Crlatr/52/2018 Of M/S. Gomati 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 . CRIMINAL APPEAL (TR) NO: 52 AND 20 OF 2018 CRL.APPEAL (TR) No. 52 of 2018 Crl.Appeal Under Section 374 of Cr.P.C. aggrieved by the Judgmentdated 09-01-2014 in C.C.No. 116 ot 201'l on the file of the Court of the SpecialJudge for Economic Offences at Hyderabad Between: 1 M/s Gomati Agro farms Pvt Ltd , 2-13131 . SS Nagar, Opp Hydernaqar,Hyderabad, Rep by Sri A.V Raghava Ralu, S/o A Venkata Rama Ralu,aged about 47 years.Hyderabad, Rep by Sri A.V Raghava Ralu, S/o A Venkata Rama Ralu,aged about 47 years.2. Alluri Venkata Raghava Ra.ju, S/o. A. Venkata Rama Raju, Director of Mis.Gomati Agro Farms Pvt. Ltd., 2-13131, SS Nagar, Opp. Hydernagar,Hyderabad. ... Appellants/ Accused 1 & 2Gomati Agro Farms Pvt. Ltd., 2-13131, SS Nagar, Opp. Hydernagar,Hyderabad. ... Appellants/ Accused 1 & 2 AND Dy- Commissioner of lncome{ax, Central Circle€, Aayakar Bhavan, RoomNo.805, 8th Floor, Basheerbagh, Hyderabad-500004. ...RESPONDENT/ Complainant Counsel for the Appellant : SRI VINOD KUMAR DESHPANDE SENIOR COUNSEL FOR SRI. G ASHOK REDDY Counsel forthe Respondent: SRI B. NARASTMHA SARMA, SC FOR t.T, CRIMINAL APPEAL (TRl NO: 20 OF 2018 Crl.Appeal Under Section 374 of Cr.P.C. aggrieved by the Judgmentdated 09-01-2014 in C.C.No. 116 of 2011 on the file of the Court of the SpecialJudge fot Economic Offences at Hyderabad Between Smt. B. Radha, Wo. Shri B. Rama Raju, Brother of Sri B. Ramalinga Raju, Ex-Chairman of M/S SCSL, Hyderabad, Director of M/s. Gomati Agro Faims Pvt. Ltd.,Plot No,2-13131 , S.S. Nagar, Opp. Hydernagar, Hyderabad.Chairman of M/S SCSL, Hyderabad, Director of M/s. Gomati Agro Faims Pvt. Ltd.,Plot No,2-13131 , S.S. Nagar, Opp. Hydernagar, Hyderabad. ... AppellanU Accused No. 3 I AND nVCommissiollerofn.]ome{ax,CentralCircle-8'AAyakarbhaveln,FloomNo.S05,6in ftoor, Basheerb; ;tr, [Hyderabad-500004] ...RE SPCrl.ltrEN.[/ [Complainant] CounselfortheAp:rellant:SRtVINODKUMARDESHPAIII)ESENIORCOUNSEL FOR SRI. IOER RAO] Counsel forthe [Rer ][pondent: ] [B. ][NARASIMHA SARMI'] The Court deliverer [the ][following: ][Judgment] I THE HON'BLE DR. JUS'IICE D.NAGARJUN os.52 and 20 of 2OLB COMMON ORDER: Cri.A.(TR).No.52 of 2018 is filed by A1 and A2 i.e.,C<.,mpany ald one of its Directors respectively, whereascrl.A.(TR)'No.2o of 20r8 is fired by 43, who is another Director ofA 1 / company, being aggrievecr b-v the conviction and sentenceimposed by the learned Special Jr.rdge lor Economic Offences atIfi,derabad in C.C.No.l l6 of ,O1 I vicie Juclgrnent datedO9.Ol .2014, wherein Accusecl Nos. I to 3 were found guilty ofthe oifences punishable under Secti on 226_C(21 read withthe oifences punishable under Secti on 226_C(21 read withSection 278-8 of the Income 'lax Act, 1961 (for short, .,the Act,,)consequently accused No.1 was sentenced to pay fine ofRs. l0,OO0/- and in default of payment of fine to initiateappropriate proceedings as required under Secti on 42L ofCr.P.C., whereas Accused No.2 was sentenced to undergorigorous imprisonment for a penod of one year and A3 wasappropriate proceedings as required under Secti on 42L ofCr.P.C., whereas Accused No.2 was sentenced to undergorigorous imprisonment for a penod of one year and A3 wassentenced to rmdergo rigorous imprisonment for a period of sixmonths and to pay fine of Rs. 10.000/_ each and in default ofmonths and to pay fine of Rs. 10.000/_ each and in default ofpayment of fine by accused Nos.2 and 3, to undergo simpleimprisonment for a period of orte rnonth each.imprisonment for a period of orte rnonth each. Since tl-r [' ][rssues involvecl ][in ][these appeals ][irr(-' ][o ][le ][and ][the]same, both [tl ][e ][appeals ][are ][being disposed ][ol ][bi ][this ][common]judgment. Since tl-r [' ][rssues involvecl ][in ][these appeals ][irr(-' ][o ][le ][and ][the]same, both [tl ][e ][appeals ][are ][being disposed ][ol ][bi ][this ][common]judgment. 2.Forcon.enience,thepar.tieshereinarereft:r-edtoastheyare arrayed [l:cfore ][the trial ][Court' ][i'e'' ][Appellant ][No' ][1 ][as]Accused [No.1 ]['Company and ]'\ppellant [Nos'2 and ][3 ][;rs Accused]Nos.2 and [3.] 