SANGHI INDUSTRIES LTD AND ANOTHER V. THE DEPUTY COMMISSIONER OF IT.,REP.,SPL PP

CRLP/8634/2016

AI Insights

The case involves Sanghi Industries Ltd and its directors, who were accused of willfully attempting to evade tax under the Income Tax Act, 1961. The complaint was filed by the Deputy Commissioner of Income Tax, alleging non-payment of self-assessment tax for the assessment year 2010-11. The petitioners argued that the tax was paid before the complaint was filed and contested their criminal liability, particularly highlighting that one of the directors, A3, was a non-executive and had resigned before the tax due date. The court examined the roles of the directors and the timing of the tax payments relative to the complaint's filing.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 727812 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 22-09-2023
• Assessment Year: misc
• Other Referred Cases: Sunil Bharti Mittal v. Central Bureau of Investigation
• Laws Referred To: Criminal Procedure Code, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: GADI KUMAR; J V PRASAD
• Assessee Lawyers: N BABU; CH KIRAN
• Keywords: Abuse of Process; Financial Crisis; Quash Criminal Proceedings; Vicarious Liability; Willful evasion of tax
• Section: 221(1); 482; 278-B; 276-C(2); 278-8; 140(4); 275 C(21)

Judgement Text

"1 13251 | IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD FRIDAY, THE TWENTY SECOND DAY OF SEPTEMBER TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE SRI JUSTICE K.SURENDER CRIMINAL PETITION Nos.: 8634 AND 12664 OF 2016 CRIM INAL PETITION No.: 8634 OF 2016 Between: 1. Sanghi lndustries Ltd, Having registered office at Sanghi Nagar, Koheda Village, Hayath Nagar tr,4andal, Ranga Reddy District, rep by its lvlanaging Director, Sri.Ravi Sanghi. 2. Ravi Sanghi, S/o Sri Ramsharan Sanghi, Koheda Village, Hayath Nagar lr/andal, Ranga Reddy District, Telangana. AND ...PETITIONERSlAl and 2 in CC.No.108/2016 l The Deputy Commissioner of lT., Circle - 3(1), 7th Ftbor, 'B' Block, l.T.Towers, A.C.Guards, lvlasab Tank, Hyderabad, Telangana. Rep by Standing Counsel for l. t. Dept ...RESPONDENT/ DEFACTO COMPLAINANT in CC 108/2016 Petition under Section 482 of Cr.P.C praying that in the circumstances stated in the lvlemorandum of Grounds of Criminal Petition, the High Court may be pleased to quash the criminal proceedings initiated in C.C.No. 108 of 2016 on the file of Special Judge for Economic Offences, Nampally, at Hyderabad, holding it as abuse of process of court by invoking the inherent jurisdiction under section 482 of the Criminal procedure code. CRLPMP. NO:9451 OF 2016 Petition under Section 482 of Cr.P.C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to stay all further proceedin Special Judge for Economic Offences, presence of the petitioners. in C.C.No. 108 of 2016 on the file of ampally, at Hyderabad, including the os 1.{ ''* + : 'L. ii, I iI: This Petition coming on for hearing, upon perusing the lVemorandum of undslbf Criminal Petition and upon hearing the arguments oi Sri N. Bharat u, Advocate for the Petitioners and Sri Gadi Praveen Kumar, Advocate for Respbndent. :* j CRIMINAL PETITION NO: 12664 OF 2 , Gro Bab the I I Between:., . r Sddhir Sanghi, Village, Hayath Road No. 12, B 0.16: S/o. Late Sri Ram Sharan Sanghi, Sanghi agar, Koheda Nagar Mandal, Ranga Reddy Dist. Presen y residing at 534, anjara Hills, Hyderabad - 500 034. AND ...PETITIONERYACCUSED No.3 Commissioner Of lncome Tax, Circle -3(1), 7th Floor, B Block, l.T , A.C. Guards, Masab Tank, Hyderabad, Telangana. Represented by .; r :pi i th8 Soecial Public Pro **l i, # rrF.ft I . Satghi lndustries Ltd., Village, Hayath Nagar Ivldnaging Director Sri sector, Income Tax Department ..RESPONDENTiCOMPLAINANT Having its registered office at Sanghi Nagar, Koheda [4andal, Ranga Reddy District, represented by its Ravi Sanghi 2 3. Ravi Sanghi, S/o. Sri Ram Sharan Sanghi, Koheda Village, Hayath Nagar N4dndal, Ranga Reddy Districl. Telangana. , ! 't E ...ACCUSED NOS.1 AND 2/ i NOT NECESSI RY PARTIES I Petition under Section 482 of Cr.P.C praying that in the ,:ircumstances , .:; stated in the N/emorandum of Grounds of Crimi nal Petition, the High Court may be n order quashing C.C. No. 108 of 201 6 on the lile of Special c Offences, Nampally at Hyderabad 94 0F 2016 I I r.it ti: J under Section 482 of Cr.P.C praying that in the oircumstances stated 'in e'ltrlemorandum of Grounds of Criminal Petition the High Court may be ainl pLss i'of Special Judge for Economic Offences, Nampally at Hyderabad, eased an order staying all further proceedings in C.C. No. 108 of 201 6 I 3. Nilemorandum of Sri Ch. Pushyam Advocate for the ent i,,los.2 and 3. '.1i{:.,:- .i. ) I i :i iI fl' fl THE HONOURABLE SRI JUSTICE K.SURENDER CRIMINAL PETITION Nos.8634 & L2664 0F 2016 COMMON ORDER: 1.. Criminal Petition No.8364 of 2016 is filed by rhe petitioners/A1 and A2 ar-rcl Criminai Perrtion No.12664 of 20'16 is hled by the petitioncr/A3 to quash the proceedings in C.C.No. 108 of 2076 on the fi1e of Special .Iudge for Economic Offences, Nampally, Hyderabad. Both petitions are heard together and disposed by u,av ol this Common Order. 