Crlatr/63/2018 Of M/S. Swarnamukhi Greenfields Pvt. Ltd v. Dy. Commissioner Of Income-Tax

IN THE HIGH COURT AT HYDERABAD FRIDAY, THE SEVENTEENTH TWO THOUSAND AND PRESENTTHE HONOURABLE [DR. ][JUSTICE D.NAGARJUN] CRIMINAL APPE [: 63 ][A][nd ][75 ][0F ][2018] Crl.A.TR.No .63 of2018: Crl.Appeal Under Section [374 ][of ][(2) ][of ][Cr.P.C. ][aggrieved ][by ][the]Judgment UiteO Og-Of-ZOt4 in [No. ][133 ][oI ][2011 ][on the ][file ][of ][the ][Court of]the Special Judge for Economic [Offences ][at Hyderabad-] Between: 1. M/s. Swarnamukhi Greenfields [Pvt. ]ltd., [2-13131, ] [Nagar, ][opp ][Hyder]Nagar, Hyderabad-72, Rep. by [its ][Managing ][Director ][A.V. Raghava Raju' ][S/o.]A.V Rama Raju, aged about [48 ]Years.Nagar, Hyderabad-72, Rep. by [its ][Managing ][Director ][A.V. Raghava Raju' ][S/o.]A.V Rama Raju, aged about [48 ]Years. 2. A.V. Raghava Raju, [Director ][of ][M/s. ][Swarnamukhi Greenlands ][Pvt. ][Ltd.' ][2-]1 3/31, SS. Nagar,'Opp. Hydernagar, [Kukatpally, ][Hyderabad-7 ][2]APPellants/ Accused No. [1 ]& [3]1 3/31, SS. Nagar,'Opp. Hydernagar, [Kukatpally, ][Hyderabad-7 ][2]APPellants/ Accused No. [1 ]& [3] AND Dv. Commissioner of lncome{ax,, [Central ][Circle-9, Room ][No.B'13, ][8th Floor,]AiyakarBhavan, Basheerbagh, [Hyderabad-500004. ]...RESPONDENT/ -ComPlainant Counsel for the Appellant [: ] COUNSEL FOR SRI. G ASHOK Counsel for the Respondent: [B. ][NARASIMHA SARMA, ] [for ][l'T.] CRIMINAL APPEAL [TRANSFER NO:][ 75 ][0F ][2018] Crl.Appeal Under Section [374 ][ot ][(2) ][of ][Cr.P.C. ][aggrieved ][by ][the]09-01-2014 [in ] [No. ][133 ][ot ][2011 ][on the ][file ][of ][the ][Court of]Judgment dated the Special Judge for Economic [Offences ][at Hyderabad.] Between: 1. D. Srinivasa Raju, [Director ][of ][M/s- Swarnamukhi Greenfields ][Pvt ][Ltd'']Fl/o. H.No. H-75, Madhura [Nagar, ][Hyderabad-38.]Fl/o. H.No. H-75, Madhura [Nagar, ][Hyderabad-38.] 2. B. Radha,, Director [of ][M/s. ][Swarnamukhi Greenfields Pvt' ][Ltd', ][R/o ][Plot]No. 1326, Road No. 66, Jubilee [Hills, ][Hyderabad.]No. 1326, Road No. 66, Jubilee [Hills, ][Hyderabad.] ... APPellants / Accused [2 ][& ][4] AND Dv. Commissioner [of lnconre-t;lx' Central Circle-9' Room ][No ][8"l ][3' ][8tr']Erf irv'r"r", i [a ][h, ][uu ][n' ] [a ][s ][h e e ][rb ][a ][g ][n' ] [vd ][e ][ra ][b ][ad ][- ][5 0 o 0 ][04']"i, .RESPONDENT/ [ComPlainant]SENIOR Counsel [for ][the ][Appellant ][: ] [DEllllANDE]FOR [SRI. ] Counsel [for ][the Respondent ][: ] [B' ] The Court [delivered ][the ][following ][Judgment] HONOURABLE DR. JUSTICE D.NAGARJUNCRIMINAL APPEAL ITRI Nos.63 and 75 of 2018 COMMON JUDGMENT: Crl.A.(TR).No.63 of 20 18 is filed by Al and ,A3 i.e.,Company and its Director respectively, whereas Crl.A.(TR).No.75of 2O 18 is filed by A2 and A4, who are another Director ofA I / compan_r', being aggrieved by the conviction and sentenceimposed by the learned Special Judge for Economic Offences atHyderabad in C.C. No. I 33 of 2Ol1 vide Judgment datedO9.0 1.20 14, ivherein Accused Nos. I to 4 were found guilty ofthe offences punishable under Section 27 6-C(21 read withSection 278-8 of the lncome Tax Act, 196 1 (for short, "the Act")consequentll, accuscd No. I was sentenced to pay fine ofRs.10,00O/- and in default of payment of fine to initiateappropriate proceedingsAS required under Section 421 ofCr.P.C., whereas Accused Nos.2 and 3 were sentenced toundergo rigorous imprisonment for a period of one year each andA4 was sentenced to undergo