O.T.C. Agencies vs Income Tax Officer

K.P.S. Sandhu, J.

[Cri. Misc. Case No. 2502M of 1985].

Six petitioners, namely, O.T.C. Agencies, P.O. Pour Fields, G.T. Road, Amritsar, Joginder Lal Mehra, Satish Mehra, Sudhir Mehra, Satish Kumar Kapur and Smt. Kiran Mehra, have filed this petition u/s 482 of the Code of Criminal Procedure, 1898, praying therein that the complaint dated 8-1-1985 filed by the respondent against the petitioners, be quashed. Petitioner Nos. 2 to 6 are partners of O.T.C. Agencies, P.O. Four Fields, G.T. Road, Amritsar. On 31-7-1979, the firm O.T.C. Agencies filed the income tax return for the year 1979-80. A part of the documents filed with the return were signed by Sudhir Kapur and certain documents were signed by Sudhir Mehra, another partner of the firm and Sudhir Mehra is accused No. 5 in the complaint. However, the verification was done by Satish Kumar Kapur on all the documents. Satish Kumar Kapur is accused No. 7 in the complaint filed by the department regarding the aforesaid return.

On 31-3-1982, an addition of Rs. 9,90,000 was made to the trading account of the firm by the income tax Department. However, the firm went in appeal. The amount was reduced to Rs. 6,85,236 from Rs. 9,90,000 addition. On further appeal to the Tribunal, by the firm, it was further reduced to Rs. 90,800 only, u/s 40A(3) of the income tax Act, 1961 (''the Act''). The Commissioner vide his order dated 26-7-1985, deleted the addition made by the department and held that there is no concealment. Consequently, the penalty imposed was deleted. However, on 8-1-1985, a complaint under sections 276C and 277 of the Act was filed against the petitioners and other partners by the ITO, Central Circle-I, Amritsar.

Mr. Bhagirath Dass, Senior Advocate, the learned counsel for the petitioners, has contended at the outset that it is nowhere alleged by the complainant that Joginder Lal Mehra, Sudhir Mehra and Smt. Kiran Mehra were in charge of, and responsible for the conduct of the business of the firm at the time of the alleged commission of the offence. There fore, no criminal liability can be fixed upon them. He has taken me through the provisions of section 278B of the Act, which read as under:

(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:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Mr. Ashok Bhan, the Senior Advocate, has not been able to say much against this proposition. Mr. Bhagirath Dass has placed reliance on my earlier judgment reported as Murari Lal v. ITO (1985) 154 ITR 227 (Punj. & Har.). I find considerable force in the contention of the learned counsel for the petitioners. In view of the provisions of section 278B, the prosecution of the three petitioners, namely, Smt. Kiran Mehra, Satish Mehra and Joginder Lal Mehra, is nothing short of abuse of process of law. Consequently, complaint against the aforesaid three petitioners is hereby quashed. However, no case for quashing the proceedings is made out as far as petitioner Nos. 1, 4 and 5 are concerned. Their petition is consequently dismissed. However, there will be no bar for these three petitioners to raise all the legal points before the trial Magistrate. Parties through their counsel are directed to appear before the trial Magistrate on 1-4-1986.

[Cri. Misc. Case No. 2715M of 1985].

Petitioners Jai Gopal and Smt. Suman Mehra have filed this petition u/s 482 praying therein that the complaint dated 8-1-1985 filed by the respondent against them, be quashed.

The petitioners are partners of O.T.C. Agencies, Post Office Pour Fields, G.T. Road, Amritsar. On 31-7-1979, the firm O.T.C. Agencies filed the income tax return for the year 1979-80. A part of the documents filed with the return were signed by Satish Kumar Kapur and certain documents were signed by Sudhir Mehra, another partner of the firm, and Sudhir Mehra is accused No. 5 in the complaint. However, the verification was done by Satish Kumar Kapur on all the documents. Satish Kumar Kapur is accused No. 7 in the complaint filed by the department regarding the aforesaid return.

On 31-3-1982, an addition of Rs. 9,90,000 was made to the trading account of the firm by the income tax Department. However, the firm went in appeal. The amount was reduced to Rs. 6,85,236 from Rs. 9,90,000 addition. On further appeal to the Tribunal, by the firm, it was further reduced to Rs. 90,800 only u/s 40A(3). The Commissioner vide his order dated 26-7-1985, deleted the addition made by the department and held that there is no concealment. Consequently, the penalty imposed was deleted. However, on 8-1-1985, a complaint under sections 276C and 277 was filed against the petitioners and other partners by the ITO, Central Circle-I, Amritsar.

Mr. Bhagirath Dass, Senior Advocate, the learned counsel for the petitioners has contended at the outset that it is nowhere alleged in the complaint that these two petitioners namely Jai Gopal and Smt. Suman Mehra were in charge of, and responsible to the firm for the conduct of the business of the firm at the time of the alleged commission of the offence. Therefore, no criminal liability can be fixed upon them. He has taken me through the provisions of section 278B which read as under : (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:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Mr. Ashok Bhan, the Senior Advocate, has not been able to say much against this proposition in view of my earlier judgment in Murari Lal''s case (supra). I find considerable force in the contention of the learned counsel for the petitioners. In view of the provisions of section 278B, the prosecution of these petitioners is misconceived and nothing short of abuse of process of law. Consequently, this petition is allowed and the complaint dated 8-1-1985 and the proceedings taken in consequence of that are quashed.