Crlatr/60/2018 Of M/S. Vindhya Greenlands Pvt. Ltd v. Dy. Commissioner Of Income-Tax

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD FRIDAY,THE SEVENTEENTH DAYOF JUNETWO THOUSAND AND TWENTYTWO PRESENT THE HONOURABLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL fiR) NOS: 60 AND 79 0F2018 Crl.A.(TRl No.60 of 2018 Crl.Appeal Under Section 374 (2) of Cr.p.C. against the Judgment dated 09_o1-2o14 in c.c. No. 127 of 2o11 on the file of the court of the Special Judge forEconomic Offences at Hyderabad Between: 1 . M/s. Vindhya _ [Greenlands ][Pvt. Ltd., B-79, ][Madhura ][Nagar, ][Hyderabad_38,]_ [Greenlands ][Pvt. Ltd., B-79, ][Madhura ][Nagar, ][Hyderabad_38,]fep. bI its Managing Director, Shri K, Gopalakrishnam-Raju,'S/o. Shri K.Rama Raju, aged about 51 years.Rama Raju, aged about 51 years. Z. !i...Co^p9tq!r1q!lg.T nqjy, Director of tWs. Vindhya Greentands pvt. Ltd.,H..No.8-3-222lB17l35,36lD-92_ and 93, Flat No.304, Sri Ramana Enclave,Madhura Nagar, S.R. Nagar Post, Hyderabad.H..No.8-3-222lB17l35,36lD-92_ and 93, Flat No.304, Sri Ramana Enclave,Madhura Nagar, S.R. Nagar Post, Hyderabad. 3. NSLR- Prasad Raju, Director of M/s. Vindhya Greenlands prrt. Ltd., FIatNo.202, H.No. B-55, Sai Vaishnavi Vihar, Vengala Rao Nagar, S_R. NagarPost, Hyderabad-38No.202, H.No. B-55, Sai Vaishnavi Vihar, Vengala Rao Nagar, S_R. NagarPost, Hyderabad-38 ... Appellants / Accused No. 1 ,3 & 4 AND Dy. Commissioner of lncome-tax,, Central Circle-9, Room No.B13, gh Floor,Aayakar Bhavan, Basheerbagh, Hyderabad-500004. ...RESPONDENT/ Complainant Counsel for the Appellants :SRl. VINOD KUMAR DESHPANOE SENIORCOUNSLE FOR SRI G. ASHOK REDDY Counsel for the Respondent: SRI B. NARASIMHA SARMA, SC for l.T. CRIMINAL APPEAL (TRl No. 79 of 2O18 Crl.Appeal Under Section 374 (2) of Cr.P.C. against the Judgment dated 09- o1-2o14 in c.c. No. 127 of 2011 on the filb of the court of the special Judge for Economic Offences at Hyderabad Between 1. P.Teia- Raj_t Director of M/s. Vindhya Greenlands pvt. Ltd., ptot No. 12549,Road No.63, Jubilee Hilts, Hyderabad-33.Road No.63, Jubilee Hilts, Hyderabad-33. 2. K.V.V. Krishnam Raiu, Director of M/s. Vindhya Greenlands pvt. Ltd., R/o.Plot No. 392, HMT Hitts, tt Venture, Opp. .ttttU Coflege, Kukatpaity,Hydetabad'-72.Plot No. 392, HMT Hitts, tt Venture, Opp. .ttttU Coflege, Kukatpaity,Hydetabad'-72. . Appellants/ Accused 2 & 5 AND Dy. Commissionerof lncome{ax, Central Circle-9, Room No.g13, gth Floor, AayakarBhavan, Basheerbagh. Hyderabad-500004. ...RESPONDENT/ Complainant Counsel for the Appellants : SRt. VINOD KUMAR DESHPANDE SENIORCOUNSLE FOR SRI. V SURENDER RAO Counsel for the Respondent: SRt B. NARASIMHA SARMA., SC for l.T. The Court delivered the following: Judgment HONOURABLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL lTRl l{os.6o and 79 of 2018COMMON JUDGMENT: 2. K.V.V. Krishnam Raiu, Director of M/s. Vindhya Greenlands pvt. Ltd., R/o.Plot No. 392, HMT Hitts, tt Venture, Opp. .ttttU Coflege, Kukatpaity,Hydetabad'-72.Plot No. 392, HMT Hitts, tt Venture, Opp. .ttttU Coflege, Kukatpaity,Hydetabad'-72. . Appellants/ Accused 2 & 5 AND Dy. Commissionerof lncome{ax, Central Circle-9, Room No.g13, gth Floor, AayakarBhavan, Basheerbagh. Hyderabad-500004. ...RESPONDENT/ Complainant Counsel for the Appellants : SRt. VINOD KUMAR DESHPANDE SENIORCOUNSLE FOR SRI. V SURENDER RAO Counsel for the Respondent: SRt B. NARASIMHA SARMA., SC for l.T. The Court delivered the following: Judgment HONOURABLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL lTRl l{os.6o and 79 of 2018COMMON JUDGMENT: Cr1.A.(TR).No.6O of 2Ol8 is filed by A1, A3 and A4 i.e.,Company and its two Directors respectively, whereasCrl.A.(TR).No.79 of 2Ol8 is filed by A2 and A5, who are otherDirectors of A1/company, being aggrieved by the conviction andsentence imposed by the learned Special Judge for EconomicOffences at Hyderabad in C.C.No. 127 ol 2O1l vide Judgmentdated O9.01.2O14, wherein Accused Nos. I to 5 were found guiltyof the offences punishable under Section 27 6-C(21 read withSection 278-8 of the Income Tax Act, 196 I (for short, "the Act")Crl.A.(TR).No.79 of 2Ol8 is filed by A2 and A5, who are otherDirectors of A1/company, being aggrieved by the conviction andsentence imposed by the learned Special Judge for EconomicOffences at Hyderabad in C.C.No. 127 ol 2O1l vide Judgmentdated O9.01.2O14, wherein Accused Nos. I to 5 were found guiltyof the offences punishable under Section 27 6-C(21 read withSection 278-8 of the Income Tax Act, 196 I (for short, "the Act")consequently accused No.1 was sentenced to pay fine ofRs. IO,OOO/ - and in default of payment of fine to initiateappropriate proceedings as required under Section 421 ofRs. IO,OOO/ - and in default of payment of fine to initiateappropriate proceedings as required under Section 421 ofCr.P.C., whereas Accused Nos.2 to 5 were sentenced to undergorigorous imprisonment for a period of one year each and to payIine of Rs.fO,OO0/- each and in default of payment of fine byaccused Nos.2 to 5, to undergo sirnple imprisonment for a periodof one month each.Iine of Rs.fO,OO0/- each and in default of payment of fine byaccused Nos.2 to 5, to undergo sirnple imprisonment for a periodof one month each. Since the issues involved in these appeals are one and the same, both the appeals are being disposed of by this commonjudgment.judgment. 