rigorous imprisonment for a periodof six months and to pay fine of Rs.I0,OOO l- each and in defaultof payment of fine by accused Nos.2 to 4, to undergo simpleimprisonment for a period of onc month each. -I -I Sincc [thc ][tssues tllr'olr ][r:cl ][irr thcse ][appeals are ][one and ][the]same, [botl-t ][the ][appe al ][s ][ztre ][ht'r ][t ][tg ][disposed ][of ][by ][this ][comlnon]judgment' 2For [conveniencc, ][the p:rrties ][herern][ are ][rcferred ][to as ][they]SAppeliant [No'1]triai [Court ][t ][e]are [arraYed ][bcfore ][tht]zln cl[Appellant ][Nos'2][ to ][4 ][as ][Accused]Accused [No ][1/ComPanv]Nos. [2 to ][4'] The [[gencsis ]][of ][thcse cascs' ][u'hich lead ][the ][appellants] 3. The [[gencsis ]]accused [to prefer thesc ][appcals' ][are ][narrated ][in ][brief ][as ][under:] M/s SwarnamukhiAccused [No ][1/company ]i) Greenfields [Private Lrrnited' ][which ][was registered ][under ][the]Comparries [Act ][with the ][Registrar ][of ][Companies ][at]Hyderabad [as ][Privatc ][Limited ][Company' ][was ][engaged ][in]the business [of acquisition ][and ][sale ][of ][lands' ][Appellant]Nos. [2 to 4 ][herelr-t ][are ][the ][Directors ][of ][Accused]No.1/ [ComPanY'] Accused [No.1 ][/ComPanY ][has][ acquired ][lands ][to ][an] Accused ii)extenl [of ][Ac.6.63 ][guntas ][in ][Sy'No' ][192 ][under the limits ][of]Bachupaliy [Mandal' ][Ranga Reddy ][District ][during ][the] -......--*ry$:?-lll I financial year 2002-2003 and dcveloped rhe said lands byrncurring some alrrounts cluring the financial years 2OO203 to 2OO7-OB. Accused No.l/Companv along r'vith othercompanies, u,ho have lands contiguous to the lands ofAccused No. 1/Company, have agreed to develop the landsjointly u,ith M/s. Mytas Property Private Limited. As perthe said development agreement, the built up area agreedto be given to Accused No. I / company, \4ras allowed to besold to various buycrs by M/ s. Mytas Property PrivateLimited and pa ss on the sale proceeds to AccusedNo.1/Company. iii) For the assessment year 2008-09, accusedNo.1/company has filed income tax returns on 30.O9.2OOSunder Ex.Pl by trifurcating the sale proceeds into long termcapital gains accrued from the sale proceeds of the landsand short term capital gains accrued from the saleproceeds of the constructed area by showing gross taxableincome as Rs.7,25, 17,587 /-, out of which an amount ofRs.4,61,12,998/- was shown as long term capital gain andRs.2,64,04,589/ - was shown as short term capital gains. -E---- iu) Accused No. I / Cornpan,rlscxpected to pav theincome tax cithcr b.r' r.r':r,r' of advance tax as rcquircd underSection 208 of thc Act or at least along with filing ofreturns [jn ]te rms of Scction 140 A of the Act. As perSection 143 (1) of the Act, the tax liabilitl, of Accused No. 1was arrived at Rs.2,15,70,486/- bv therespondent /complainant and raiscd a demand underSection 156 read u'itl-r Scction 143 of thc Act and issued anintimation to Accuscd No. i under Ex.P2./Company Accuscd No.1 / com pan-v\VAS required to pay the tzr-xdemandeci within 30 davs of service of notice. but it hascommitted default. v) Respondent/ complainant has issued show-causenotice dated 17 .11.2OO9 under Sectioo 221 (Il of the Actunder Ex. P5, wherein the appellants were asked to showcause as to why penalty should not be levied forcommitting delault in payment of tax. As there was noresponse lrom the appellants, the complainant has issuedanother show cause notice dated 25.08.2010 under