3. The ger esis [of ][these ][cases, ]['lvhich tead ][the ][appellartts-]accused [to ][pr ][rfer ][these appeals, ][are ][narrated ][in ][lrrref ][i1s ][under:] i) Ar cused No'l/Company [- M/"' ][Gonrati ][r\gro ][Farms]Privateimited,whichwasregisteredunderl:heCompaniesAct wil h the [Registrar ][of ][Companies ][:rr- ][Hy ][Cerabad ][as]Private Limited [Company, ][was ][errgaged ][in ][the ][business ][of]acquisi ion and [sale ][of ][lands' ][Appellant ][Nos' ][2 ][and ][3]herein Lre [the ][Directors ][of ][Accused ][No'1/Company'] A:cused No.l/Company No.l/Company [[has ][acquired ][lands ][to ][an]][[acquired ][lands ][to ][an]][[lands ][to ][an]][[to ][an]][[an]] ii) A:cused No.l/Company No.l/Company [[has ][acquired ][lands ][to ][an]][[acquired ][lands ][to ][an]][[lands ][to ][an]][[to ][an]][[an]]extent [,f ][Ac.S1.00 guntas ][in ][Sy'Nos'189' 19r)' ]['O1 ][and ][203]under the limits [of ][Bachupally ][Mandal' ][Rrmga ][Reddy]Distric rluring the [financial years ][2OOO-12[rOl ][to ][2OO4-O1] I and developed the said lands by incurring some amountsduring the financial years 200 1-02 to 2OO7-08. AccusedNo.1/Company has floated 9 companies by name M/s.Kanj al Green Fields Private Limited and eight others with1O0% holding in the year 2006-07 and sold lands under 9different sa,ie deeds for the financial vear 2OO7 -OB andclaimed exemption of such transfer by invoking provisionsunder Section 47 of the Act. iii) For the assessment year 2OO8-09, accusedNo. i/company has filed income tax returns on 3O.09.2008under Ex.P1 by showing taxable income as Nil and bookprofit under Section 11SJB as Rs.24,41,41,876/-, which ismore than regular income. Since the book profit was morethal regular income, the same has been taken for thepurpose of taxation and tax liability was arrived atRs.2,76,61,267 /-. iv) Accuseci No.1/Company1Sexpected to pay theincome tax either by way of advance tax as required underSection 2O8 of the Act or at least along with filing [of]returns in terms of Section l4O-A-qfJhe Act. As [per]a/ Sectir r 143 (1) of the Act, the tax liability. of {ccused No.1on br rl< profit lr,as arrived at Rs.3,37,60,5,85/- by therespo dent/complainant and raised a de:land underScctio r 156 read with Section 143 o[ the: A.r:t and issued arlint.imi -i,rn to Accused No. 1/Cornpa:rr under Bx.P5.Accus d No. 1/companywas required t,r ray the taxdemar ded within 30 days of service of :tt-,tic:, but it hascomnr :ted default v) I lespondent/complainant has issur:d show-causenotice trnder Section 221 (l) of the [y'.o_ ]under E;x.P7,vvhere [,r ]the appellants were asked to shory ,:atrse as to whypenalt should not be levied for com.nLitting default inpayme rt of tax. As there was no reriponrie from theappell nts, the complainant has issue<l ancther show-cause rotice dated 01.09.2O10 under Ex. Pii uader Section221 (1 read rvith Section 143-A of the lrct. Finally, onemore [, ][,pportunity ]was also given by ttLr, Deltartment bygiving r,nother show-cause notice dated 1?'.09.11OiO (Ex.p4)under lection 22L (l) read rvith Section :43-l\ of the Act.An op :ortunity of being heard was al:io given by the respondent/complainant to Accused No. 1/Company lixingthe date of hearing as 21.09.2010, but there was noresponse, on which a penalty of Rs.50,00,OO0/- wasrmposed by way of order [dated ]22.09.2010 [(Ex.P6) ][under]Section 22L read with Section 140-A(3) of the Act and thesaid proceedings were served on accused No.1 on23.O9.2010. respondent/complainant to Accused No. 1/Company lixingthe date of hearing as 21.09.2010, but there was noresponse, on which a penalty of Rs.50,00,OO0/- wasrmposed by way of order [dated ]22.09.2010 [(Ex.P6) ][under]Section 22L read with Section 140-A(3) of the Act and thesaid proceedings were served on accused No.1 on23.O9.2010. 4. Considering the willful evasion of paSrment of tax, therespondent/complainant has decided to initiate [prosecution ][and]accordingly a notice was issued to accused No.1/company [and]other Directors under Section 27 6-C(21 of the Act, as to [why]prosecution shall not be initiated against them for willful evasionof the tax. All of them have given reply stating that [there ][was ][no]intention to evade [pa)T ]nent of tax. Another [notice was ][issued ][to]accused No.l/Company and its directors under [Exs.P7 ][to ] dated O4. 