2. For convenience, convenience, the parties parties herein are referred referred to as theytheyare arrayed before the trial Court. i.e., Appellant No.1 asAccused No.1/Company ancl Appellant Nos.2 to 5 as AccusedNos. 2 to 5 For convenience, convenience, the parties parties herein are referred referred to as theythey 3. The genesis of the se case s, which lead the appellants_genesis of the se case s, which lead the appellants_of the se case s, which lead the appellants_the se case s, which lead the appellants_se case s, which lead the appellants_case s, which lead the appellants_s, which lead the appellants_which lead the appellants_the appellants_appellants_accused to prefer these appeals. are narrated in brief as under: The genesis of the se case s, which lead the appellants_genesis of the se case s, which lead the appellants_of the se case s, which lead the appellants_the se case s, which lead the appellants_se case s, which lead the appellants_case s, which lead the appellants_s, which lead the appellants_which lead the appellants_the appellants_appellants_ i) Accused No. l/Company - M/s. Vidhya Green Lands Private Limited, which u,as registered under the CompaniesAct with the Regist.rar of Companies at Hyderabad asPrivate Limited Compar-ry, rvas engaged in the business ofacquisition and sale of lands. Appellant Nos. 2 to 5 hereinare the Directors of Accused No. 1/Company.acquisition and sale of lands. Appellant Nos. 2 to 5 hereinare the Directors of Accused No. 1/Company. The genesis of the se case s, which lead the appellants_genesis of the se case s, which lead the appellants_of the se case s, which lead the appellants_the se case s, which lead the appellants_se case s, which lead the appellants_case s, which lead the appellants_s, which lead the appellants_which lead the appellants_the appellants_appellants_ i) Accused No. l/Company - M/s. Vidhya Green Lands Private Limited, which u,as registered under the CompaniesAct with the Regist.rar of Companies at Hyderabad asPrivate Limited Compar-ry, rvas engaged in the business ofacquisition and sale of lands. Appellant Nos. 2 to 5 hereinare the Directors of Accused No. 1/Company.acquisition and sale of lands. Appellant Nos. 2 to 5 hereinare the Directors of Accused No. 1/Company. ii) Accused No.l/eompany has acquired lands to anextent of Ac.7.50 gunras in Sy.No.19g under the limits ofBachupally Mandal, Ranga Reddy District during thefinancial years 2OO2-2O03 and developed the said lands by rncurring some arnounts during the financial years 2O02-O3 to 2OO7-08. Accused No.l/Company and 13 othercompanies have entered into a common agreement withM/s. Mytas Property Private Limited on 30.12.2005 forconstruction o[ apartments and bungalows and to sell thesame to intending purchasers iii) For the assessment year 2OO8-O9, accusedNo.1/company has hled income tax returns on 30.09.2008under Ex.Pl by bifurcating the sale proceeds into long termcapital gains accrued from the sale proceeds of the landsand short term capital gains accrued from the sa.leproceeds of the constructed area by showing gross taxableincome as Rs.8,I1,O9,527 l-, out of which an amount ofRs.5,21,64,025/ - was shown as long term capital gain andRs.2,98,69,444 l- was shown as short term capital gains. expected to to pay thethe i,r) Accused No.1/Companylsexpected to to pay thetheincome tax either by way of advance tax as required underSection 208 of the Act or at least along with filing ofreturns in terms of Section 140-A of the Act. As perSection i43 (1) of the Act, the tax liability of Accused No.l )' was arrived at Rs.2,16,58,942/- by the respondent/complainant and raised a demand underSection 156 read with Section 143 of the Act and issued anintimation to Accused No.1/Company under Ex.p2.Section 156 read with Section 143 of the Act and issued anintimation to Accused No.1/Company under Ex.p2.Accused No.1/companv was required to pay the taxdemanded within 3O days of service of notice, but it hascommitted default.committed default. v) Respondent/complainant has issued show-causenotice dated 17.11.2OO9 under Section 221 lll of the Actunder Ex.PS, wherein the appellants were asked to showcause as to why penalty should not be levied forcommitting default in payment of tax. As there was noresponse from the appellants, the complainant has issuedanother show-cause notice dated 25.08.20 1O under Ex.p6under Section 221(1) ol the Act. Finally, one moreopportunity was also give n by