Section 276B of the income tax Act, 1961 — Offences and Prosecution — If any amount was paid pursuant to the said show cause notice, the proof thereof could have been produced by petitioners so as to avoid criminal prosecution and there is nothing on record to show that the remittances made by petitioners have been brought to the notice of the Central Government.[2020] 53 ITCD 26 (KARN)
Facts: Petitioners are sought to be prosecuted under section 276-B for failure to remit the tax deducted at source during the financial year 2010-2011 and 2011-2012 amounting to Rs. 1,57,85,655/- and Rs. 1,35,54,167/- respectively.
The impugned action is assailed by the petitioners on the following grounds:-
First, the show-cause notice is issued in respect of nine companies whereas the prosecution is launched only against the petitioners which is legally untenable. The Company is a juristic person and in terms of section 2(35) of the Act, notice is required to be issued to each of the companies individually and not a composite notice as done in the instant case. Hence, the prosecution launched against the petitioners suffers from basic vice.
Second, the show cause notice was issued only to petitioner No.1 namely Managing Director and not to the Company - petitioner No.2 and in that view also, the prosecution launched against the petitioners are defective and contrary to section 276 of the Act.
Third, the impugned sanction in the instant case has been accorded without application of mind. Tax deducted at source by the petitioners was remitted much earlier to the issuance of sanction order, which fact is not reflected in the sanction order indicating that the sanction order has been issued without application of mind and on this score also, the impugned proceedings are liable to be quashed.
Lastly, it is contended that the section provides for mandatory term of imprisonment coupled with fine in respect of the offences committed by a company. As held by the Hon'ble Supreme Court in the case of Assistant Commissioner v. Villiappa Taxtiles Ltd. [2003] 132 Taxman 165/263 ITR 550, no criminal prosecution could be sustained for the offences under sections 276, 277 and 278 of the Act when the offences are rendered punishable with fine and imprisonment.
Held, that none of the contentions urged by learned counsel for petitioners merit acceptance. Insofar as the contention based on Annexure-'B' is concerned, the said notice was not issued as a show cause notice preceding adjudication or the prosecution, rather a reading of the said notice at Annexure-'B' indicates that it was issued to Dr. Villoo Morawala Patell who was the Chairman and Managing Director of Avesthagen & Group companies. Captioned subject of the said notice was to keep the Managing Director informed and to treat him as the Principal Officer of the Company. After narrating the circumstances of notice, it is stated therein that the said notice was issued to convey the intention of the Department to treat him as the Principal Officer of the above companies. It is not a show cause notice. On the other hand, in the complaint, it is specifically stated that show cause notice was issued to accused on 14.08.2013. Petitioner has not referred to the said document. Therefore, the argument of learned counsel for petitioners based on Annexure-'B' is totally misconceived and cannot be a ground to quash the proceedings.
The second contention urged by petitioners is also misconceived for the reason that the said argument is also built upon Annexure-'B'. Learned counsel has based his argument on the impression that under the said intimation, a joint notice was issued to all the Companies; but it is not so. On the other hand, order passed under section 201(1) and 201(1A) of the Act (Annexure-'E') makes it evident that the order was passed only against petitioner - Company and not against all the Companies as contended by learned counsel for petitioners. Therefore, even this plea is liable to be rejected.Under the said circumstances, if any amount was paid pursuant to the said show cause notice, the proof thereof could have been produced by petitioners so as to avoid criminal prosecution. There is nothing on record to show that the remittances made by petitioners have been brought to the notice of the Central Government. Consequently, petition fails and same is dismissed.