Crlatr/19/2018 Of M/S. Nallamala Agro Farms Pvt. Ltd v. Dy. Commissioner Of Income-Tax

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD FRIDAY ,THE SEVENTEENTH DAY OF JUNETWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE DR. JUSTICE D.NAGARJUN CRIM INAL APPEAL (TR) Nos : 19 and 62OF 2018 Crl.A.fiR) No. 1 9 of 2018 : Crl.Appeal Under Section 374 ol Cr.p.C aggrieved by the Judgment daJed09-01-2014 in c.c.No. 117 of 2011 on the file of the court of the Speciat JudgdforEconomic Offences at Hyderabad. Between: '1. M/s. Nallamala Agro Farms Pvt. Ltd., Flat No..|02, Dhanuniava Nest. RaiivNagar, Yousufguda, Hyd_erabad-45, Rep. by Shri D.V.S.Subbi Ralu, Slo. t_ateD.K. Raju, aged about 45 years.Nagar, Yousufguda, Hyd_erabad-45, Rep. by Shri D.V.S.Subbi Ralu, Slo. t_ateD.K. Raju, aged about 45 years. 2 P V:Q.^S1Qba Raju,, Director of M/s. Nallamata Agro Farms pvt. Ltd., FtatNo.'102, Dhanunjaya Nest, Rajiv Nagar, yousufguda; Hyderabad_4s.No.'102, Dhanunjaya Nest, Rajiv Nagar, yousufguda; Hyderabad_4s. 3. M.S.uryalgrayana Raju,, Direcot of M/s. Nallamala Agro Farms pvt. Ltd., FlatNo.102, Dhanunjaya Nest, Rajiv Nagar, yousufguda, Fyderabad-45. [- ][- ][']No.102, Dhanunjaya Nest, Rajiv Nagar, yousufguda, Fyderabad-45. [- ][- ]['] ... Appellants / Accused Nos. 1, 2 & 5 AND D^y. Commissioner of lncome-tax,, Central Circle-g, Aayakar Bhavan, Room No.g05,8h floor, Basheerbagh, UyaeraOaO-SOOOO+. [- ][-' ][-'-]8h floor, Basheerbagh, UyaeraOaO-SOOOO+. [- ][-' ][-'-] ...RESpONDENT/ Comptainant Counsel for the Appellant : Sri Vinod Kumar Deshpande, Senior Counsel for. SRI. GASHOKREDDY Counsel for the Respondenti SRI B. NARASIMHA SARMA, SC for INCOME TAX Crl.A. TR)( No. 62 of 2018 : crl.Appear under section 324 of cr.p.c aggrieved by the Judgment dated09'01-2014 in c.c.No. 117 of 2011 on the file of the court oithe Special Judge forEconomic Offences at Hyderabad. Between: IP, Py,ryrlflulqna [Raju,, Director ][of ][M/s. ][Naflamata ][Agro ][Farms ][pvt. ]Ltd.,'Flat No. 102, Dhanunjaya Nest. Rajiv Nagar, yousufguda, Hyder;bad_45: Flat No. 102, Dhanunjaya Nest. Rajiv Nagar, yousufguda, Hyder;bad_45: 2Namb^uri No. 102, Dhanunjaya Rama Raju,, Nest, Rajiv Director of Nagar, M/s. Nallamala yousufguOi, Agro Farms Hyderanad_+t. pvt. Ltd., Flat' [-'] ... Appellants / Accused Nos. 3 & 4 AND Dy. Commissioner of lncome{r.r, g_e1la] Circle_B, Aayakar Bhavan, Room No.805,8"' floor, Basheerbagh, Hyderab;d-500004.8"' floor, Basheerbagh, Hyderab;d-500004. ...RESpONDENT/ Comptainant counsel for the Appelant : Sri vinod Kumar Deshpande, senior counser forSRI. G ASHOK REDDY Counsel for the Respondent: SRI B. NARASIMHA SARMA, SC for INCOMEThe Court delivered the following: Judgment THE HONOURABLE DR. JUSTICE D.NAGARJUNCRIMINAL APPEAL ITRI Nos.lj a d [,62 ]qf 2OlACOMMON JUDGMENT: Cr1.A.(TR).No.19 of 2018 is filed by Al, A2 a"nd A5 i.e.,Company and its two Directors respectively, whereasUrlA-.(TR).No.62 of 2OlB is liled by ,4.3 and A4, ',vho are ol-heri)iicutors c-rf Al/company, being aggrieved bv rhe conviction andsentc ce impost:d by the learned Special Juilge for DconomicOffe r:es at I{yderabad in C.C.No .1L7 of 201 I vidc Judgmentclated 09.01.2014, rvherein Accused Nos. 1 to 5 rvcre found guiltyof the offenccs punishable under Section 276-C(21 read withSection 278--13 of the lncome Tax Act, 1961 (for short, "the Act")cocsequentl-y accused No.I rvzrs sentenced to pay fine ofRs. i0,OO0/ - and in default of payment of hne to initiatezrppi-opriate procecdingsas required under Section 42I ofCr.P.C., whereas Accused Nos.2 to 5 were sentenced to undergcrrlgorous imprisonmerrt for a period of one year each ald to payfine of Rs.10,000/- each and in default of payment of hne byaccnsed Nos.2 to 5, to undergo simple imprisonment for a periodof one month each. Sincc tl-re issues inrroh,ed in these appeals are one and thesame, both the appeals arc being disposed of by this commonjudgment. Sincc tl-re issues inrroh,ed in these appeals are one and thesame, both the appeals arc being disposed of by this commonjudgment. 2. For convenience, convenience, the parties herein are referred to as theyparties herein are referred to as theyto as theyas theyare arrayed before the lrial Court. i.e., Appellant No.1 asAccused No.1/Company and Appellant Nos.2 to 5 as AccusedNos. 2 to 5. For convenience, convenience, the parties herein are referred to as theyparties herein are referred to as theyto as theyas they 3. The ge ncsis of thesc cases, which led the appellants_accused to prefer these appeals, ale narrated in brief as under: i) Accused No.1/Company - M/s Na[amala AgroFarms Private Limited, which was registered under theCompanies Act with the Registrar of Companies atHyderabad as Private Limited Compaly, was engaged inthe business of acquisition and sale of lands. AppellantNos. 