the Department by givingarrotlrel slrow-cause notice dated 12.lO.,2OLO (Ex.p./l underSection 221 lll read w.ith Section 143-,{ of the Act- Anopportunitv of being heard was also given by therespondent/complainant to Accused No. l/Company fixing the date of hearingS 18.10.2010, but there was no response, on which a penalty of Rs.52,0O,OOO/-wasimposed by way of order dated 25.10.2010 (Ex.P8) underSection 221 read with Section 14O-A(3) of the Act and thesaid proceedings were served on accused No.1 on29.tO.20tO the date of hearingS 18.10.2010, but there was no response, on which a penalty of Rs.52,0O,OOO/-wasimposed by way of order dated 25.10.2010 (Ex.P8) underSection 221 read with Section 14O-A(3) of the Act and thesaid proceedings were served on accused No.1 on29.tO.20tO 4. Considering the willlul evasion of payment of tax, therespondent/complainant has decided to initiate prosecution andaccordingly a notice was issued to accused No.l/company andother Directors under Section 27 6-C(21 of the Act, as to whyprosecution shall not be initiated against them for willful evasionof the tax. A11 of them have given reply stating that there was nointention to evade payrnent of tax. Another notice was issued toaccused No.l/Company and its directors under Exs.PlO andPl I dated 11.01.20 l1 asking them as to why prosecution shallnot be initiated under Section2T6-C(21 of the Act. Again replieswere hled by accused No.l/compaly arrd its Directors/ accusedNos.2 to 5 under Exs . P i 2 and P 13 stating that there was nointention of willful evasion of tax. 5. As Accused No.1/Company and its Directors/ accusedNos.2 to 5 have not paid the tax in response to the demandnotice issued under Section 1a3 (l) of the Act and also failed topay the penalty, the respondent/ complainant after obtainingsanction order dated 16.03.2011 for launching of prosecution(rled a complaint before the Special Court for Economic Offencesagainst accused No.1 and accused Nos.2 to 5, the otherDirectors, alleging that thev have committed olfence punishableunder Section 276-C(21 read with Section 27g_B of the Act, asthey have willfully evaded tax even were though they havingsufficient resources. 6. The Special Court for Economic Offences took cognizanceof the offences against Accused No.1/Company and its Directorsi.e., Accused Nos. 1 to 5, under Section 27 6_C(21 read withSection 278-8 of the Act and charges were framed against themunder Section 276 - C(2) read with Section 27g_B(ll of the Actand all thc accused l'rave pleaded not guilty of the charges arrdclaimed to be tried. 7. In order to to prove the the charges leveled leveled against theappellants, the respondent/com.plainant has examined pws. I to In order to to prove the the charges leveled leveled against the 3 and got marked Exs.Pl to P14. 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 ail of them have denied andreported that they did not choose to examine any witness ontheir behalf. However, they got marked Exs.D I to D3 on theirbehalf. 8. The substance of the evidence of PWI 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.8,11,09,53O/- and tax liability asRs.2,64,34,730/-. The evidence of PW2/lncome Tax officer is tothe extent that he has considered the annual report of accusedNo.l/company for the financial year 2O07-O8 under Ex.P3 andbank account statements of accused No.l/Company with theAXIS Bank Limited under Ex.P4 and found that accusedNo.l/Company did not pay the tax returns in spite of havingsurplus and suflicient funds. PW3 is the Income Tax Officer,who has succeeded PW2. His evidence is that he has passed penalty order under Ex.pB imposing penatty of Rs.52 lakhs andraised demand under Ex.p9 and the same was served on theaccused. He also deposed that as there was no response fromaccused. He also deposed that as there was no response fromthe accused, show cause notices under Section 276_C of the Actwere issued against ali the accused through which accused wereinformed that the department is initiating criminal proceedingsand consequently the department has filed the complaint.were issued against ali the accused through which accused wereinformed that the department is initiating criminal proceedingsand consequently the department has filed the complaint. penalty order under Ex.pB imposing penatty of Rs.52 lakhs andraised demand under Ex.p9 and the same was served on theaccused. He also deposed that as there was no response fromaccused. He also deposed that as there was no response fromthe accused, show cause notices under Section 276_C of the Actwere issued against ali the accused through which accused wereinformed that the department is initiating criminal proceedingsand consequently the department has filed the complaint.were issued against ali the accused through which accused wereinformed that the department is initiating criminal proceedingsand consequently the department has filed the complaint. 