1O.201O asking them as to why [prosecution shall ][not]be initiated under Section [276-C(2) ]of the Act' [Again ][replies]were filed by accused No.1/company [and ][its ][Directors/ ][accused]Nos.2 and 3 stating that there [was ][no ][intention ][of ][willful ][evasion]of tax. 5. As A cused No. I /Cornpaly and its D:rer'tors/ accusedNos.2 and i h:rve not paid the tax in re sponsr,, tc the demandnotice issr-r, d under Section i43 (1) of the Act arnd also failed topav the pe altr,, tlte respondent/ complainant f .led a complaintbefore the pecial Court for Economic Oflences against accusedNo.1 and ;r, :rrsed Nos.2 and 3, the other Dire:< 1., rrs, alleging thatthel' hieve r- rnnrittr:d offence punishable lndr:r' ljcction 276-C(21rearl with S ction 278-8 ol the Act, as tht'y ha.zer willfully evadedtax even thr ugh they were having sufficient reslllrcos6. The S recial Court lor Economic Of1'enc,:r; took cognizanceof the offen, es against Accused No.1/Conrpary i:nd its Directorsi.e., Accust I Nos. 1 to 3 under Section 275-C('21 read withSection 278 E'' of the Act and charges were fr;unr:d lgainst themunder Secti ,n 276 - C(2) read with Section it:'8-B(1) of the Actand all the [,rccused ]have pleaded not gut lty ot the charges andclaimed to L [.: ]tried. 7. In or er to prove the charges leveleC against theappellants, he respondent/complainant has e:r.amined PWs. 1 to3 and got m [,rrked ]Exs.Pl to Pl4. After closure: of evidence of the complainant, the incriminating evidence elicited against theappellants was read over and explained to them under Section313 of the Cr.P.C., for which a-11 of them have denied andreported that they did not choose to examine any witness ontheir behalf. However, they got marked Exs.Dl to D3 on theirbehalf. 8. The substance of the evidence of PW1 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 totaitaxable income as Rs.24,41,4L,876/- and tax liabilityasRs.3,37,60,585/-. The evidence of PW2/Income Tax officer is tothe extent that he has considered the alnual report of accusedNo.l/company for the frnancial year 2OO7-O8 under Ex.Pl andbank account statements of accused No. l/Company wift theAXIS Barrk Limited under Ex.P2 and found that accusedNo. l/Company did not pay the tax returns in spite of havingsurplus and sufficient funds. PW3 is the Income Tax Officer,who has succeeded PW2. His evidence is that he has passedpenalty order under Ex.PS imposing penalty of Rs.50 lakhs and - raised dem rld under Ex.P6 and the same ila'; served on theaccused. l': also Ceposed that as there il,as no response fromthe accuser show ci,urse noti(:es under Sr:ctior .17€-C of the Actwere issur:d against all thc accused tlrroup4h u'hi,::h irccused r,vereinformr:d th Lt tl-re department is initiating cr- rr, nal proceedingsand conseqt ently the department has fileci the [,;omp,laint.] - raised dem rld under Ex.P6 and the same ila'; served on theaccused. l': also Ceposed that as there il,as no response fromthe accuser show ci,urse noti(:es under Sr:ctior .17€-C of the Actwere issur:d against all thc accused tlrroup4h u'hi,::h irccused r,vereinformr:d th Lt tl-re department is initiating cr- rr, nal proceedingsand conseqt ently the department has fileci the [,;omp,laint.] 9 . After f rl1-fledged trial, on considerin5l thc :r Ltir': material onrecord, t.hr' rial Courl- has ibund Accuse d No,1 /Company andA2 and A.3, ihe Directors of A 1 company gurl.1 of the offencespunishable urder Sectiorrs ['276-C(21 ]and 278-3 of the Act andwere sent(]rl eC as stated supra. Aggrieve(l by tht-. szLid judgmentand convjcl o a of Special .-Iudge for Econo;r.i r.:al Offences atHyderabad. :he present appeals are filed origir:,allr before theMetropolitar Sessiorrs Judge Court at. Hydr:rabad. 10. The er [,t,vhile ]High Court for the States of Te angana andAndhra Pre:ft:sh has issued circular ROC.N,t.3,1, CriminalSection/2Ol ', dated 2B.OB.2O|7, wherein it is, cLarified thatagainst anr' "r'ders passed by the Speciai Judgt: ftrr EconomicOffences, I yCerabad, in the State of T,:langana andVisakhapatn trn in the State of Andhra Pradesh, the High 9ourt Court. In view of the said circular, these appeals filed by theappellants have been transferred from Metropolitan sessionsJudge Court, Hyderabad, to the High Court for the State ofTelangana. 