2 to 5 herein are the Directors of AccusedNo.1/Company. ii) Accused No.l/Company has acquired lards to anextent of Ac.50.60 guntas in Sy.Nos.203, 191, 202 and.2O4under the- lirnits of Bachupalty Mandal, Ranga Reddy District during the financial years 2OO|-2OO3 anddeveloped the said lands by incurring some amountsduring the financial years 2001-02 to 2OO7-08. AccusedNo.l/Company has floated 8 companies by name M/s.Karanja Agro Farms Private Limited and seven others with1OO% holding in the year 2006-07 and sold lands under 9different sale deeds for the financial year 2OOZ-O8 andclaimed exemption of such transfer by invoking provisionsunder Section 47 of the Act. iii) For the assessment year 2008-09, accusedNo. 1/cornpany has Iiled income tax returns on 30.09.200gunder Ex.Pl by showing taxable income as Nil and bookprofit under Section 115JB as Rs.2O,46,76,320/-, which ismore than regular income. Since the book profit was morethan regular income, the same has been taken for thepurpose of taxation and tax liability was arrived atRs.2,31,89,827 l-. ir) Accused No.l /Company is expected to pay theincome tax either by way of advance tax as required underSection 2O8 of the Act or at least atong with filing of t* returns in terms of Scction 140-A of the Act. As perSection 143 (1) ol the Act, the tax liabilit5. of Accused No.1was arrived at Rs.2,83,03,180/- by therespondent/ complarnant and raised a demand underSection i 56 read with Section 143 of the Act and issued anintimation to Accused No. 1/Company under Ex.P2Accused No. 1 / companvwas required to pay the taxdemanded within 30 davs of service of notice, but it hascommitted default v) Respondent/ complainant has issued show-causenotice under Section 221 (11 of the Act under trx.P5,wherein thc appellants vvere asked to show cause as to whypenalty should not be levied for committing default inpayment of tax. As there was no response from theappellarts, the complainant has issued another show-cause notice dated 01.09.2010 under Ex.P6 under Section22I (ll read with Section 143-4 of the Act. Finally, onemore opportunity was also given by the Department bygiving another show-cause notice dated 17.O9.20LO (Ex.P7)under Section 221 (l) read with Section 143-4 of the Act. ..'../ // v) Respondent/ complainant has issued show-causenotice under Section 221 (11 of the Act under trx.P5,wherein thc appellants vvere asked to show cause as to whypenalty should not be levied for committing default inpayment of tax. As there was no response from theappellarts, the complainant has issued another show-cause notice dated 01.09.2010 under Ex.P6 under Section22I (ll read with Section 143-4 of the Act. Finally, onemore opportunity was also given by the Department bygiving another show-cause notice dated 17.O9.20LO (Ex.P7)under Section 221 (l) read with Section 143-4 of the Act. ..'../ // An opportunity of being heard was also given by therespondent/complainant to Accused No. I /Company fixingthe date of hearing as 2l .O9 .2O l O, but there was noresponse, on which a penalty of Rs.45,00,000/_ wasimposed by way of order dated 22.09.2010 (Ex.pg) underSection 22I read with Section 140-4.(3) of the Act and thesaid proceedings were served on accused No.I on2s.o9.201o.4 . Considering the willful evasion of payment of tax, therespondent/complainant has decided to initiate prosecution andaccordingly a notice was issued to accused No. l/company andother Direcrors under Section 276_C(21 of the Act, as to whyprosecution sha_ll not be initiated against them for willful evasionof the tax. All of them have given reply stating that there was nointention to evade payment of tax. Another notice was issued toaccused No.l/company and its directors under Exs.pro to p14dated 04. 10.20 10 asking them as to why prosecution shall notbe initiated under Section 276-C(2) of the Act. Again replieswere filed by accused No. 1/company and its Directors/accused Nos.2 [to 5 ][under ][Exs ] [to ][Pi9 ][stating ][that ][there ][was ][no]intention [of ][willful ][evasion ][trf ][tax] 5. As Accused [No ][1/Company ][alld its ][Directors/ ][accused]Nos.2 [to ][5 ][have ][not ][paid ][the ][tax ][in ][response ][to ][the ][demand]notice [issued ][under section ][143 ][(1) ][of ][the ][Act ][and ][also ][failed ][to]pay [the ][penalty, ][the ][respondent/ ][complainant ][after ][obtaining]sartction [order ][dated ][25'02 ][2011 ][for ][launching ][of ][prosecution]filed [a ][complaint ][beforc ][thc ][Special ][Court ][for ][Economic ][Offences]against [accused ][No ][l atld ][accused ][Nos'2 ][to 5' ][the ][other]Directors, [alleging ][that ][thc-t' ][hat'e committed ][offence ][punishable]under [Section ][276-C(21 ][read ][ri'ith ][Section ][278-8 of the ][Act' ][as]tax even though [theY were ][having]they [have ][willfullY ][evaded]sufficient [resources'] 6. The [Special ][Court ][for ][Economic ][Offences ][took ][cognizance]of the [offences ][against ][Accusecl ][No' ][1/Company ][and ][its ][Directors]i.e., [Accused ][Nos' ][1 ][to ][5, ][under ][Section ][276-C(21 ][read ][with]section [278-8 ][of ][the ][Act and ][charges were ][framed ][against them]underSection2T6_C(2)readwithSection2Ts-B(|\oftheActanda]ltheaccusedhavepleadednotguiltyofthechargesa]1dclaimed to [be ][tried. ] / -- . :-- /' 7. In order to prove the charges leveled against theappellants, the respondent/complainant has examined pWs.l to3 and got marked Exs.Pl to p2O. After closure of evidence of thecomplainant, the incriminating evidence elicited against theappellants was read over and explained to them under Section313 of the Cr.P.C., for which all of them have denied andreported that they did not choose to examine arry witness ontheir behalf. However, they got marked Exs.Dl to D3 on theirbehalf. / -- . :-- /' 7. In order to prove the charges leveled against theappellants, the respondent/complainant has examined pWs.l to3 and got marked Exs.Pl to p2O. After closure of evidence of thecomplainant, the incriminating evidence elicited against theappellants was read over and explained to them under Section313 of the Cr.P.C., for which all of them have denied andreported that they did not choose to examine arry witness ontheir behalf. However, they got marked Exs.Dl to D3 on theirbehalf. 8. The substance of the evidence of pWl is that after receivingof returns of income tax filed by accused No. l /company, therespondent/complainant has processed the same under Section143(1) of the Act and issued intimation determining the totaltaxable income as Rs.20,46,76,320/_ and tax liability asRs.2,83,03,180/-. The evidence of pW2 /lncome Tax officer is tothe extent that he has considered the annuar report of accusedNo.l/company for the financia.l year 2OOZ_Og under Ex.p3 andbank account statements of accused No.l/Company with theAXIS Bank Limited under Ex.p4 and found that accusedNo. I /Company did not pay the tax returns in spite of having surplus [and ][sufficient ][fr-rnds ] [is the ][lncome Tax ][Officer']who has [succeecled ] [Hr ][s ][evidence ][is that ][he ][has ][passed]penalty [order ][under ][Ex ] [imposing penalty of Rs'45 ][iakhs ][and]raised [demand ][under ][Ex ][Pg ][ir'nd ][the ][same ][u'as ][ser-ved ][ou ][the]accused. [He also ][deposed ][that ][as ][there was ][no ][response from]the accused, [show ][cause ][notices ][under ][Sectiorl ][276-C of the ][Act]were issued [against all ][the ][accused ][through ][u'htch ][accused ][were]informecl [that ][the ][departmenr ][is initiating ][criminal ][proceedings]ald consequently [the ][depart.ment ][has hled ][the complaint'] After full-fledged [[triai][ on considering the ][entire material ]][[ on considering the ][entire material ]][[entire material ]][[on]] g. After full-fledged [[triai][ on considering the ][entire material ]][[ on considering the ][entire material ]][[entire material ]][[on]]record, [the ][trial ][Court ][has ][found ][Accused ][No ][' ] [/ ][Company ][and]A2 to [A5, ][the ][Directors ][of ] [ compary, ][guiltY ][of ][the ][offences]punishable [under ][Sectio ][ns ][276-C(2\ ][an'd' ][278-8 ][of the Act ][and]were [sentenced ][as ][stated ][supra' ][Aggrieved ][by ][the ][said ][judgment]and conviction [of ][Special ][Judge ][for ][Economical ][Offences ][at]Hyderabad, [the ][present ][appeals ][are ][filed ][originally ][before ][the]Metropolitan [Sessions ][Judge Court ][at Hyderabad'] 10. [The ][erstwhile High Court ][for the ][States ][of ][Telangana ][and]Andhra Pradesh [has ][issued ][circular ][ROC'No'34' ][Criminal]Section/2Ol7, dated [28.Oa.2OI7, ][wherein ][it ][is ][clarified ][that] \ against any orders [passed ]by the [Special ]Judge for [Economic]Offences, Hyderabad, in the State of Telangana [and]Visakhapatnam in the State of Andhra Pradesh, the High Courthas the [jurisdiction ]to entertain the appeals, not the SessionsCourt. In view of the said circular, these appea-ls filed by theappellants have been transferred from Metropolitan SessionsJudge Court, Hyderabad, to the High Court for the State ofTelangana. Il. The summary of grounds of appeal as filed by theappellants in brief arc as under: a) The trial Court has failed to see that accusedNo.l/company was not having funds to pay the tax on the duedate as reflected in Ex. P4-bank statements. b) The trial court has misconstrued tJ'.e presumption underSection 278-E of the Act and erred in holding that the burden ofproof is on the accused to prove that there was no willful evasionof payment of tax. c) The trial Court erred in holding that the accused failed toprove non-existence of culpable mental state in non-payment of Il. The summary of grounds of appeal as filed by theappellants in brief arc as under: a) The trial Court has failed to see that accusedNo.l/company was not having funds to pay the tax on the duedate as