9. After full fledged trial, on considering the entire material full fledged trial, on considering the entire material fledged trial, on considering the entire material trial, on considering the entire material on considering the entire material material onrecord, the trial Court has found Accused No. l/Company andA2 to A5, the Directors of A 1 company, guilty of the offencespunishable undcr Sections 276_C(21 and, 278_8 of the Act andwere sentenced as stated supra. Aggrieved by the said judgmentand conviction of Special Judge for Economical Offences atHyderabad, the present appeals are filed originally before theMetropolitan Sessions Judge Court at Hyderabad. After full fledged trial, on considering the entire material full fledged trial, on considering the entire material fledged trial, on considering the entire material trial, on considering the entire material on considering the entire material material on The erstu,hile erstu,hile High Court for the States Court for the States the States States of Telangana andTelangana and 10.The erstu,hile erstu,hile High Court for the States Court for the States the States States of Telangana andTelangana andAndhra Pradesh has issued circular ROC.No34, CriminalSection/20 17, dated 28.OB.2O17,wherein it is clarified thatagainst any orders passed b1r theSpecial Judge for EconomicOffences, Hyderabad, in theState of Telangana andagainst any orders passed b1r theSpecial Judge for EconomicOffences, Hyderabad, in theState of Telangana and Visakhapatnam in the State of Andhra Pradesh, the High Court has the jurisdiction to entertain the appeals, not the SessionsCourt. In view of the said circular, these appeals filed by theCourt. 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.Judge Court, Hyderabad, to the High Court for the State ofTelangana. 11. The summary of grounds of appeal as filed by the appellants in brief are as under: accuseda) The trial Court has failed to see that No. l/company was not having funds to pay the tax on the duedate as reflected in Ex.P4-bank statements and that accusedNo. I has not received any sale proceeds from M/s. MytasProperty Private Limited, thereby the respondent/complainanthas not produced any evidence to sho'*, that accusedNo.l/Company has received sale proceeds from M/s. MytasProperty Private Limited. b) The trial court has misconstrued the presumption under Section 278-D of the Act and erred in holding that the burden of proof is on the accused to prove that there was no willful evasionof payment of tax.of payment of tax. c) The trial Court erred in holding that the accused failed toprove non-existence of culpable mental state in non-payment oftaxes on the date of filing rclLrrns and as on the date of demandnotice and that the trial Cor-r rL taited to appreciate that in spite ofnot having a',y cogent evidcnce to show that aII the accusedhave willfully evaded the ta-r. the trial court has concruded thataccused have committed willlul evasion in payment of tax. d) The trial court faiied r o see that all the assets belong toaccused No.1/company werc attached under Section 2gr-B ofthe Act and due to paral_vzing o[ financial activities of accusedNo. l, tax could not be paid rn time. proof is on the accused to prove that there was no willful evasionof payment of tax.of payment of tax. c) The trial Court erred in holding that the accused failed toprove non-existence of culpable mental state in non-payment oftaxes on the date of filing rclLrrns and as on the date of demandnotice and that the trial Cor-r rL taited to appreciate that in spite ofnot having a',y cogent evidcnce to show that aII the accusedhave willfully evaded the ta-r. the trial court has concruded thataccused have committed willlul evasion in payment of tax. d) The trial court faiied r o see that all the assets belong toaccused No.1/company werc attached under Section 2gr-B ofthe Act and due to paral_vzing o[ financial activities of accusedNo. l, tax could not be paid rn time. e) The trial court failed trial court failed court failed failed to consider the admission consider the admission of pW3 thatthatthe amount received by Accused No. I is towards/Companysharc applicatio, ruorrcy trt-res not attract tax riability and thatthe trial Court could not consider that accused No. t has notreceived Rs.8 crores I1 lakhs from M/s. Mytas property privateLimired. The trial court failed trial court failed court failed failed to consider the admission consider the admission of pW3 thatthat The Trial Court should not have concluded that accusedTrial Court should not have concluded that accusedCourt should not have concluded that accusedshould not have concluded that accusednot have concluded that accusedhave concluded that accusedconcluded that accusedthat accusedaccusedf) Nos.2 to 5 are responsible for day to day affairs of accusedNo.l/company and should have taken into consideration thenotices