11. The summary of grounds of appea,I as filed by theappellants in brief are as under: a) The trial Court has failed to see that accusedNo.1/Company was not having funds to pay the tax on the duedate as reflected in Ex.p2-bank statements. b) The tria-l court has misconstrued the 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_paSrment oftaxes on the date of liling returns and as on the date of demandnotice and that the trial Court failed to appreciate that in spite ofnot having any cogent evidence to show that all the accused---' r''n have ra'illlu v evadcd the tax, the trial Court [a:; concluded thataccused lra e: committed rr'illfui evasion in pan rrt'nt of tiul.d) The t ial court failed to see that all the assets belong toaccused \< 1/Company \\'ere attached under Slection 281-B ofthe Act an, rlue to paralyzing of financi'rl a,:tivitir's of accusedNo.1, tax cr rld not be paid in time. e) The 1 irrl Courr should not have c,rncluclr:d that accusedNos.2 and i are responsible for day to day rrfi airs of accusedNo. 1/ Comp Lr-Ly and should have taken into cr ,nsideration thenotices issr e,1 under Section 278 B of the l.c t proposing theprosecution clid not refer accused Nos. 2 ar d 3 as principaloflicers ant rhereby accused Nos.2 anc 3 shoull have beenacquitted. The C rtrrt below failed to see that when the returns weref) determined. t he department held that since r-he book profitunder Secti :n 115 JB was more than regrrlar inr:onre, they havearrived thal A I was liable to pay the tax. Hov,ever, A1 was nothaving fund ; on that date and hence, the elenrt:nt oi mens rea is absent and hence, the Court ought to have acquitted theaccused. L2. Heard Sri Vinod Kumar Deshpande, learned Senior counselfor the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, considered theentire material on record, relevant provisions of the Act and theauthorities cited. 13. Now, the points for determination in these appeaJs are: 1) Whether the conviction judgment dated09.01.2014 in C.C.No. 116 of 2O1l on rhe file ofSpecial Judge for Economic Offences atHyderabad against the appellants can be setaside? 2) Whether the appellants - accused havecommitted willful evasion of tax?committed willful evasion of tax? 3) To what relieP absent and hence, the Court ought to have acquitted theaccused. L2. Heard Sri Vinod Kumar Deshpande, learned Senior counselfor the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, considered theentire material on record, relevant provisions of the Act and theauthorities cited. 13. Now, the points for determination in these appeaJs are: 1) Whether the conviction judgment dated09.01.2014 in C.C.No. 116 of 2O1l on rhe file ofSpecial Judge for Economic Offences atHyderabad against the appellants can be setaside? 2) Whether the appellants - accused havecommitted willful evasion of tax?committed willful evasion of tax? 3) To what relieP L4. 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.l Company hascommitted willful default, to fasten the liability under Section 276 C of t e Income Ta,x Act. The que stioe r.,f rvillful defaultcomes, whr r appellant No. I Oompany is havir 11 sullicient fundsto its crec|t a-rd deliberately cl-rooses not to pa1 t he tax or divertsthe lunds f r other purposes. According to tL c appellants theywere not h ving funds to pal the tax, therel:'.,, contended thatthere u.as n , ['adllful ]default cornmitted by rhcnr 1 5. PWli i : his cross examination admitted t t :a t a tpellalt No. 1Company \\ 1si not having lunds as on tire date o1 fiiing of theretums. i1 rs aiso the case of the appellants tlu L thr: Respondent- Income 1'r r Department has not placed an,r n-rat,:rial to showthat inspit, of having sufficient funds, tlLt appellalt No. iCompany l-r rs deliberateiy evaded in payment of tax, thereby theappellants; ' ere not having any culpable ment a state to evadethe tax delil [,-'r'ately.] 