Application Of Mind And On This Score Also, The Impugnedproceedings Are Liable To Be Quasnecd v. M/S.velliappatextiles Litd., & Another, Air 2004 Sc 8, No. Criminalprosecution Could Be Sustained For The Offences Under Sections2/6, 2/77 And 278 Of The Act Wh

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE QO DAY OF SEPTEMBER Z2OL9 BEFORE. THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA| #WRIT PETITION NO.47514 OF 2017(GMRES) BETWEEN: 1.DR VILOO PATELL MANAGING DIRECTOR © M/S AVESTHAGEN LIMITED | A COMPANY [INCORPORATED UNDER COMPANIES ACT, 1956 HAVING ITS | NO 43/39, 4 FLOOR WARD NO 91,PROMENADE ROAD, SECOND CROSS, |BANGALORE KA 560005 2.M/S AVESTHAGEN LIMITED — A COMPANY [INCORPORATED UNDER COMPANIES ACT 1956 HAVING ITS NO 43/39, 4 FLOOR WARD NO 91, PROMENADE ROAD, SECOND CROSS | BANGALORE KA 560005 REPRESENTED BY ITS MANAGING DIRECTOR © DR VILLOO PATELL. ... PETITIONERS (BY SRI: HARIKRISHNA S HOLLA, ADVOCATE) AND THE INCOME TAXK DEPARTMENT BY DEPUTY COMMISSIONER OF INCOME TAX TDS CIRCLE -1(1) HMT BHAVAN 2 BANGALORE - 560022 ... RESPONDENT (BY SRI: K V ARAVIND A/W SRI: DILIP.M., ADVOCATES) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND.22/ OF THE CONSTITUTION OF INDIA READ WITH SECTION 482OF CODE OF CIVIL PROCEDURE PRAYING TO CALL FORRECORDS ON THE FILE OF SPECIAL JUDGE, ECONOMICOFFENCES, BANGALORE AND SET ASIDE THE ORDER DTD05.04.7016 TAKING COGNIZANCE OF THE COMPLAINT INCC.NO.95/2016 VIDE ANNX-G. THIS WRIT PETITION COMING ON FOR PRELIMINARY.HEARING IN ‘°B’ GROUP THIS DAY, THE COURT MADE THEFOLLOWING:- ORDER Heard learned counsel for petitioners and learned Standing Counsel for respondent -— Income Tax Department. Petitioners are sought to be prosecuted under section 276- B of the Income Tax Act, 1961 (hereinafter referred to as “theAct”) for failure to remit the tax deducted at source during thefinancial Year.2010-2011and.2011-J0O12amountingCORs.1,57,85,655/- and Rs.1,35,54,16/7/- respectively. 2. The impugned action is assailed by the petitioners on)the following grounds:- First, the show-cause notice is issued in respect of ninecompanies whereas the prosecution is launcned only against tnepetitioners which is legally untenable. The Company is a juristicperson and in terms of section 2(35) of tne Act, notice isrequired to be issued to each of the companies individually andnot a composite notice as done in the instant case. Hence, tneprosecution launched against the petitioners suffers from basicVIce. Second, tne snow cause notice was issued only to)petitioner No.1 namely Managing Director and not to theCompany - petitioner No.2 and in that view also, the prosecutionlaunched against the petitioners are defective and contrary tosection 2/76 of the Act. Third, the impugned sanction in the instant case nas been|accorded without application of mind. Tax deducted at source bythe petitioners was remitted much earlier to the issuance ofsanction order, which fact is not reflected in the sanction orderindicating tnat tne sanction order has been issued without v application of mind and on this score also, the impugnedproceedings are liable to be quasnecd. Lastly, it is contended that the section provides formandatory term of imprisonment coupled with fine in respect ofthe offences committed by a company. As held by the Hon’‘bleSupreme Court in the case of THE ASSISTANT COMMISSIONER,ASSESSMENT-II, BANGALORE & Others vs. M/s.VELLIAPPA|TEXTILES LITD., & Another, AIR 2004 SC 8, no. criminal|prosecution could be sustained for the offences under sections2/6, 2/77 and 278 of the Act when the offences are renderedpunishable with fine and imprisonment. | ‘3.None of the contentions urged by learned counsel forpetitioners merit acceptance. Insofar as the contention based onAnnexure-'B’ is concerned, the said notice was not issued as asnow cause notice preceding adjudication or the prosecution,rather a reading of the said notice at Annexure-'B’ indicates thatit was issued to Dr.Villioo Morawala Patell wno was tne Cnairmanand Managing Director of Avesthagen & Group companies.