2. The petitioners are arral,cd as ,{1 to A3 in the complaint filed by the Deput-t Commissioncr of lnr:ome fix, Cir.te-:(1). The offence alleged is under Se ction 276-C(2. &, 278-8 of the Income Tax Act, 196 i 3. In the complaint filed, it is alleged that A I is Limited company, A2 and A3 arc ils Directors. A1/company filed return of income terx for the assessmcnt year 20lO-11 on 20.O9.2010 determining its net aggrcgatc liabiiity at Rs.2,56,O3,81O/-. The returns were llicd q,it}-rout payment of tax. The Assistant Commissioner of lncome Tax issued no[ice s on 21.O 1.201 1 under it 2 Section 221{1J and 140,4 of Income Tax Aci, 196 1 to tl-rc accused ior non payment cf self assessment tax as liled bv ihe accl.sed 4. in response to the notice, repl]'' $ as givcn stating that the cornpany was in financial crisis and timc u'as sought lor pa5rmsnl of tax. The Assistant Commissioner, illcome Ta-x pa-ssetl penaltl' imposing an amount of Rs.64,00,953/ . Aggrievecl bv the order, appeal was filed before the CIT (A) and the penaltv rvas restricted to Rs.10.00 lakhs. The decision of CIT-A u'as challengcd r'vhrch is pending adjudication before the ITAT. 5. Learned Senior Counsel appearing for the petitione rs u'ould submit that the entire amount of tax s'as in lact u'as paid even prior to 14.O3.2O11. The complaint in question u'as filed on 29.O3.2O16. Further, petitioner/A3 was non-executive l)romoter. He resigned as Director frorn 17 .12.20 11. The petitioner/43 being a non-executive Director, was not responsible for the dal'. 1o 6., management of the company. 6. On the other hand, learned counsel appearing for tl-e Income Ta;< Department would submit thit thcse are question s of fact which can only be decided during trial. Accordingly, prayed to dismiss the petitions. 7. The offence allegcd is undcr Section 275 C(.21 of the Income Tax Act, 1961. It an , per-sor'I rt,illfulll' attempts in any manner whatsoever to affect the payment of ta-:<, penalt;', cr interest under the Act, he shall be punrshable rvith rigorous imprisonment for a term which shall not be iess tt.ran three months but which may extend to two year-s and shail also iiable to fine. . 8\" Section 278-B of the Income Tax Act, i96 i deals with the offences by Companies. When Lhe offence is cornrnitted by the company, every person 1 'ho at ihe time of commission of offence was in-charge and was rcsponsible lor conciucting business of the ! company as well as the companr shall be dcemed to be guilty of the offence and shall be liable for punishment. 9. The petitioner/A3 is roped in by u'a1' of vicarious liability. In the complaint, it is not stated as to how this petitioner was responsible for the day today alfairs of the compaly. The twin requirement for making a person responsible by way of vicarious liability is that i) a person should have been responsible for conduct of the business of the fompany; ii) and company as a whole. Unless both the ingredients are satished, a person cannot be roped in to face criminal prosecution. t -,. --..J i i, <- 4 10. The Hon'ble Supreme Court in the casc of Sunil Bharti Mittal v. Central Bureau of Investigation L helC that a t)irector or Malaging Director or Chairman of the compani coi-tici be meide accused along rvith the company only if there is sr-lfltcienl material to prove his active role coupled rvith criminal intent. 11. As seen from the record, which are annual repolt lor the years 20O9-2O1.O, 2OlO 2O11 and 2Ol1-2O12 of A1 company. pctitioner/A3 rvas shown as the promoter and non cxecutive Director. Further, the day today management of the company ilas conducted by the Vice-Chairman and Managing Director 12. In the absence of any specific allegation in the complaint that petitioner/A3 was responsible for the filing of the returns r.r'ithout payment and was responsible for day to day basis for tltr: conduct of the business and supervision of the affairs of the company, the petitioner/A3 cannot be criminally proceeded rvith lor the violation of the said provisions under the Act. 13. Learned Senior Counsel relied on the judgments; i) judgment in Criminal Miscellaneous No.3669f of 2OO7, dated O3.12.2OO9 of '(201s) 4 scc 609 High Court of Patna; iii .Judgmenr, tn Crir.ninai O.P (MD) |Jc. 13383 of 2019 and Cr1.M.P.(MD) Nos.8303 and 83C'+ of 2019 dated 2.O3.202O; iii) judgment of Gujarat High Court in the case of Vinaychandra Chandulal Shah r'. State cL Gujaiat ( 1995 2 1 3 ITR 307 Guj) and iv) order of the Income 'la-x Appeilate Tribunai in iTA Nos.122 &,834lHYD/20 16, dated 01.10.2C19 14. In ali the judgments, it r.r'a s ftrund that uniess the prcsecution establishes that the returns wcre filed it'ith an intention to evade tax, proceedings cannot be continued 15. In the present case, the entirc ra-ri liable \"vas paid before 14\"O3.2011, even prior to lodging of the complarnt on 28.03.20 11. The said payment is not disputed by the prosecution. Sub-section 2 of Section 276C would be attr:rcted onll' '\"r'hen a person willfully attempts in any manner r.l,hatsoever to el'ade the payment of any tax, penalty or interest under the Act anci not otherwise. In view of the payment being made by the petitioners even before the lodging the complaint after receiving the notice, it cannot be said that there was any willful evasion. Furthe6o the ta-.< was accepted by the department without any reserva t ion. * t .. i-- .. 6 17. Accordingl,v, both the Criminal petitrons arc :rllorve