16. Accorc ng to the appellant No.l [()omp:rrLy ]has Iiled ITretums on [( ]ue date declaring the income tax as; "nil' by showingbook profit rnder Section 11SJB of the Income 'l'ax Act. As perthe returns, the book profits were found to be nr<:,re than regularincome. Ac< ording to one ol the grounds of aptrreal, even thoughbook profits uere found to be more than inconre:, as there were no funds in the account of the appellant No.l Company, couldnot pay the tax. The trial Court in its order has observed thatthough appellant Company was not having the liquid cash as onthe date of filing of returns, it (Company) was having reserves,which were diverted to other concerns without bothering the taxliability on book profits in terms of Section 11sJB of the IncomeTax Act. Thus, even the trial Court has concluded that theappellant No. 1 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 al1 the assets of appellant No.lCompany were attached under Section 281F of the Income TaxAct and thereby there was no financial activity of the appellantNo.l Company. Thus, there was no occasion for appellant No. 1Company to have any funds to its credit. Further, M/s. Maytasproperties Limited a.lso requested for raising of the attachment ofthe properties in order to execute the sale deeds in favour of the - purchasers s,) that the sale proceeds can be [,a td dtrer:tly to thedepartmen c,n behalf of the appellant No. 1 [()c,mF,an,v. ][M/s.]Mavtas pro rerties Limited also requested [to ][riris,,, ][the ][attachment]of five acrr s belonging to M/s.Chitravathi ltllrrt [F'arms ][Private]Limited for disposal by Revenue Department to be adjustedagainst the outstanding tax demand of a1l thc 19 [Companies]including a No. 1 Company vide letter lrted [1 ] .03.20 [1 ][1.]'peilant - purchasers s,) that the sale proceeds can be [,a td dtrer:tly to thedepartmen c,n behalf of the appellant No. 1 [()c,mF,an,v. ][M/s.]Mavtas pro rerties Limited also requested [to ][riris,,, ][the ][attachment]of five acrr s belonging to M/s.Chitravathi ltllrrt [F'arms ][Private]Limited for disposal by Revenue Department to be adjustedagainst the outstanding tax demand of a1l thc 19 [Companies]including a No. 1 Company vide letter lrted [1 ] .03.20 [1 ][1.]'peilant 18. It is lso mentioned in the ground ol appc'al that eventhough ap1 e)lant No. I Company has tr [zrn ]s [e ][r ]t'ed the land [in]lavour of sr b:icliary Company, it does nol annourtt [r.o ]tralsler asper Section 45 read with Section 47 (iv) of th: Income Tax Actald therebl appellant No.1 Company is not liet lr, to [pay ]tax. 19. The o lrcr aspect raised by the appella:'rts [jn ]ttLe [grounds ]ofappeal is t ra.t when appellant No.l Companl, hits submittedincome tax eturns, surplus amount was <:lainrt:cl to be exemptedunder capit [,1 ]gains as per Section 45 reao with Siec'.ion [47 ][(tvl ]ofthe Income ["zx ]Act and thereby the liability ol' letx should not belevied on th :;aid 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 ta-x and adjustment ofrefund of income tax dues of Rs. 11.45 crores vide letters dated22.02.2010 and 11.O3.2011 in favour of appellant No.1Company. The trial court in its judgment at Page 15 Para No.33has observed that nothing has been placed on record to showthat the department was in fact any due of any refunds to M/s.Maytas Properties Private Limited and whether such relundswere fortilied by passing appropriate refund orders. However, onperusal of the letters dated 22.O2.2O1O arld 1 1.03.2011addressed by the M/s. Maytas Properties Private Limited, theendeavour of appeilant No.l 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.lCompany was not to pay the income tax and evade the samewillfully, the letters dated22.O2.2O10 and 11.03.2011 addressedby M/s. Maytas Properties Limited requesting the department toadjust TDS refund of the tax liability could not have beenaddressed. 