Ex.p6under Section 221 (l) rcad wirh Section 143_A of the Act. v) Respondent/ complainant has issued show-causenotice dated 17 .11.2OO9 under Sectioo 221 (Il of the Actunder Ex. P5, wherein the appellants were asked to showcause as to why penalty should not be levied forcommitting delault in payment of tax. As there was noresponse lrom the appellants, the complainant has issuedanother show cause notice dated 25.08.2010 under Ex.p6under Section 221 (l) rcad wirh Section 143_A of the Act. Finally, one morc opportunit_\. u,as also given by thcDepartment by giving another show-cause norice datedl,2.lO.2OlO (Ex.P7) undcr Section 221 (l) read \,ith Secrionl,2.lO.2OlO (Ex.P7) undcr Section 221 (l) read \,ith Secrion143-A ol the Act. An opporturrity of bcing heard q,as alsogiven by the respondent/ complainant to AccusedNo. 1/Company flxing the date of hearing as l8.1O.2OlO,but there rvas no response, on which a penalty ofgiven by the respondent/ complainant to AccusedNo. 1/Company flxing the date of hearing as l8.1O.2OlO,but there rvas no response, on which a penalty ofRs.47,00,O00/ \vas imposed by wa,y of order dated25.10.20 10 (Ex. P8) under Section 221 read with Section140-A(3) of the Act and the said proceedings were servedon accused No. 1 on 29.IO.2OlOon accused No. 1 on 29.IO.2OlO 4. Considering the willfui evasion of payment of tax, therespondent/complainant has decided to initiate prosecution andaccordingly a notice was issued to accused No. 1/company andother Directors under Section 226-C(21 of the Act, as to whyprosecution shall 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. 1 / Company and its directors under Exs.p 10 andPl I dated 13.01.20 I 1 asking them as to why prosecution shall nor bc ipiLiatcd [yncler ]Scr:tir,tr [276 ][C(21 ][of ][thc ][A(rt. ][Again ][replies]Ncre filed br accusecl No. [1,i ][Companr. ][and ][its ][Dtrcctors/accused]Nos.2 to ,\4 unde r Exs.Pl2 [ar-rd ] [stating ][that ][there ][!\'as ][no]intention of u'i11ful cvasion [ol'tax'] 5. As Acr:used No. [1/Company ][and ][its ][Directors/ ][accused]Nos.2 to 4 tiavc not [pald the ][ta-x ][tn ][responsc ][to ][the ][demand]r-rotice issued undcr Section [r+3 (1) ][of ][the Act ][and ][also ][lailcd ][to]paY the penalt-y, the [re ][spolldent/ ][complainant ][after ][obtaining]sanction order dated [16.03 ][20i ][1 ][for ][launching ][ol ][prosecution]before [the ][Special ][court ][for ][Economic offences]liled a complaint against accused No.1 [and ][accused ][Nos ][2 to 4' ][the ][other]that [the,v ][have ][committed ][offence ][punishable]Directors, alleging under Section 276-C(21 [reacl ][with ][Section ][278-8 ][of ][the ][Act, ][as]they have wiilfully evaded [t ][ax ][even ][though ][they ][were ][having]sufhcient resources. 6. The Special Court [for ][Economic Offences ][took ][cognizance]of the offences against Accuscd [No.1/company ][and ][its ][Directors]i.e., Accused Nos. 1 to [4, ][under ][Section ][27 ][6-C(21 ][read ][with]Section 278-8 of the Act [ancl ][charges were ][framed against them]under Section 276 - C(21 read lr.ith [Section ]278-8(1) of the Act and all the accused have pleaded not guilty of the charges andclaimed to be tried 7. In order to prove the chargcs leveled against theappellants, the respondent/ complainant has examined pWs.l to3 and got marked trxs.