reflected in Ex. P4-bank statements. b) The trial court has misconstrued tJ'.e presumption underSection 278-E of the Act and erred in holding that the burden ofproof is on the accused to prove that there was no willful evasionof payment of tax. c) The trial Court erred in holding that the accused failed toprove non-existence of culpable mental state in non-payment of taxes on the ciate [of ][filing returns ][and ][as ][on ][the date ][of ][demand]notice ald [thzrt ][the ][trial ][Court failed ][to ][appreciate ][that ][in ][spite ][of]not having any [cogent ][e','idence ][to ][show ][that ][all ][the ][accused]have willfully [evaded ][the tax, ][the ][trial ][Court ][has ][concluded that]accused have [committed ][u'illful ][evasion ][in ][payment ][of ][tax'] The trial court trial court court [[failed ][to ][see ][that ][all ][the ][assets belong ]][[to ][see ][that ][all ][the ][assets belong ]][[see ][that ][all ][the ][assets belong ]][[that ][all ][the ][assets belong ]][[all ][the ][assets belong ]][[the ][assets belong ]][[assets belong ]][[to]] d) The trial court trial court court [[failed ][to ][see ][that ][all ][the ][assets belong ]][[to ][see ][that ][all ][the ][assets belong ]][[see ][that ][all ][the ][assets belong ]][[that ][all ][the ][assets belong ]][[all ][the ][assets belong ]][[the ][assets belong ]][[assets belong ]][[to]]accused No. [1 ]/ [Company ][\\rerc ][attached ][under ][Section ][28 ][1-B ][of]the Act and [clue ][to ][paralyzing ][of ][finar-rcia1 ][activities ][of ][accused]No.1, tax [could ][not ][be ]Paid [in ][time'] The Trial Court Trial Court [[should ][not ][have ][concluded ][that ][accused]][[not ][have ][concluded ][that ][accused]][[have ][concluded ][that ][accused]][[concluded ][that ][accused]][[that ][accused]][[accused]] e) The Trial Court Trial Court [[should ][not ][have ][concluded ][that ][accused]][[not ][have ][concluded ][that ][accused]][[have ][concluded ][that ][accused]][[concluded ][that ][accused]][[that ][accused]][[accused]]Nos.2 to 5 are [responsible ][for ][day ][to ][day affairs ][of ][accused]No.l /company [arrd ][should ][have ][taken ][into ][consideration ][the]notices issued [under ][Section ][278-8 ][of ][the ][Act ][proposing ][the]prosecution did not [refer ][accused Nos' ][2 ][to ][5 ][as ][principal ][officers]and thereby [accused Nos.2 ][to ][5 ][should ][have ][been ][acquitted'] The Court [[below ][failed ][to ][see ][that ][when ][the ][returns ][were]][[failed ][to ][see ][that ][when ][the ][returns ][were]][[to ][see ][that ][when ][the ][returns ][were]][[see ][that ][when ][the ][returns ][were]][[that ][when ][the ][returns ][were]][[when ][the ][returns ][were]][[the ][returns ][were]][[returns ][were]][[were]] f) The Court [[below ][failed ][to ][see ][that ][when ][the ][returns ][were]][[failed ][to ][see ][that ][when ][the ][returns ][were]][[to ][see ][that ][when ][the ][returns ][were]][[see ][that ][when ][the ][returns ][were]][[that ][when ][the ][returns ][were]][[when ][the ][returns ][were]][[the ][returns ][were]][[returns ][were]][[were]]the [department ][held ][that ][since ][the ][book ][profit]determined, under Section [115 ] [was more ][than ][regular ][income' ][they ][have]arrived that A1 was liable [to ][pay the ][tax. ][However, ][A1 was ][not ]!/ / having funds on that date ald hence, the element of mens rea [is]absent and hence, the Court ought to have acquitted [the]accused. 12. Heard Sri Vinod Kumar Deshpande, Iearned Senior counsel for the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, considered theentire material on record, relevant provisions ol the Act and theauthorities cited. 13. Now, the points for determination in these appeals are: / having funds on that date ald hence, the element of mens rea [is]absent and hence, the Court ought to have acquitted [the]accused. 12. Heard Sri Vinod Kumar Deshpande, Iearned Senior counsel for the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, considered theentire material on record, relevant provisions ol the Act and theauthorities cited. 13. Now, the points for determination in these appeals are: I ) Whether the conviction judgment datedO9.OL.2O|4 in C.C.No.ll7 of 2011 on the fiel ofSpecial Judge for Economic Offences atHyderabad against the appellants can be setaside? 