|Captioned subject of the said notice was to keep the Managing ‘3.None of the contentions urged by learned counsel forpetitioners merit acceptance. Insofar as the contention based onAnnexure-'B’ is concerned, the said notice was not issued as asnow cause notice preceding adjudication or the prosecution,rather a reading of the said notice at Annexure-'B’ indicates thatit was issued to Dr.Villioo Morawala Patell wno was tne Cnairmanand 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 theCompany. After narrating the circumstances of notice, it isStated therein that the said notice was issued to convey theintention of the Department to treat him as the Principal Officerof the above companies. It is not a show cause notice. On theother nand, in the complaint, it is specifically stated that snowcause notice was issued to accused on 14.08.2013. Petitionernas not referred to the said document. Tnerefore, the argumentof learned counsel for petitioners Dased on Annexure-'B’ is totallymisconceived and cannot be a ground to quasn the proceedings. 4Tne second contention urged by petitioners is alsomisconceived for the reason that the said argument is also builtupon Annexure-'B’. Learned counsel has based nis argument onthe impression that under tne said intimation, a joint notice wasissued to ali the Companies; put it is not so. On the otner hand,order passed under section 201(1) and 201(1A) of the Act(Annexure- E’) makes it evident that the order was passed onlyagainst petitioner - Company and not against all the Companies as contended by learned counsel for petitioners. Therefore, eventhis plea is liable to be rejected. — 5.Coming to the next contention that the sanctionOrder issued for prosecution of petitioners does not reflectapplication of mind is concerned, I have gone through the saidsanction order wherein the Commissioner of Income _ TaxSanctioning Authority has narrated the facts of the case, referredto provisions of law applicable to the facts and has observed thatan opportunity was given to the assessee in default to make thepayment. Para 6 of the sanction order dated 15.10.2015 readsas follows:-. 6. Opportunity: This office has sent showcause notices dated 02.05.2014, 24.06.2014,|17.08.7014 under section 27/6B read _ wisection 2/8B of the Income Tax Act, 1961,|reguiring tne deaductor to snow cause wnyprosecution proceedings shouid not be initiated|for the said default of non-remittance of TDS to Central Government Account. Under the said circumstances, if any amount was paid pursuant to the said show cause notice, the proof thereof could nave beenproduced by petitioners so as to avoid criminal prosecution. Tnere is notning on record to snow that the remittances made bypetitioners nave been brought to the notice of the CentralGovernment. 6.Learned counsel for petitioners has produced thecopies of the communication obtained from the Office ofAssistant Commissioner of Income Tax (TDS), Circle-1(1),Bangalore along with challan details report for making payments.It reflects that on 10.09.2014 a sum of Rs.1,52,6/5/- andanother sum of Rs,1,69,974/- was remitted not by _ thpetitioners herein, but by Avestha Gengraine TecnnologiesPrivate Limited. Tne said remittances do not relate to the case Innand. Asa result, even the sanction order does not reflect anyerrors warranting interference by this Court. Hence, thisargument is also rejected. J.The last contention, urged by learned counsel forpetitioners is no more|res integrain view of the ConstitutionBench decision of the Hon’ble Supreme Court inSTANDARDCHARTERED BANK vs. DIRECTORATE OF ENFORCEMENT, (2005) 145 Taxman 154 (SC).It may be useful to refer to paras 30 to|33 of said judgment wnhicn reads tnus; J.The last contention, urged by learned counsel forpetitioners is no more|res integrain view of the ConstitutionBench decision of the Hon’ble Supreme Court inSTANDARDCHARTERED BANK vs. DIRECTORATE OF ENFORCEMENT, (2005) 145 Taxman 154 (SC).It may be useful to refer to paras 30 to|33 of said judgment wnhicn reads tnus; 30.The contention of the appellants is thatwhendf)offenceIS|punisnable|witnimprisonment and fine, the court is not leftwith any discretion to impose any one of them.and consequently the company being a Juristicperson cannot be prosecuted for the offencefor which custodial sentence is the mandatorypunishment. If the custodial sentence is theonly punishment prescribed for the offence,this plea is acceptable, but wnen the custodialsentence and fine are tne prescribed mode ofpunishment,theCOUTTCaf)IMposethesentence of fine on a company which is foundguilty as the sentence of imprisonment isimpossible to be carried out. It is anacceptable legal maxim that law does notcompel a man to ao tnat which cannot possiblybe performed [impotentia excusat legem|].This principle can be found