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 all ol them have denied andreported that they did not choosc to examine any witness ontheir behalf. However, they got marked Exs.D i to D3 on theirbehalf. and all the accused have pleaded not guilty of the charges andclaimed to be tried 7. In order to prove the chargcs leveled against theappellants, the respondent/ complainant has examined pWs.l to3 and got marked trxs.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 all ol them have denied andreported that they did not choosc to examine any witness ontheir behalf. However, they got marked Exs.D i to D3 on theirbehalf. 8. The substance of the evidence of pWl is that after receivingof returns of income tax liled by accused No. l the/company, respondent/complainant has processed the same under Section143(1) of the Act and issued intimation determining the totaltaxable income as Rs.7,25,17,590/_ and tax liability asRs.2,37,O7 ,l4O /-. The evidence of pW2/lncome Tax ofhcer is tothe extent that he has considered the annual report of accusedNo.l/company for the hnancial year 2OOZ-Og under Ex.p3 andbank account statements of accused No. 1 / Company with the AXIS Llank Linrited undcr IixP4 and lound thitt:rccuscdNo. l/Compartl did not pit-\ the tzLX rcturlts in spitc ol havir-rgsurplus and sr-rl'ficicnt funcls. PW3 is the Income ['t'a-x ]Officcr.s'ho has slrcceeded I)W2. I{is evidence is thal he has passcdperraltr, ordcr under Ex.P8 imposing penalty of Rs.47 lakhs andraised dem:rnd under trx. P9 and the same vgas served on theacc:usccl. Hc erlso deposcd that as there u,as no response lromthc irccursccl. shoin czruse notices under Seclion 276 C of the Actu'crc issued agatnst all thc accused through which accused u,ereinlormcd that the department is initiating criminal proceedingsand consequenth' the departmcnt has filed the complaint 9. After full fledged trial, on considering the entire material onrccord, the trial Court has found Accused No.1/Company andA2 Lo A4, the Directors of z\1 company, guilty of the offencespu n ishable under Scctio ns 27 6-C(21 and 27 8 B of the Act andwere sentenced as stated supra. Aggrieved by the said judgmentand conviction of Special Judge for Economical Offences atHyderabad, the present appcals are filed originally before theMetropolitan Sessions Judge Court at Hyderabad. 10. The erstrvhile High Court for the States o[ Telangana andAndhra Pradesh has issucd circular ROC.No.34, CriminalSection/2O 17, dated 28.O8.2O17 , whcrein it is clarificd thatagainst any orders passed by the Special .Judge lor EconomicOffences, Hyderabad, in the State of Telangana andVisakhapatnam in the State of Andhra Pradesh, the High Courthas the jurisdiction to entertain the appcals, not the SessionsCourt. In view of the said circular, these appcals filed by theappellants have been translerred from Metropolitan SessionsJudge Court, Hyderabad, to the High Court lor the State ofTelangana. 1 1 . The summary of grounds of appeal as filed by theappellants in brief are 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 and that accusedNo.l has not received any sale proceeds from M/s. MytasProperty Private Limited, thereby the respondent/ complainanthas not produced any evidence to show that accused No. I /Com1>:rn,, has rcceir r,cl salc proceeds from M/s. Mr-tasPropcrt-r' Priva' c- LirlitcclPropcrt-r' Priva' c- Lirlitccl b) Thc trial court has misconstrued the presumption underSection 278-E, ol thc Act anrl erred in holding that thc burden ofprool is on the accused to prove that there \\ras no u,illfui evasionof