2l Whether the appellantsaccused havecommitted willful evasion of tax? To what relieP3) 14. It is submitted by the appellants in the grounds of appealthat the Respondent - Income Tax Department has not placedsufficient material to show that appellant No. 1 Company has --- committed wrlllul default. to fasten [the ][iiability ][under ][Section]276 C of the Income [Ta,x ]Act. [The ][question ][of ]"r'illful [delault]I [Company ][is ][having ][sufflcient ][funds]comes, when appellant [No. ]to its [credit ][and ][deliberatelv ][chooses ][not ][to ][pay ][the ][tax ][or diverts]the funds for other [purposes. ][According ][to ][the ][appellants ][they]were not having funds [to ][pay ][the tax, ][thereby, ][contended that]there was no willful [default ][committed by them] 15. PW3 in his [cross ][examination admitted ][that ][appellant ][No.1]Company was not [having ][funds as ][on ][the ][date ][of ][filing ][of ][the]returns. It is also the [case ][of the ][appellants that the ][Respondent]- Income Tax Department [has ][not ][placed any ][material to ][shoq']that inspite of having [sufficient ][funds, ][the ][appellant ][No' ][1]company has deliberately [evaded ][in ][payment ][of ][tax, ][thereby ][the]appellants were not having [any ][culpable ][mental ][state ][to ][evade]the tax deliberatelY. 16. According to the appellalt [No.l ][company ][has filed ] returns on due date [declaring ][the ][income ][tax ][as ]['nil' ][by ][showing]book profit under Section [115JB ][of the ][Income ][Tax ][Act ][As ][per]the returns, the book profits were found to [be ][more ]than regularincome. According to one of the grounds of appeal, even though / book profits were found to be more than income, as there [were]no funds in the account of the appellant No.l [company, ][could]not pay the tax. The trial Court in its order has observed [that]though appellant company was not having the tiquid cash as [on]the date of Iiling of returns, it (company) was having reserves,which were diverted to other concerns without bothering the taxliability on book prolits in terms of Section l i5JB of the IncomeTax Act. Thus, even the trial Court has concluded that theappellant No.l Company had no liquid funds to pay the tax ason the date of filing of returns. It is mentioned in the grounds ofappeal that even though the book profits were more than regularincome, appellant No. 1 Company was not in a position to pay thetax, thereby, appellant No.1 company has not committed defaultwillfully. 17. It is also admitted fact that all the assets of appellant No. 1Company were attached under Section 2818 of the Income TaxAct and thereby there was no financial activity of the appellantNo.1 Company. Thus, there was no occasion for appellant No.lCompany to have any funds to its credit. Further, M/s. Maytasproperties Limited also requested for raising of the attachment of 17. It is also admitted fact that all the assets of appellant No. 1Company were attached under Section 2818 of the Income TaxAct and thereby there was no financial activity of the appellantNo.1 Company. Thus, there was no occasion for appellant No.lCompany to have any funds to its credit. Further, M/s. Maytasproperties Limited also requested for raising of the attachment of the propertics in order [to ][execute ][the ][sa'1e ][deeds ][in ][favour ][of ][the]purchasers so that the [salc ][proceeds ][can ][be ][paid directly ][to ][the]on [behalf ][of the ][appellant ][No' ][1 ][company' ][M/s]department MaytaspropertiesLimitedarlsorequestedtoraisetheattachmentof five acres [belonging ][to ] / [s.Chitravathi Agro Farms ][Private]Limited for rlisposal [by ][Revenue ][Department ][to ][be ][adjusted]against the outstanding [tax ][demand ][of ][all ][the ][19 ][companies]including appellant [No. ] [Company ][vide ][letter ][dated ][1 ][1'03 ][20 ][1 ][1] 1 8. It is also mentioned [in ][the ][ground ][of ][appeal ][that ][even]though appellant [No.1 ][company ][has ][tralsferred ][the ][land ][in]favour of subsidiary [company, ][it ][does ][not amount to transfer ][as]per Section 45 read [with ][Section ][47 ][(ivl ][of ][the ][Income ][Tax ][Act]ald thereby [appellant ][No.1 ][company ][is not liable to ][pay tax'] Lg. The other [aspect ][raised ][by ][the ][appellants ][in ][the grounds ][of]appeal is that [when ][appellant ][No.l ][Company ][has ][submitted]income tax returns, [surplus amount ][was ][claimed ][to ][be exempted]under capital [gains ][as ][per ][Section ][45 ][read ][with ][Section 47 ][(iv) ][of]the Income Tax Act [and ][thereby ][the ][liability ][of ][tax ][should ][not ][be]levied on the said surplus amount. 20. It is also not in dispute that M/s. Maytas propertiesLimited has requested the Respondent - Income Tax Departmentfor adjustment of TDS refund of income tax and adjustment ofrefund of income tax dues of Rs. I 1.45 crores vide letters dated22.O2.2010 and 11.03.2011 in favour of appellant No.1company. The trial court in its judgment at Page 15 Para No.33has observed that nothing has been piaced on record to showthat the department was in fact any due of any refunds to M/s.Ma1'tas properties Private Limited and rvhether such refundswere fortified by passing appropriate refund orders. However, onperusal of the letters dated 22.O2.2OIO and 11.03.2011addressed by the M/s. Maytas Properties Private Limited, theendeavour of appellant No.1 company is very clear that in themost possible manner