issued under Section 27 8-B of the Act proposing theprosecution did not refer accused Nos. 2 to 5 as principal ofltcersand thereby accused Nos.2 to 5 should have been acquitted. The Trial Court should not have concluded that accusedTrial Court should not have concluded that accusedCourt should not have concluded that accusedshould not have concluded that accusednot have concluded that accusedhave concluded that accusedconcluded that accusedthat accusedaccused 12. Heard Sri Vinod Kumar Deshpande, learned Senior counsel for 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. I3. Now, the points for determination in these appeals are 1) Whether the conviction judgment datedO9.Ol.2Ol4 in C.C.No.127 of 2Ol1 on the file olSpecial Judge for Economic Offences atHyderabad against the appellants can be setaside? 2l Whether the appellantsaccused havecommitted willful evasion of tax? To what relief.?3) 14. It is submitted by the appellants in the grounds of appealthat the Respondent - Income Tax Department has not ptacedsufficient material to shos. that appellant No. 1 Company hascommitted willfur defaurt, ro fasten the liability under Section276 C of the Income Tax ActThe question of willful defaultcomes, when appellant No.l Company is having sufhcient fundsto its credit and deliberate 11, <:hooses not to pay the tax or divertsthe funds for other purposcs. According to the appellants theywere not having funds to i)a_\, the tax, thereby, contended thatthere was no willlut default committed by them. 15. PW3 in his cross examination admitted that appellant No.l Company was not having ftrnds as on the date of filing of thereturns. It is also the r;ase oi the appellants that the Respondent- Income Tax Department has not placed any material to showthat inspite of having suflicient funds, the appellant No.lcompany has deliberately cvaded in payment of tax, thereby theappcllants were rlot iraving any culpable mental state to evadethe tax deliberately. 16. According to the prosecution, appellant No. 1 company hasself assessed rhe tzrx liabilit-v as Rs.g, f l,O9,S3O/_, however, no F'f 15. PW3 in his cross examination admitted that appellant No.l Company was not having ftrnds as on the date of filing of thereturns. It is also the r;ase oi the appellants that the Respondent- Income Tax Department has not placed any material to showthat inspite of having suflicient funds, the appellant No.lcompany has deliberately cvaded in payment of tax, thereby theappcllants were rlot iraving any culpable mental state to evadethe tax deliberately. 16. According to the prosecution, appellant No. 1 company hasself assessed rhe tzrx liabilit-v as Rs.g, f l,O9,S3O/_, however, no F'f tax arnount was paid along with IT retqtns. The trial Court in itsorder has observed that though appellant company was nothaving the Iiquid cash as on the date of filing of returns,1t(company)was having reserves, which were diverted to otherconcerns without bothering the tax liability on capital gains.Thus, even the trial Court has concluded that the appellant No.lCompany had no Iiquid funds to pay the tax as on the date offiling of returns. 17. It is also admitted fact that atl the assets of appellant No.1 Company were attached trnder Section 2BlB of the Income TaxAct and thereby there was no financial activity of the appellantNo.1 Company. Thus, there was no occasion for appetlant No.1Company to have any funds to its credit. Further, M/s.Maytasproperties Limited also requested for raising of the attachment ofthe properties in order to execute the sale deeds in favour of thepurchasers so that the sale proceeds can be paid directly to thedepartment on behalf of the appellant No.l company. M/sMaytas Properties Limited also requested to raise the attachmentof hve acres belonging to M/ s. Chitravathi Agro Farms PrivateLimited for disposal by Revenue Department to be adjusted ir- [., ][i ][i-{' ][-] against the outstanding ta_x demand of all the 19 companlincluding appellant No. I Company vide letter dated 11.03.20 11. 18. It is also mentioned in the grounds of appe4l that eventhough appellant No.1 Company has allowed M/s.MaytasProperties Limited to sell the lands pertaining to Accused No.lCompany, it did not receive the sale proceeds. 19. 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 ald adjustment ofrefund of income tax dues of Rs. 1 1.45 crores vide letters dated22.O2.2O1O and 1 1.O3.201 i in favour of appellant No.1company. The trial court in its judgrnent at page 19 para No.46has observed that nothing has been placed on record to showthat the department was in lact any due of any refunds to M/s.Maytas properties Private Limited and whether such refundswere fortified by passing appropriate refund orders. However, onperusal of the lettens dated ZZ{2.2O|O ar.rd I 1.O32Oft.addressed by the M/s. Maytas properties private Limited, theendeavour of appellalt No.l Company is very clear that in themost possible manner the tax liability was to be paid. This Court is of the opinion that if really the intention of appellantNo. 