payment of I zL{ 1 1 . The summary of grounds of appeal as filed by theappellants in brief are 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 and that accusedNo.l has not received any sale proceeds from M/s. MytasProperty Private Limited, thereby the respondent/ complainanthas not produced any evidence to show that accused No. I /Com1>:rn,, has rcceir r,cl salc proceeds from M/s. Mr-tasPropcrt-r' Priva' c- LirlitcclPropcrt-r' Priva' c- Lirlitccl b) Thc trial court has misconstrued the presumption underSection 278-E, ol thc Act anrl erred in holding that thc burden ofprool is on the accused to prove that there \\ras no u,illfui evasionof payment of I zL{ c) l'he trial Court err'ed in holding that thc accused failed toprove non cxistencc of culpable mental state in non paymcnt oftaxes on the drrtc ol filing rcturns and as on the date of demandnotice and th.rl thc t rial Cor-Lrt failed to appreciate that in spite olnot having an.\' cogent evi<lence to show that all the accusedhave willfullv evaded the tax, the trial Court has concluded thataccused have committed vvillf u1 evasion in payment of tax d) The trial court failed to see that all the assets belong toaccused No.1/Company ''l,ere attached under Section 281-B ofthe Act and dlre to paralyzing of financial activities of accusedNo.1, tax could not be paid ir-r time. e) e) The trial court failed to consider the admission of pw3 thatthc amount rcceivr:d b_r, Accused No. 1/Company rs towards - sl-rarc application money [does ][not ][attract ][tax ][liabilit,v ][and ][that]the Lrial Court could [not ][consider ][that ][accused ][No' ][l ][I'ras not]receivcd Rs.7 crores 25 lakhs [from ][M/s. ][Mytas ][Propcrtl' ][Private]Limited. The Trial Court Trial Court Court should not [[have concluded ][that ][accused]][[that ][accused]][[accused]] f) The Trial Court Trial Court Court should not [[have concluded ][that ][accused]][[that ][accused]][[accused]]Nos.2 to 4 are responsible for day [to ][day affairs ][of ][accused]No. I / company and should have taken into consideration [the]notices issued under Section 278-8 of lhe Act proposing [the]prosecution did not refer accused Nos. 2 to 4 as principal officersand thereby accused Nos.2 to 4 should have been acquitted 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 materia-l on record, relevant provisions of the Act and theauthorities cited 13. Now, the points for determination in these appeals are: 1) Whether the conviction [judgment ]dated O9.0 1.2014 in C.C.No.133 of 2011 on the file ofSpecial Judge for Economic Offences at H_vderalr;rci irgliinst rlrc, appcllants can be setasid c? 2l Wht',thcr thc.;rppellantsaccuscd havecommitLe d u'illlul cr a sron of tax? 3) To s'hat rclicf'l 14. It is subrnittcd bv thc appellants in the grounds of appealthat the Respondcnt lncr,rrrc Ta-x Department has not placedsufficient matcrial to shorr that appellant No.1 Companl, hascommitted u,illlul dcizrrrl[. to fasten the liabilitv under Section276 C of the lncome ['l'a-x ].\r:1. The question of [q,illful ]defaultcomes, \4,hen appellant No.'l Company is having sufficient fundsto its credit ar-r<l deliberatel-i chooses not to pay the tax or divertsthe funds for other purposcs. According to the appellants theywere not having lunds to pa-r, the tax, thereby, contended thatthere was no '"villful dcfault r:ommitted by them. 15. PW3 in his cross examination admitted that appellant No.1Company was not having frrnds as on the date of filing of thereturns. It is also the case ol the appellants that the Respondent - Income Tax Department has not placed any material to showthat inspite ol having sulficient funds, the appeilant No.l companv has dehberately evaded in pal,ment of tax, thereby thcappellants u.t:re no[ having any culpablc mental state to evadethe tax deliberatell. 