the tax liability was to be paid. This courtis of the opinion that if really the intention of appellant No. Icompany was not to pay tJle income tax and evade the samewillfully, the letters dated,22.O2.2O1O and 11.03.2011 addressedby M/s. Maytas Properties Limited requesting the department toadjust TDS refund of the tax liability could not have beenaddressed. : \* --- 21. Another contention [raised ][in ][the ][grounds ][of ][appeal ][is ][that]accused Nos.2 to [5 ][arc ][not ][responsible ][for ][day ][to ][day affairs ][of]appellant No.1 [company ][and ][that ][there ][is ][no ][material ][placed]before the trial Court [to ][establish ][that ][accused ][Nos'2 ][to ][5 ][are]responsible for [day ][to ][da1' ][affairs of appellant ][No' 1 ][company ][and]that unless there [is ][specific resolution ][authorizing ][one ][of ][the]directors as principle [officer, ali the directors ][of ][the company ][are]principle offit:ers of [the company, thereby, ][the obsen'ation of trial]Court that unlcss [restricted ][by ][the ][provisions ][of the ][Comp:-rnies]Act, all the dtrectors [are authorized ][to ][do ][all ][the acts ][al]d ][thereby]accused Nos.2 [to 5 ][are ][pnncipal ][officer is erroneous'] 22. In Akkinapalti [Sujatha ][(smt.t ][and ][others ][v' ][State ][of] Public [Prosecutor, ][High ][Court ][of ][Telangana']Telangana, Hyderabad and anotherr, [wherein ][it ][was ][held as ][follows:] 22. In Akkinapalti [Sujatha ][(smt.t ][and ][others ][v' ][State ][of] Public [Prosecutor, ][High ][Court ][of ][Telangana']Telangana, Hyderabad and anotherr, [wherein ][it ][was ][held as ][follows:] "10. In POOJA [u']STATE OF [the ][Supreme ][Court]made the follouing [ob ][seruations:] "... Time and [again, ][it ][lns ][been ][asserted ][bg]tLtis Court that [onLg ][tlrcse ][persons ][who ][tuere ][in]cLnrg e of and [responsible ]for [the conduct ][of ][the]business of the Compang at the [time ][of] I 2o2l (2) ALr {crl.) 21.1 (s.B ) commission of an offence uill be [liable ]for ciminalaction. A Director, uho was not in charge of [and]was not responsible for the conduct of thebusiness of the Compang at the releuant time, utillnot be liable for an offence Under Section 141 ofthe N.I. Act." In National Small Industries Corporation(supra) this Court obserued: Section 141 is a penalprouision creating uicarious liabilitg, and which, asper settled law, must be strictlg construed. It istherefore, not sufftcient to make a bald cursorystatement in a complatrtt that the Director (anagedas en accused) is in charge of and responsible toth-e company for th.e conduct of the business of thecompanA without anything more as to the role ofthe Director. But tLLe complaint shauld spell out asto tnw and 1 (2014) 16 SCC 1 6 in uthat mannerRespondent 7 was in charge of or utas responsibleto th.e accused Compang for tlre conduct of itsbusiness. This ls in consonance uith strictinterpretation of penal statutes, espectallg, wtrcresuch statutcs create uicartous liabilitg. A ompangmay haue a number of Directors and to make anAor all the Directors as axused. in a complaintmerely on the basis of a statement tlnt tley are incharge of and responsible for the anduct of th.ebuslness of tLrc compang without anAthing more is not a [sufftcient ][or ][ttd ][r:quate ][fulfillment ][of ][tLe]requirem.ents [nder ][St:ction ][] ][4 ][1'] not27.Llnfoftunclt<:1t1, [the ][Higlt ][Court ][did]deal [the]issue in [o ]ProPer [PersPectiue]andcomn-Litte [d ][error ][in ][dismi'ssing ][th'e ][u)nt ][petitions ][bA]holding [that ][in ][the ][Complaints ][filed ][bg ][the]Respondent [No' ][2, ][specific auerments utere ][made]' [takirug]against [the ][Appetlant ][But ][on ][the ][contrary ]the complatnt [as ][a ][uhole' ][it can ][be ][inferred ][that ][in]the entire [t:ontplatnt' ][rto ][speciJic ][role ][is ][attibuted ][to]the AppellanL [in ][the ][commission ][of ][offence ][' ][It ][is]settled lau [that ][to ][attract ][a ][case ][(Jruder ][Section]141 of [the ][N-1. ][Act ][a ][specific ][role ][must haue ][been]plaged [bg ][a ][Director ][of ][the ][Compang ][for ][fastening]uicaious [tiabilitg' ][But ][in ][this ][case' ][the ][Appellant]uLas neither [a ][Director ][of the ][acased ][Compang]nor in [charge ][of ][or ][inuolued ][in ][the dag ][to ][dag]affairs [of ][the ][Compang ][at ][the ][time ][of ][commission]of the [alleged ][offence ][' ][There ][is ][not ][euen ][a ][tt''thisper]or shred [of ][euidence ][on ][record ][to ][shaut ][that ][th'ere]is ang [act ][committed bg the Appellant ][from ][uhich]a reasonable [inference ][can ][be ][dratun ][that ][the]Appellant [could ][be ][uicaiouslg ][held ][tinble ][for ][the]offence [witLt ][tthiclt ][she is ][charged''] 11. In [RAVINDER DEVDASANI's] case [(1 ][supra)' ][the ][Supreme ][Court ][alloued ][tLe]quash petition [not ][onlg ][on ][the ][ground thnt ][there ][is] no specific role attributed to the'appellant [but ][also]on the ground that the [appeLlant ][has resigned as]Director much prior to [issuance ][of ][the ][clreque. ][Tlrc]Supreme Court taking [into ][consideration its ][earlier]decisions in National Small Industies [Corporation]u. Harmeet Singh Panital [(2010) 3 SCC 33O];Gunmala Sales 7 Piuate Ltd. u. Anu Mehta [(2015) -l SCC 1031 and Pepsi Foods Ltd. u. [Special]Judicial Magistrate ft1998) 5 SCC 3431, reiteratedthe ratio that a complaint, where no specifrc role isattibuted to the Director - Accused, is liable to bequashed." 