27. Anott [,rr ]contelltion [raised ][in ][the grountl:; ][rlf ][ltppeal ][is ][that]accused Nr' ';.2 and [3 ][are not ][responsible ][lor ][dzLv ][to ][da-t' ][affairs ][of]appellant I o 1 [Company ][and ][that ][there ][is ][no ][milterial ][placed]before the rial Court [to ][establish ][that ][ac:cus':rl ][Nor;'2 ][and ][3 ][are]for [day ][to ][day affairs ][of ][appellant No ][1 ][()ompany ][and]responsible that unlesr there [is ][specific resolution auttxrrjzing one ][of ][the]directors a: [principle ][of{icer, ][all the directors ][ol ][the ][Company ][are]o iicers of the [Company, ][thereby, ][tht: ][observation ][of]principle trial [()ourt ]that uniess [restricted ][by ][the ][.:rovisions ][of ][the]Companies Act, all [the directors ][are ][authorizt:c ][lo ][c ][o ][all ][the ][acts]and therel [y ]accused [Nos.2 ][and ][3 ][are ][prinr:ipal ][officers ][is]errone o Lls. 22. In Al kinapalli [Sujatha ][(smt.f ][and ][othr:rs ][v' ][State ][of]Telangana Public Prosecutor, [High ][CotLr ][t ][o!' ][Telangana,]Hyderabad and anothert, [wherein ][it ][was ][helcl ][a,; follows:] '10. In POOJA [DEVIDT\SiAIt|I ][u']STAT OF MAHARASHIRA1 [th.e ][Suprttrn"t ][Court]) made tle .following obseruations: '. . Time and [again, ][it ][ha's ][been ][a:;:;e ][rtetl ][bg]1l1is [t ]['ourt ]that onlg [tlnse ][persons ][whc ][r.uere ][in'] I clTarge of and responsible for the conduct of thebusiness of the Compang at the time ofcommission of an offence will be liable for ciminalaction. A Director, utho utas not in charge of and.was [not ][responsible ]for the conduct of thebusiness of the CompanA at the releuant time, willnot be liable for an offence Under Section 141 ofthe N.I. Act." '10. In POOJA [DEVIDT\SiAIt|I ][u']STAT OF MAHARASHIRA1 [th.e ][Suprttrn"t ][Court]) made tle .following obseruations: '. . Time and [again, ][it ][ha's ][been ][a:;:;e ][rtetl ][bg]1l1is [t ]['ourt ]that onlg [tlnse ][persons ][whc ][r.uere ][in'] I clTarge of and responsible for the conduct of thebusiness of the Compang at the time ofcommission of an offence will be liable for ciminalaction. A Director, utho utas not in charge of and.was [not ][responsible ]for the conduct of thebusiness of the CompanA at the releuant time, willnot 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 u.thich, asper settled law, must be strictly construed. lt istherefore, not sufficient to make a bald cursorystatement in a complaint that the Director (arragedas an accused) is in charge of and responsible tothe compang for the conduct of the business of thecompanA uithout angthing more as to the role ofthe Director. But tte amplaint should spell out asto how and 1 (2014) 16 SCC 1 6 in what mannerRespondent 7 was in cluzrge of or uas responsibleto the accused Company for tte conduct of itsbusiness. Thi"s is in consonance u,tith strtctinterpretation of penal statutes, especially, utteresuch stafutes create uicarious liabilitg. A compangmag haue a number of Drectors and to make anAor all the Directors as accused in a complaintm.erelg.on the basis of a statement ttrat theg are in/ ./- charg ' of and responsible for [the ][t'onduct ][oJ ][the]/rusin 'ss of the compang uithout [aru1thitt11 ][itto ]["e ][is]not c su.fficient or adequate fulfillm.ent [of ][the]requir zrnents Under Section [141.] )','. unfortunatelg, tte High [rloutt ][t.lid ][not]cleal tlte fssue in a [proper ][perspecliue ][and]comm tted error in dismissing [the utrit ptzlittons by]hotdi 'q that in the Complaints filecl ltg [the]Respc :tdent No. 2, specifrc [auerments ][7re ][re ][Trt.ade]ct gain [:t ]the Appellant. But [on the ][contrarl, ][ta'king]the cc'nplaint as a uthole, it can [be irtfen ][ed ][thot ][in]the er iire complaint, no specific [role ][is ][attrtbuted ][to]the A tSlellant in the commission [of ][off<trrc.e. ][[t ][is]settle, [i ]lnu that to attract a [case \Jndet ]'Section141 c [- ]thet N.l. Act a specific role must [luttte ][L'een]ptage' i bg a Director of the Compang for Ja:;teninguicai,'us ltabilitg. But in this case, [the l,p.pellant]utas ;,either a Director of the acatsed [Cc,mpanU]nor i charge of or inuolued in the do.g to [dag]affair: of the Compang at tle [time ]of [cctntmis.sion]of the alleged offence. There is [not ]euen,t [uthi:;per]or shr :zd of euidence on record to [shortt ]tlnt [tlrcre]is an1 act committed by the Appellant from. [ult\ich]a rea,;onable inference can be [dra ][u.tn ]tlnt [the]Appel ant could be uicaiouslg leld [liabk: ].for [the]offenc z uith tahich she [is ][charged."] 