15. PW3 in his cross examination admitted that appellant No.1Company was not having frrnds as on the date of filing of thereturns. It is also the case ol the appellants that the Respondent - Income Tax Department has not placed any material to showthat inspite ol having sulficient funds, the appeilant No.l companv has dehberately evaded in pal,ment of tax, thereby thcappellants u.t:re no[ having any culpablc mental state to evadethe tax deliberatell. 16. According to the prosecution, appellant No. I company hasself assessed thc tax liability as Rs.2,15,7O,49O1-, however, notax amount was paid along with IT returns. The trial Court in itsorder has observed that though appellant company \ ras nothaving the liquid cash as on the date of filing of returns, it(compan_y) ",l,as having reserves, which were diverted to otherconcerns u,ithout bothering the tax liability on capital gains.Thus, cven the trial Court has concluded that the appellant No. ICompany had no liquid funds to pay the tax as on the date offiling of returns. 17 . It is also admitted fact that all the assets of appellant No.1Company were attached under Section 281El of the Income TaxAct a-nd thereby there was no financial activity of the appe[antNo.1 Company. Thus, there was no occasion for appellant 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 the Ir--- purchascrs so that tht' salr' [procccds ]<:an be paid directly to tl-redepartmcnt on berh:rll of tlri' :rppellant No. 1 company. M/s.Maytas Properties Limitcd [aiso ][requestcd to raisc ]thc [attachmcnt]of five acres belonging lo [\1/s.Clritravathi ][Agro ]Farms [Private]Limited for disposal [br ][Rcvcn ][uc ][Department ][to ][be ][adjusted]against the outstanding [tar ][demand ][of all ][the ][19 ][companies]including [appellant ][No.I ][Corrrparry ][vide ][letter ][dated ][11.03.2011.] tl'rc grounds ol appeal ol appeal appeal that even 18. It is also menltoncdltltl'rc grounds ol appeal ol appeal appeal that eventhough appellant [No.1 ][C,)nrpan)- ][has ][allowed ][M/s.Maytas]Propertres Limited [to ][scll tlrc ][lernds ][pcrtaining ][to ][Accused ][No.1]Company, it [dicl ][not ][reccive ][l ][lrc ][sale proceeds] 19. It is also not [in ][dispute ][that ][M/s. ][Maytas ][Properties]Limited [has ][requested ][the ][Rr:spondent ][- ][Income ][Tax ][Department]for adjustment oI [refunrl ][of ][income ][tax ][and ]adjustment [of]refund of [income ]tax [dues ][ol ][Rs. ] [1.45 ][crores vide ][letters ][dated]22.O2.2O1O and [1 ][1.03.20 ] [1 ]in [favour ]of appellant [No.1]The trial court [in ][lls judgment ]at [Page ]l9 Para No.46company. has observed that nolhing has been [placed ]on record to showthat the department u,as in lacL aly due of any refunds to M/sMaytas propcrties Private Limitcd and whether such refunds werc fortified b-V passing appropriate refund orders. Hou,ever, onperusal of the 1e tte rs dated 22.02.2O10 and 1 1.03.201 1addressed bl the M/s. Maytas Properties Private Limited, theendeavour of appellant No. 1 Company is very clear that in themost possiblc manncr the tax liability was to be