1 Company was not to pay the income tax and evade thesarne willfully, the letters dated 22.O2.2OIO and 11.03.2011addressed by M/s. Maytas Properties Limited requesting thedepartment to adjust TDS refund of the tax liability could nothave been addressed. 20. Another contention raised in the grounds of appeal is thataccused Nos.2 to 5 are not responsible for day to day affairs ofappellant No.l Company and that there is no materia-l placedbefore the trial Court to establish that accused Nos.2 to 5 areresponsible for day to day affairs of appellant No.1 company andthat unless there is specific resolution authorizing one of thedirectors as principle officer, all the directors of the company areprinciple officers of the company, thereby, the observation of trialCourt that unless restricted by the provisions of the CompaniesAct, all the directors are authorized to do a-ll the acts and therebyaccused Nos.2 to 5 are principal ofhcer is erroneous. 20. Another contention raised in the grounds of appeal is thataccused Nos.2 to 5 are not responsible for day to day affairs ofappellant No.l Company and that there is no materia-l placedbefore the trial Court to establish that accused Nos.2 to 5 areresponsible for day to day affairs of appellant No.1 company andthat unless there is specific resolution authorizing one of thedirectors as principle officer, all the directors of the company areprinciple officers of the company, thereby, the observation of trialCourt that unless restricted by the provisions of the CompaniesAct, all the directors are authorized to do a-ll the acts and therebyaccused Nos.2 to 5 are principal ofhcer is erroneous. 2I. In Akkinapalli Sujatha (smt.) and others v. State ofTelangana, Public Prosecutor, High Court of Telangana, Hyderabad and anotherr, wherein it was held as follows: "10. In POOJA RAVINDER DEVIDASANI u.STATE OF MAHARASHTRA| tlrc Supreme Courtmade the follouing obseruations: "... Time and again, it has been asserted. bgthis Court that onlg those persons wha were incLutrge of and responsible for the conduct of thebusiness of the Company at the time ofcommtssion of an offence will be liabte for criminalaction. A l)irector, who taas not in cLnrge of and,was not responsible Jor the conduct of thebuslness of the Compang at the releuant time, u,tillnot be liable for an offence [Jnder Section 141 ofthe N.I. Act." In National Small Industries Corporation(supra) thLs Court obserued: Section 141 is a penalprouiston creating uicarious liabilitg, and which, asper settled latu, must be stictlg construed. It istherefore, not sufficient to make a bald cursorystatement i.n a complairtt tltat th-e Direcl<tr (urruyed.as an accused) is in cdarge of and responsible tothe compang for the conduct of the business of thecompanA without angtfojng more as to tte role of the Director. But the complaint should spell out asto Law and 1 (2O14) 16 SCC 1 6 in tuhat mannerRespondent 7 uLo.s tn charge of or rttas responsibleRespondent 7 uLo.s tn charge of or rttas responsibleto the accused Compang for the conduct of itsbusiness. This is in consonance uitlt stictiruterpretation of penal statutes, especiallA, talrcrebusiness. This is in consonance uitlt stictiruterpretation of penal statutes, especiallA, talrcresuch statutes create uicarious liabilitg. A companymag lto-ue a ruumber of Directors and to make angor all tlrc Directors as accused in a complatntmerelg on th-e basis of a stateilent that theg are inmerelg on th-e basis of a stateilent that theg are incharge of and responsible for the conduct of thebuslness of tLrc compang uitl.aut anytlting more isnot a sufficient or adequate fulfillment of tlerequire ments Under Section 141.not a sufficient or adequate fulfillment of tlerequire ments Under Section 141. 27. Unfortunatelg, the Higlt Court did notdeal th.e issue in a proper perspectiue andcommitted error in dismissing tle urit petitions bytrolding that in the Complaints filed bg theRespondent No. 2, speci,fic auerments u.tere madeagainst th.e Appellant. But on tle contrary, takingthe complaint as a uhale, it can be inferred that inthe entire complaint, nn speciftc role is attibuted tothe Appellant in tLe contmission of oJfence. It issettled lau.t that to attro.ct a case Under Section141 of tLtE N.I. Act a specific role must ltaue beenplaged by:,a Director of the Compang for fasteningutcarious liability. But in this case, tle Appellant 27. Unfortunatelg, the Higlt Court did notdeal th.e issue in a proper perspectiue andcommitted error in dismissing tle urit petitions bytrolding that in the Complaints filed bg theRespondent No. 2, speci,fic auerments u.tere madeagainst th.e Appellant. But on tle contrary, takingthe complaint as a uhale, it can be inferred that inthe entire complaint, nn