11. In POOJA RAVINDER DEVIDASANI'scase (1 supra), the Supreras Court allouted thequash petition not only on the ground that there isno specific role attributed to the appelLant but alsoon the ground that the appellant has resigtted asDirector much pior to issuance of the cheque. TheSupreme Court taking into consideration its earlierdecisions in National Small Industies Corporationu. Harmeet Singh Panital 3 SCC 330];[(2010) Gunmala Sales 7 Priuate Ltd. u, Anu Mehta [(2015)7 SCC 1031 and Pepsi Foods Ltd. u. SpecialJudicial Magistrate [(1998) 5 SCC 343], reiteratedthe ratio that a complaint, ulvre fto specilic role isattibuted to the Director [* ]Accused, is Liable to bequasLrcd." 23. In Alka Khandu Avhad v. Amar Syamprasad Mishra and another2, it was held by the Honourable Supreme Courtas follows: "8.1 Section 141 of the NI Act is relating tothe offerrce bg companies and it cannot be madeapplicable to the indiuiduals. Learned counselappeaing on betnlf of the original complainanthas submitted tLnt "Company" means anA bodAcorporate and includes, a firm or other association 23. In Alka Khandu Avhad v. Amar Syamprasad Mishra and another2, it was held by the Honourable Supreme Courtas follows: "8.1 Section 141 of the NI Act is relating tothe offerrce bg companies and it cannot be madeapplicable to the indiuiduals. Learned counselappeaing on betnlf of the original complainanthas submitted tLnt "Company" means anA bodAcorporate and includes, a firm or other association 2o2r (2) ALT (Crl.XSC)(D.8.)r' o.f int i.t;iduals and ttrcrefore in case o,' a .;ointliabili; q of tuto or more persons it utill 1'c ll wihin*other associatioru of indiuiduals" and tlo-ereforeutith fuz aid of Section 141 of tlle N.r [Act, ][the]appel, ult ulho is jointlg liable to pay the debt, [can]be prr stzcuted. TlLe aforesVld cannot be oc,:epted.Two p iuate indiuiduals cannot be said tc' 5e ["other]assoc rzlion of indiuiduals'. Therefore, tlu:re i:; noquestt tn of inuoking Section 141 of tlut NI Actagain. t th-e appellant, as the lictbilitg is ttrcindiu 'ual liabilitg (may be a joint liabirli:ie.s), butcanno be said to be tlrc offence commlt'.ed bA acomp( ltu or bg it corpoyate or Jirm or otherassoc: ltfons of indiuiduals. 'The appellant h<zre' n isneithe a Director nor a partner in ang 1ir-,m ahohas s,sued the cheque. Therefore, eue,n theappell Ln.t cannot be conuicted with tlut aicl ofSectio , 141 of th-e NI Act. Therefore, the l{iglt Courthas c, rrt.mitted a graue error in not quas hing ttrccompl rirtt against the appellant for the offencepunid able under Section 138 r/ut Sectio,t 141 ofthe Nl 4ct. The crtminai complaint filed a'qzinst theappell tnt for tLrc offence punishable under [;Sec'tion]138 r, u' Section 141 of the NI Act, there_rore, canbe sai [,' ]to be abuse of process of laut anai. '.h.ere.forethe sa [,te ]is required to be quashed and set asit7e." 24. On considering the ratio laid down by the Honourable ApexCourt in the decisions reported above, it is clear that theprosecution must specifically mention in the compiaint as to therole 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 isalso expected to allege that the appellants are in-charge of aparticular branch/wing/unit of appellant No.1 Company. Merelysaying that all the directors are in-charge and responsibie lor theday-to-day affairs of the appellanr'filo.I Cornpany will not servethe purpose. 25. Appellant No.l Company has tlled an application underSection 391 of the Code of Criminal Procedure along with theappeal for receiving Order passed by the Appellate Tribunal inITA.No.0894 /ClT (A)-12, HYD 2014-i5, dated 3t.12.2Ot4. It issubmitted by the learned counsel for the appellants that theorder passed by the Income Tax Appellate Tribunal dated3L|2.2OL4 the Assessing Officer has to re-compute the incomeof the assessee. Thus, the question of tax liability as per thefresh assessmCnf- would come into question. Flence, lhe proseclltion initiated by the lncome Tax Departmenl. on the basisof order, lvl- ch is not in existence is not maint.eirLable. 26. Appell rrLt No.1 Company has filed anothe: applicationunder Sec:t-i n 39 1 of the Code of Criminai Pro:<:dure along u'iththe appeal fc,r receiving (1), Dossier Reports t.f the [appellant]Companv ir ['the ]assessment yea-r 2008-()9, [(11) ]Files [pertaining]to TRO Pror :e dings pertaining to the appellar t [(,:orrtpany ]and [(3)]entire proce rdings pertaining to the sanction otdr:r in the appcal.It is strbm i tcd by the learned counsel f or th e appellants thatsan<:tion ur; accorded for p;osecution withoul riss.gning cogentreasons an' in order to prove that thr: al4rellalts have notr,r,illfuli-v eva le d the paymeni. of taxes, the files to the1:,ertaining said ortler' : [-rrl ]all communications betwer:n th,: rrssessing officerand thc sir.n t: oning authority are crucial <locurar,:ntr;. 