in Bennion’sStatutory Interpretation 4[th]Ean. At page 969°"All civilized systems of law import theprinciple that lex non cogit an imposibilia.....As Patternson J. said "the law compels no. impossibility”. Bennion discussing about legalimpossibility at page 9/70 states that, “If anenactment requires what Is legally impossible itwill be presumed tnat Parliament intended it tobe modified so as to remove the impossibilityelement.” This Court applied tne doctrine ofimpossibility of performance [Lex non cogit adimpossibilia] in} numerous cases [State ofRajasthan v. Shamsner Singh 1985 (Suppl.)SCC 416; Special Reference No.1 of 2002under Article 143(1) of the Constitution of India[2002] 8 SCC 237]. 31.As the company cannot be sentenced toimprisonment, the court nas to resort topunishment of imposition of fine which is also aprescribed punishment. As per the scheme ofvarious enactments and also tne Indian Pend]|Code,mandatorycustodialsentenceIS|prescribedforGraver|offences.[fFtheappellants’ plea is accepted, no company orcorporate bodies could be prosecuted for theGraveroffences whereas|tneycouldbeprosecuted for minor offences as the sentenceprescribed therein is custodial sentence or fine.We do not think that the intention of the!Legisiature is to give complete immunity from prosecution to the corporate bodies for thesegrave offences. The offences mentioned underSection 56(1) of FERA Act, 1973, namely thoseunder Section 13, clause (a) of sub-section (1)of section 18; section 18A; clause (a) of sub-section (1) of section 19; sub-section (2) ofsection 44, for which the minimum sentence ofsix montns’ imprisonment ts prescribed, areserious offences and if committed would heaveserious financial consequences affecting theeconomy of the Country. All those offencescould be committed by company or corporatebodies. We ado not think tnat tne legisiativeintent is not to prosecute the companies forthese serious offences, if these offencesinvolve the amount or value of more than one|lakn, ana tnat tney could be prosecuted onlywhen the offences [nvoive an amount or valueless than Rupees one !/akn. 37.As the company cannot be sentenced toimprisonment, the court cannot impose tnatpunishment, but when imprisonment and fineis the prescribed punisnment the court canimpose the punisnment of fine whicn could beenforcedagainsttheCOlM)palhSuchnaddiscretion is to pe read into tne section so far| 37.As the company cannot be sentenced toimprisonment, the court cannot impose tnatpunishment, but when imprisonment and fineis the prescribed punisnment the court canimpose the punisnment of fine whicn could beenforcedagainsttheCOlM)palhSuchnaddiscretion is to pe read into tne section so far| as the juristic person is concerned. Of course,the court cannot exercise the same aiscretion|as regards a natural person. [nen the courtwouldNot|be|passingthesentenceInaccordance with law. As regards company, thecourt can always impose a sentence of fine anathe sentence of imprisonment can be ignoredas it is impossible to be carried out in respectof a company. This appears to be the intentionof the Legislature and we find no difficuity in-construing the statute in such a way. We donot think that there is a blanket immunity forany company from any prosecution for seriousoffences merely because the prosecution wouldultimately entail a sentence of mandatoryimprisonment. Tne corporate bodies, sucn asa firm or company undertake’ series ofactivities that affect the life, liberty andaproperty of the citizens. Large scale financialirreguiarities are done by various corporations.The corporate venicle now occupies such alarge portion of the industrial, commercial andsociological sectors that amenability of thecorporation to a criminal law Is essential to-Nave a peaceful society with stable economy. 33.We hold that tnere is no immunity to thecompanies from prosecution merely becausethe prosecution is in respect of offences forwhicn the punisnment prescribed is manaatoryimprisonment,We|overrule|theVICWSexpressed by the majority in Vellilappa TextilesLtd.'s case (supra) on tnis point and answerthereferenceaccordingly.Varlousothercontentions nave been urged in all appeals,including this appeal, they be _ posted fonearing before appropriate bencn. 8.In the light of these discussions, I do not find any ground to accede to the prayer made in the petition. Consequently, petition fails and same Is.aismissead.s Sd/- JUDGE BSS|