the principal officer thereof" in Section 204(iii). For other offences under the Income-tax Act, 1961, such as under Sections 276C, 277, 276CC, etc., such a notice as contemplated under Section 2(35)(b) to either the managing director or director is not necessary as there was no expression akin to the expression used in Section 204 in any of the provisions related to those offences under Sections 276C, 276CC, 277, etc. This position is made clear in the decision reported in Geethanjali Mills Ltd. v. V. Thiruvengadathan [1989] 179 ITR 558 (Mad), wherein, his Lordship, after taking note of the ruling rendered in M. R. Pratap v. V. M. Muthuramalingam, ITO [1984] 149 ITR 798 (Mad), has Ruled that the (page 568) "determination of the 'principal officer' is necessary only in the case of deduction of tax at source as in the case of salaries and interest other than interest on securities, etc., and not otherwise." In the case reported in Geethanjali Mills Ltd. v. V. Thiruvengadathan [1989] 179 ITR 558 (Mad), the offence alleged in the complaint is under Sections 276C(1), 277 and 278B of the Income-tax Act, 1961. Relying on this decision in Geethanjali Mills Ltd. v. V. Thiruvengadathan [1989] 179 ITR 558 (Mad), extracting the Sections 194A, 200 and 204, his Lordship observed in para. 2 at page 568 :

23. Dealing with point No. 1, citing a decision of this court reported in M.R. Pratap v. V.M. Muthuramalingam,, ITO [1984] 149 ITR 798, wherein it has been held that notice under Section 2(35)(b) of the Income-tax Act is necessary for the managing director of a company to be treated as principal officer, to make him liable for being prosecuted for an offence under Section 276B of the Act committed by the company. Further noting that there is no contra-decision available from any other quarter and in spite of objection by the other side on the ground that the said judgment was on appeal in the Supreme Court, since the trial court thought that it was still binding on it, considered the view to decide the said point and after wide discussions would ultimately arrive at the conclusion upholding" the ruling of this court rendered by Justice S. Natarajan (as he then was) and would end up saying that as long as Section 2(35)(b) is applicable to a company, introduction of Section 278B does not alter the position to get out of the said ruling in respect of an offence under Section 276B and thus deciding point No. 1 against the prosecution.