speciftc role is attibuted tothe Appellant in tLe contmission of oJfence. It issettled lau.t that to attro.ct a case Under Section141 of tLtE N.I. Act a specific role must ltaue beenplaged by:,a Director of the Compang for fasteningutcarious liability. But in this case, tle Appellant Luas neither a Director of the accused Componynor tn charge of or inuolued in tle dag to dagaffairs of the Comparut at the time of commissionofthe alleged offence. There is not euen a uhispernor tn charge of or inuolued in tle dag to dagaffairs of the Comparut at the time of commissionofthe alleged offence. There is not euen a uhisperor shred o-f euidence on record to shouL that thereis ang act committed bg the Appellant from whicha reasonabLe inference can be dranan that tlrcis ang act committed bg the Appellant from whicha reasonabLe inference can be dranan that tlrcAppellant could be uicaiousLy trcld liable for theoffence uith which she is cltarged." 11. In POOJA RAVINDER DEVIDASAN|s case (1 supra), the Supreme Court allouted thequash petition not onlg on the ground that there isno specific role attributed to the appellant but alsoon th,e ground tLtat the appelLant Lrr-s resigned_ asDirector much prior to issuance of tlte cheque. TheSupreme Court taking into consideration its earlierdecisions in National Small Industies Corporationu. Harmeet Singh Panital [(2010) 3 SCC 330];Gunmala Sales 7 Priuate Ltd. u. Anu Mehta [(2015)7 SCC 1031 and Pepsi Foods Ltd. u. SpecialJudicial Magistrate (1998) 5 SCC 3431, reiterated.the ratto that a complaint, ut here no specific role isattributed to the Director * Accused, is liable tu bequashed." ... 22. In Alka Khandu Avhad v. Amar Syamprasad Mishraand another2, it was held by the Honourable Supreme Courtas follows: "B.l Section 141 of ttt-e NI Act is relating tothe offence by ampanies and it cannot be madeapplicable to the indiuiduals. Learned counselappearing on behnlf of th.e original complainantLns submitted that "Compang" means ang bodycorporate and includes, a firm or otlrcr associationof indiuiduals and tLrcrefore in case of a jointliability of tuo or more persons it utill falL utithin"other association of indiuiduals" and ttrcreforeuith the aid of Section 141 of th.e NI Act, theappellant utho is [jointlg ]liable to pay the debt, canbe prosecuted. The aforesaid cannot be accepted.Two priuate irudiuiduals cannot be said to be 'otherassociation of indiuiduals". Therefore, tLere ts noquestion of inuoking Section 141 of the NI Actagainst th.e appellant, as tle liability is theindiuiduat liabilitg (mag be a joint liabilities), butcarlnot be said to be the ofJence committed by acompanA or bg it corporate or firm or otherassociations of indiuiduals. The appellant herein isneither a Director nor a partner in ang firm uthoLuts issued th.e cheque. Therefore, euen tte) appellant cannot be conuicted. with tlrc aid, ofSection 141 of the NI Act. Therefore, the High Courthas committed a graue error in not quashing theSection 141 of the NI Act. Therefore, the High Courthas committed a graue error in not quashing thecomplaint against the appellant for tLw offencepunishable under Section j3B r/w Section 141 ofthe NI Act. TLe ciminal punishable under Section j3B r/w Section 141 ofthe NI Act. TLe ciminal complaint filed, against theappellant for the offence punishable und.er Section138 r/ul Section 141 of the NI Act, therefore, canbe said to be abuse of process of law and- thereforethe same is required to be quashed. and, set aside." appellant cannot be conuicted. with tlrc aid, ofSection 141 of the NI Act. Therefore, the High Courthas committed a graue error in not quashing theSection 141 of the NI Act. Therefore, the High Courthas committed a graue error in not quashing thecomplaint against the appellant for tLw offencepunishable under Section j3B r/w Section 141 ofthe NI Act. TLe ciminal punishable under Section j3B r/w Section 141 ofthe NI Act. TLe ciminal complaint filed, against theappellant for the offence punishable und.er Section138 r/ul Section 141 of the NI Act, therefore, canbe said to be abuse of process of law and- thereforethe same is required to be quashed. and, set aside." 23. On considering the ratio laid down by the Honourable ApexCourt in the clecisions reported above, it is clear that theprosecution must specil'icall1, mention in the complaint 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. t 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 responsibre for theclay-to day affairs of the appellant No.1 Compar5r-will not servethe purpose. ,/'i>..