11. In [RAVINDER DEVDASANI's] case [(1 ][supra)' ][the ][Supreme ][Court ][alloued ][tLe]quash petition [not ][onlg ][on ][the ][ground thnt ][there ][is] no specific role attributed to the'appellant [but ][also]on the ground that the [appeLlant ][has resigned as]Director much prior to [issuance ][of ][the ][clreque. ][Tlrc]Supreme Court taking [into ][consideration its ][earlier]decisions in National Small Industies [Corporation]u. Harmeet Singh Panital [(2010) 3 SCC 33O];Gunmala Sales 7 Piuate Ltd. u. Anu Mehta [(2015) -l SCC 1031 and Pepsi Foods Ltd. u. [Special]Judicial Magistrate ft1998) 5 SCC 3431, reiteratedthe ratio that a complaint, where no specifrc role isattibuted to the Director - Accused, is liable to bequashed." 23. In AIka Khandu Avhad v. Amar Syamprasad Mishra and anotherz, it was held by the Honourable Supreme Courtas follows: "8.7 Section 141 of the NI Act is relating to the offence bg companies and it cannot be madeapplicable to the indiuiduals. Leamed munselappeartng on betnlf of the oiginal amplainanthas submitted that [oCompang' ]mearls ang bodgcorporate and includes, a rtrm or other associationof indiuiduals and therefore in case of a jointliabilitg of tuto or more persons it will fall utithinnother association of indiuiduals' and therefore \ '2o2l [(2) ]ALr (crl XSC) 6e (D.8.) --r- u.tith the [aid ][of ][Se,:'tion ][1a1 ][of ][the ] [Act, ][the]appellant [tuho ][ls ][joitttltl ][liable ][to ][pag ][the ][debt, can]be prosecuteci. [The ][u ]foresaid [cannot ][be ][accepted.]Two [priunte ][indiuiducrls cannot ][be ][said ][to be ]["other]association [of ][indiutrluals". ][Therefore, ][there ][is ][no]of inuokirul [Section ][1a1 ][of ][the ] [Act]question against [the ][appellant, ][as ][tLLe ][liabilitg ][is ][the]indiuidual [liabilitg ][(mag ][be ][a ][joint ][liabilities), but]cannot [be ][said to ][bc the ][offence committed ][bA ][a]firtn [or ][other]compan.A [or bg it ][carporate ][or ]associations [of ][indutithLaLs. The ][appellant herein ][is]neith.er [a ][Director ][nor ][a ][partner ][in ][any ]firm [uho]has issued [the ][cheque. ][Therefore, ][euen ][the]appellant [cannot ][be' conuicted ][uith ][the ][aid ][of]Section [141 ][ofthe ] [Act. ][Therefore, the ][HighCourt]hns [committed ][a ][graue ][error ][in ][not quashing ][the]cotrlplaint [against ][the ][appellant ]for [tle ][offence]punishable [under ][Section 138 ][r/u ][Section ][141 ][of]the NI [Act. ][TtLe ][ciminal ][complaint ]filed [against ][the]appellant for [the ][offence ][punishable under ][Section]138 r/ut [Section 141 ][of ][the NI ][Act, ][therefore, can]be said [to be ][abuse ][of ][process ][of law ][and ][therefore]the same [is ][required to ][be ][quaslrcd ][and ][set ][aside. ]["] 24. On [considering the ratio laid ][down ][by the ][Honourable ][Apex]Court in the [decisions ][reported ][above, ][it ][is ][clear ]that theprosecution must specifically mention in the complaint as to the \ ;t--/ffi :-* ,t'Fsi [. ]['*,. ]/'/ J role played by the appellant in [the ]management [of ]the [company.]Merely saying that the [appellants ][are responsible ][for ][the ][day-to-]day affairs of the Accused [No.1 ][Company ][is ][not sufficient. ][It ][is]a-lso expected to allege that the appellants are in-charge of [a]particular branch/wing/unit of appellant No.1 Company. Merelysaying that all the directors are in-charge and responsible for theday-to-day affairs of the appellant No.1 company will not servethe purpose. 24. On [considering the ratio laid ][down ][by the ][Honourable ][Apex]Court in the [decisions ][reported ][above, ][it ][is ][clear ]that theprosecution must specifically mention in the complaint as to the \ ;t--/ffi :-* ,t'Fsi [. ]['*,. ]/'/ J role played by the appellant in [the ]management [of ]the [company.]Merely saying that the [appellants ][are responsible ][for ][the ][day-to-]day affairs of the Accused [No.1 ][Company ][is ][not sufficient. ][It ][is]a-lso expected to allege that the appellants are in-charge of [a]particular branch/wing/unit of appellant No.1 Company. Merelysaying that all the directors are in-charge and responsible for theday-to-day affairs of the appellant No.1 company will not servethe purpose. 