26. Appell rrLt No.1 Company has filed anothe: applicationunder Sec:t-i n 39 1 of the Code of Criminai Pro:<:dure along u'iththe appeal fc,r receiving (1), Dossier Reports t.f the [appellant]Companv ir ['the ]assessment yea-r 2008-()9, [(11) ]Files [pertaining]to TRO Pror :e dings pertaining to the appellar t [(,:orrtpany ]and [(3)]entire proce rdings pertaining to the sanction otdr:r in the appcal.It is strbm i tcd by the learned counsel f or th e appellants thatsan<:tion ur; accorded for p;osecution withoul riss.gning cogentreasons an' in order to prove that thr: al4rellalts have notr,r,illfuli-v eva le d the paymeni. of taxes, the files to the1:,ertaining said ortler' : [-rrl ]all communications betwer:n th,: rrssessing officerand thc sir.n t: oning authority are crucial <locurar,:ntr;. 27 . Consir ering the same ald on hetrrinlS i.,oth sides, thisCourt is of i rr'opinion that these documents [rr'€ ]very relevant toconsider t-h [qrounds ]raised in the app,:als [,)n ]hand. therebythese docun e:.tts are received 24. In view of the above discussion and on perusal of thegrounds of appeal, it is evident that the appellants have raisedcertain substantial issues including that the appellant Companyhas not committed willful were nodefault, as admittedly there funds to the credit of appellants; the request of M/s. MaytasProperties Limited to raise the attachment of lands, so that saleproceeds can be paid duly towards income tax on beha-lf of theappellants, but same was not considered; the appellant Nos.2and 3 are not the principle officers and thereby they cannot beheld to be responsible for the act-s committed by the Compaxy;appellant No.l Company has filed IT rFturns on due datedeclaring the income tax as "nil" as book profit r.rnder Section1 1SJB of the Income Tax Act. Further, the appellants have fitedpetitions under Section 391 of the Cocie of Criminal Procedure toreceive ( 1) Dossier Reports of the appellant Company for theassessment year 2OOa-O9, (21 Files pertaining to TROProceedings pertaining to the appellant Company, (3) entireproceedings pertaining to the sanction order in the appeal and1(4) Order passed by the Appellate Tribunal in ITA.No.OB94/CIT(A) 12, HYD 2014-15, dated 31.12.2074 and accordingly the saiddocuments were receir,ed. ,1 \ '-. 29. Consi rering the abovc, this Courl is ,rf the consideredopinion th t the trial Court1S required tr be directed tore-consider rll the issues that are raised by th,: rrplrellar-rt in thisappt:al ancl he documents filed under Section l{1, 1 of the Code ofCrinrinal Pr cedure and give findrng afresh by 1i,,in,3 opportunityto both sidc [,] 30. Accorr irgly, l:oth these criminal appeal t ar() disposed ofsetting asr<,: the conviction and sentence <lzttecl 09.01.2C14recorded b1' S:tecial Court for Bconomical Offer ct:s itt Hyclerabadand C.C.No )6 of 2071 is rt:manded back to l.tLe trial Court witha direction I consider the compiaitii afresh ir .,rcccrdance withlaw, after glir.rg an opporturrity to both sides "o adduce furtherevidence, il rny. I{owever, thc trial Court shall n,tt lte influencedby the coml rcnts and observations, if any, rnrLde try this Courttouching mt ['it ]s of the case u,hile passing r>rderr; As a r ':r1uel, pending miscellaneous aprlrL.cations, if any,shall stand , osed. Sd/. t(. SRINIVASA .IOINl' REGISTRAR/.,TRUE COPY//t-.wIJECTION OFFICER Toi - tt Soecial Jt lcle for Economic [Offences ][it ][Hyderab:td']" z. iii. or. C"mrr sl;ioner of lncome'tax, [Central ][Circle-8 ][A'ayakar ][Bhavan,]- Room'No.805, lth Floor, Basheerbagh, Hyderabad'S0( 004' 3. One CC to SR [REDDY, ][Advocate ] 4. One CC to Sri ['/. ] [RAO, Advocate ][(OPUC;)] 5. One CC to SRI [B. NARASIMHA ][SARMA, ][Advocate ][[CIF'UC]] 6. Two CD CoPie [;] '- - [-- ] HIGH COURTDATED:17|(t(it CzZ 146":1F" 16:t.lo()2 [/ ]At]I| [2U0]i. [,i]rlCOMMON JL'D ;IUIEN'r+,.', [./])7!1CRL.APPEAL ['I ]?.Nos.52 AND 20 ot 2018 DISPOSING OI I'HECRL.APPEALS TR.(B)t.-% J.-,