\, 24. Appellant No.I company has hled [an ][application ][under]Section 39 I of the Code of Criminal [Procedure ][along ][with ][the]appeal for receiving [(1) ][Dossier ][Reports ][of ][the ][appellant ][company]for the assessment year 2OO8-09, [(2) ][Files pertaining ][to ] Proceedings pertaining to the appellant [company ][and ][(3) ][entire]proceedings pertaining to the sanction order [in ][the ][appeal' ][It ][is]submitted the learned [counsel ][for the ][appellants ][that]by sanction was accorded for [prosecution ][without ][assigning ][cogent]reasons and in order to [prove ]that [the ][appellants have ][not]willfully evaded the payment of taxes, [the ][files pertaining ][to ][the]said order and a-ll communications [between ][the ][assessing officer]and the sanctioning authority are crucial [documents.] 25. Appellant No.1 company has filed [another ][application]under Section 39 1 of the Code of Criminal [Procedure along ][with]the appeal for receiving cornmon Order, [dated ][22 ]'O5 ['2015]passed by the Appellate Tribuna.l in ITA.No'1O12 [of ][2Ol4' ][It ][is]submitted by the learned counsel for [the appellants ][that in ][view]of the common order dated 22.05.2015 [passed ][by ][the ][Income]Tax Appellate Tribunal, the Assessing [Ofhcer ][has ][to ][re-compute]the income of the assessee. [TLrus, ][the ][question ][of ][tax ][liability ][as] per the fresh assessment u,ould come into question. Hence, theprosecution initiated by the Income Tax Department on the basisof order, which is not in existence is not maintainable. 26. Considering the same and on hearing both sides, thisCourt is of the opinion that rhese documents are very reievant toconsider the grounds rajsed in the appealson hand, therebythese documents are received. 27. In view of the above discussion and on perusal of the grounds of appear, it is evident that the appella,ts have raisedcertain substantia_l issues including that the appellant Companyhas not committed willful default, as admittedly there were nofunds 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 tou,ards income tax on behalf of theappellants, but same was not considered; the appellant Nos.2 to5 are not the principle officers arrd thereby they cannot be heldto be responsitrle for the acts cornmitted by thecompany.Further, the appeilants have fired petitions under Section 391 ofthe Code of Criminal procedure to receive (1) Dossier Reports ofthe appellant companv for the assessment year 2OOg_O9, (21/ 27. In view of the above discussion and on perusal of the grounds of appear, it is evident that the appella,ts have raisedcertain substantia_l issues including that the appellant Companyhas not committed willful default, as admittedly there were nofunds 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 tou,ards income tax on behalf of theappellants, but same was not considered; the appellant Nos.2 to5 are not the principle officers arrd thereby they cannot be heldto be responsitrle for the acts cornmitted by thecompany.Further, the appeilants have fired petitions under Section 391 ofthe Code of Criminal procedure to receive (1) Dossier Reports ofthe appellant companv for the assessment year 2OOg_O9, (21/ Files pertaining to TRO Proceedings pertaining to the appellantcompany, (3) entire proceedings pertaining to the sanction orderin the appeal and (a) common order, dated 22.05.2015 passedby the Appellate Tribunal in ITA.No.lO l2 of 2Ol4 andcompany, (3) entire proceedings pertaining to the sanction orderin the appeal and (a) common order, dated 22.05.2015 passedby the Appellate Tribunal in ITA.No.lO l2 of 2Ol4 andaccordingly the said documents were received. 2A. 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 the appe[ant in thisappeal and the documents filed under Section 39 I of the Code ofCrimina,t Procedure and give finding afresh by giving opportunit5rto both sides. 29. Accordingly, both these criminal appeals are disposed ofsetting aside the conviction and sentence dated O}.OL.2OI4recorded by Special Court for Economical Offences at Hyderabadand C.C.No.127 of 2OI1 is remanded back to the trial Court witha direction to consider the complaint afresh in accordance withlaw, after giving an opportunity to both sides to adduce anyfurther evidence, if any. However, the trial Court shall not beinfluenced by the comments and observations, if any, made bythis Court touching merits of the case while passing orders. As a sequel, pending miscellaneous applications, if any,shall stand closed.shall stand closed. Sd/. C.V. MALLIKARJUNA VARMAJOINT REGISTRAR//TRUE COPY// G SECTION OFFICER To 1. The Metropolitan Sessions Judge, Hyderabad.(with records, if any) 2. The Special Judge for Economic Offences at Hyderabad 3 The Dy. commissioner of rncome{ax,, centrar circre-g, Room No.g13, gthFloor, Aayakar Bhavan, Basheerbagh, Hyderabad_500004.Floor, Aayakar Bhavan, Basheerbagh, Hyderabad_500004. 3. One CC to SRt. G. ASHOK REDDY, Advocate tOpUCI 4. One CC to Sri V. Surender Rao, Advocate (OPUC) 5. One CC to SRt. B. NARASTMHA SARMA, SC for t.T. tOpUCltOpUCl 6. Two CD Copies { HIGH COURT DR DNRJDATED:17l0612022 COMMON JT]DGMENT CRIMINAL APPEAL(TR) NOS: 60 AND 79 OF 2018 DISPOSING OF THE BOTH CRL.APPEAI-S b 1:; i4'r(:l[t]ya..)LBIU|lzull\:r\"n