Case Law Details
Gautham Vasudev Menon Vs ACIT (Madras High Court)
Former Director Not Liable for Company’s Tax Return Default After Prior Resignation; Income Tax Prosecution Set Aside Because Petitioner Was Not Director During Relevant Year; Criminal Proceedings Quashed Because ROC Records Confirmed Director’s Resignation; Former Company Director Gets Relief Because He Was Not in Charge During Alleged Offence Period.
The Madras High Court considered a Criminal Original Petition seeking to quash proceedings in E.O.C. No.24 of 2019 pending before the Additional Chief Metropolitan Magistrate, Egmore, Chennai.
The prosecution case was that the first accused company, assessed under the jurisdiction of the respondent Income Tax Department, had derived substantial income during Financial Year 2012-2013, including professional income, contractual income, and cash deposits. According to the Department, the accused were required to file the income tax return under Section 139(1) of the Income Tax Act, 1961 on or before 30.09.2013 for Assessment Year 2013-2014. Since no return was filed despite issuance of a show cause notice dated 27.04.2016, the Department alleged commission of an offence under Section 276CC of the Act and filed a complaint.
The petitioner was arrayed as Accused No.3. The petitioner contended that he had been inducted as a Director of the first accused company on 01.06.2010 and had resigned from the directorship with effect from 02.05.2011. To substantiate this claim, the petitioner produced Form No.32 and related documents filed before the Registrar of Companies.
The Revenue argued that the petitioner’s contentions could only be examined during trial and that documents produced before the High Court required proof before the Trial Court. It was also contended that the petitioner, being a Director of the company, was responsible for the conduct of business at the relevant time and was therefore liable for prosecution under Sections 276CC and 278B of the Income Tax Act.
After examining the records, the High Court noted that Form No.32 filed before the Registrar of Companies was an undisputed document and had been duly recorded by the Registrar of Companies. The certified copy of the document showed that the petitioner had resigned from the company with effect from 02.05.2011.
The Court held that during the relevant Assessment Year 2013-2014, the petitioner was not a Director of the first accused company. Therefore, he could not be held liable for offences allegedly committed by the company during that period. On this ground alone, the complaint against the petitioner was held unsustainable.
Accordingly, the Madras High Court quashed the criminal proceedings against the petitioner alone while directing the Trial Court to continue proceedings against the remaining accused and complete the trial within three months. The Criminal Original Petition was allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Criminal Original Petition has been filed seeking to quash the proceedings in E.O.C.No.24 of 2019 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Chennai.
2. The case of the first respondent/complainant is that the first accused is an Assessee on the file of the first respondent, Non-Corporate Circle, bearing Permanent Account No.AAFCP2805A and falling within the jurisdiction of the first respondent. The second accused is a Director of the first accused Company and the other accused persons are also the Directors of the said Company. It is further alleged that the accused derived income during the Financial Year 2012-2013 comprising professional income of Rs.8,28,44,364/-; contractual income of Rs.24,78,925/- ; cash deposits of Rs.11,50,000/- and further cash deposits to the tune of Rs.7,00,000/-. Therefore, the accused ought to have filed the return of income under Section 139(1) of the Income Tax Act, 1961, on or before 30.09.2013 for the Assessment Year 2013-2014. Despite the taxable and substantial income received by the accused, he failed to file the return of income within the stipulated time. Therefore, the first respondent caused a show cause notice dated 27.04.2016. However, there was no response to the said show cause notice and as such, the accused had committed an offence under Section 276CC of the Income Tax Act, 1961. Thereafter, the first respondent lodged the complaint.
3. The petitioner is arrayed as A3. The only ground raised by the petitioner is that he was inducted as a Director of the first accused Company on 01.06.2010. Thereafter, he resigned his directorship from 02.05.2011. In order to substantiate the same, the petitioner has produced Form No.32 along with other undisputed documents.
4. Per contra, the learned Senior Standing Counsel appearing for the first respondent filed stating that the points raised by the petitioner can be considered only during the trial. He further submitted that the documents, which are produced before this Court, cannot be relied upon at this stage and the same have to be proved before the Trial Court by letting in evidence. Admittedly, the petitioner failed to file the return of income for the Assessment Year 2013-2014 and therefore, liable to be prosecuted for the offence punishable under Section 276CC of the Income Tax Act, 1961. The mere production of Form No.32 or any documents said to have been filed before the Registrar of Companies does not ipso facto absolve the petitioner from liability under Section 278B of the said Act and the same requires evidence before the Trial Court. She further submitted that the first respondent satisfied with all the statutory requirements and that the petitioner, being a Director of the first accused Company, was in charge of and responsible for the conduct of its business at the relevant point of time when the offence was committed. Hence, the petitioner is also liable to be prosecuted and punished for the offence under Section 276CC read with 278B of the Income Tax Act, 1961.
5. Heard the learned counsel appearing on either side and perused the materials available on record.
6. A perusal of the records reveals that the petitioner has filed Form No.32 before the Registrar of Companies, which is an undisputed document. The same has been duly recorded by the Registrar of Companies, who has also issued a certified copy of Form No.32. It shows that the petitioner, who is arrayed as A3 in the complaint lodged by the first respondent, was inducted as a Director of the first accused company on 01.06.2010 and thereafter, resigned from the said position with effect from 02.05.2011. Therefore, at the relevant period of time, i.e., Assessment Year 2013-2014, the petitioner was not a Director of the first accused Company. Therefore, the petitioner cannot be held liable for any offence alleged to have been committed by the first accused. On this sole ground, the complaint lodged by the first respondent against the petitioner cannot be sustained and is liable to be quashed.
7. In view of the above, the proceedings in E.O.C.No.24 of 2019 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Chennai, is hereby quashed as against the petitioner alone. The Trial Court is directed to proceed with the trial as against the other accused persons and complete the trial within a period of three months from the date of receipt of a copy of this order.
8. In the result, this Criminal Original Petition stands allowed. Consequently, connected miscellaneous petitions are closed.
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