25. Appellant No. I company has filed an application underSection 39 I of the Code of Criminal Procedure along with theappeal for receiving Order passed by the Appellate Tribunal inITA.No.0895/CrT (A)-12, HYD 2014-15, dated 3t.12.2014. It issubmitted by the learned counsel for the appellants that theorder passed by the Income Tax Appellate Tribunal dated31.12.2014 the Assessing Offrcer has to re-compute the incomeof the assessee. Thus, the question of tax liability as per tJeefresh assessment would come into question. Hence, theprosecution initiated by the Income Tax Department on the basisof order, which is not in existence is not maintainable. -26. Appellant [No.1 ][company ][has filed ][another ][application]under Section [39 ][1 ][ol the ][Corle ][of ][Criminal ][Procedure along ][with]the appeal for [receiving ][(1) ][Dossier ][Reports ][of ][the ][appellant]company for [the ][assessment ],vear [2008-09, ][(2) ][Files ][pertaining ][to]TRO Proceedings [pertaining ][to ][the ][appellant ][compa-ny ][and ][(3)]entire [proceedings ][pertaining to the sanction order ][in ][the ][appeal']It is submitted [by ][the ][learned ][counsei ][for ][the ][appellants ][that]sanction [was ][accorded ][for ][prosecution ][without ][assigning ][cogent]reasons and [in ][order ][to ][prove ][that the ][appellants have ][not]evaded [the ][pavmer-rt ][of ][taxes, the files ][pertaining ][to ][the]wiltfully said order [and ][aII ][communications ][betr'l'een ][the ][assessing officer]and the [sanctioning ][authority ][are ][crucial documents'] 27 . Considering [the ][same ][and ][on ][hearing ][both ][sides' ][this]Court is of [the opinion ][that ][these ][documents are very relevant ][to]consider the [grounds raised ][in ][the ][appeals ][on hand' ][thereby]these docum [ents ][are ][recerved'] 28. In view [of the ][above ][discussion ][and][ on][ perusal ][of ][the]grounds of appeal, [it ][is ][evident ][that ][the appellants ][have ][raised]certain substantial [issues ][including that the appellant ][Company]has not committed willful dcfault, as admittedly there [were ]no funds to the [credit ][of ][appellants; ][the ][request ][of ][M/s' ][Maytas]Limited [to ][raise ][[he ][attachment ][of ][lands, ][so that ][sa]e]Properties proceeds can be [paid ][duly ][towards income ][tax ][on ][beha-lf ][of ][the]appellants, but [same ][was ][not ][considered; ][the ][appellant ][Nos.2]and 3 are not the [principle ][officers ][and ][thereby they ][cannot ][be]held to be responsible [for ][the ][acts committed ][by the ][company;]appellant No.l [company ][has ][filed ] [returns ][on ][due ][date]declaring the income [tax ][as ]['nil" ][as book ][profit ][under ][Section]115iB of the lncome [Tax ][Act. Further, ][the appellants ][have ]filedpetitions under Section 39i [of the ][Code ][of ]Criminal Procedure toreceive ( 1) Dossier [Reports ][of ][the ][appellalt ]company for theassessnlent year 2OO8'O9, [(2) ][Files ][pertaining ]to TROProceedings pertaining to the appellant company, (3) entireproceedings pertaining to the sanction order in the appeal and(4) Order passed by the [Appellate ]Tribunal in ITA.No.O8gs/ClT(A)-12, HYD 2014-15, dated 31.12.2OL4 and accordingly the saiddocuments were [received.] 29. Considering the [above, ]this Court is of the consideredopinion that the trial [Court ]is required to be directed tore-consider all the issues that [are ][raised ]by tl.e appellant in this appeal and the documents liled under Section [39 1 ][ol ][the ][Code of]Criminal Procedure and [qive ][linding ][afresh ][by ][giving ][opportunrty]to both sides. 30. Accordingly, both thesc criminal [appeals ][are ][disposed ][of]setting aside the conviction [and ][sentence ][dated ][09.01.20 ][14]recorded by Special [Court ][for ][Economical ][Offences ][at ][Hyderabad]arrd C.C.No. 117 [of ]2Ol1 [is ][remanded back ][to ][the ][trial ][Court ][with]a direction to consider [the ][complaint ][afresh ][in ][accordance ][with]iaw, after giving an opportunity [to ][both ][sides ][to ][adduce ][further]evidence, if any. [However. ][thc ][trial ][Court shall ][not ][be ][influenced]by the comments ald [observations, ][if ][any, made ][by ][this ][Court]touching merits of [the ][case ][rvhile passing orders'] As a sequel, [pending ][miscellaneous ][applications, ][if ][arry,]shall stand closed Sd/- M, VIJAYA BHASKARJO]NT REGISTRAR //TRUE COPY// SECTION OFFICER To 1. The Special Judge for Economic Offences , at [Hyderabad (With Records]if any)if any) 2. The Deputy Commissioner of lncome Tax , Central [Circle ][-8, ][Aayakar]Bhavan, Room No. 805, 8'n Floor, Basheerbagh, Hyderabad - 500004.Bhavan, Room No. 805, 8'n Floor, Basheerbagh, Hyderabad - 500004. 3. One CC to SRl. G. ASHOK REDDY, Advocate IOPUCI 4. One CC to SRl. B NARASIMHA SARMA , SC for t.T. Dept. tOpUCI 5. Two CD Copies HIGH COURT DATED:1710612022 iiIE [il ][i2][?3\Common JudgmentCRIMINAL APPEAL[(TR) ]Nos [: ][1]I[ and 62 ] DISPOSING OF THE BOTH [CRL.APPEALS.] v