paid. ThisCourt is of the opinion that if really the intention ol appellantNo. I Compan_\: was not to pay the income tax and evade thesamc n,illfullr., the lctters dated 22.O2.2O1O and I 1.03.201 Iaddressed b1 M/s. Maytas Properties Limited requesting thedepartment to adjusr TDS refund of the tax liabilitv could nothave been addressed. werc fortified b-V passing appropriate refund orders. Hou,ever, onperusal of the 1e tte rs dated 22.02.2O10 and 1 1.03.201 1addressed bl the M/s. Maytas Properties Private Limited, theendeavour of appellant No. 1 Company is very clear that in themost possiblc manncr the tax liability was to be paid. ThisCourt is of the opinion that if really the intention ol appellantNo. I Compan_\: was not to pay the income tax and evade thesamc n,illfullr., the lctters dated 22.O2.2O1O and I 1.03.201 Iaddressed b1 M/s. Maytas Properties Limited requesting thedepartment to adjusr TDS refund of the tax liabilitv could nothave been addressed. 20. Another contention raised in the grounds of appeal is thataccused Nos.2 to 4 are not responsible for day to day affairs ofappellant No. I Company and that there is no material placedbefore the trial Court to establish that accused Nos.2 to 4 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 olficers of the company, thereby, the observation of trialCourt that unless restricted by the provisions of the Companies Act. all the dircctors arc arrrhorized to clo all tl'rc acts and therebvaccuscd Nos.2 to 4 an'principrrl officer is erroncous 21. In Akkinapalli Sujatha (smt.) and others v. State ofTelangana, Public Prosecutor, High Court of Telangana,Hyderabad and anotherl, u hcrein it rvas hcld as follows '10. In POOJA I?AVINDER DEVIDASANI u.STATE OF MAHARASHIRAi the Supreme Courtmade the follotui rtg oltseruct.tions: "... Time and aqatn. it has been asserted bA this Court th.at onlg those persons who were incharge oJ' and resportsrblc: for the conduct of thebusiness of Lhe [(-ontpctnA ]ot the time ofcommission of an offenc:e utill be liable for ciminalaction. A Director, who u.,tts not in charge of andwas not responsible for the conduct of thebusiness of the Compang at the releuant time, tuillnot be liable for an offence Undeir Section 141 ofthe N.l. Act." In National SmaU Industies Corporation(supra) this Court obsertted: Section 141 is a penalprouision creating uiconous LiabiLity, and tuhich, asper settled la uL, must be stictly constnled. It isth-erefore, not sufficient to make a bald cursorystatement in a complaint that the Director (arraged ) 2021 (2) ALT lctt.) 211 lS r3.l as an accused.) [is ][in ][charge ][oJ' ][and ][responsible ][to]the company J'or [the ][concluct ][of ][Lhe ][business of ][the]componA [tt ][tithout ][angthittg ][ntore ][as ][to ][the ][role ][of]the Director. [But the ][complaint ][should spell out ][as]to hotu and" [1 ][(2014) ][16 ] [6 ][in ][uthat ][manner]utas [in ][charge of ][or utas ][responsible]Respondent [1 ]to the accused [CompunA ]lor [the ][conduct ][of ][its]business. This is [in ][consononce ][tttith ][strict]of [penal ][statutes, especially, ][where]interpretation such statutes [create ][uicarious ][liabilitg. A ][compang]may haue a number [of ][Directors ][and ][to make ][anA]or all the Directors [as ][accused ][in a ][complaint]merelg on the basis [oJ' ][a statement ][that ][theg are ][in]chnrge of and [responsible ]for [the ][conduct ][of ][the]business of the compang [without angthing ][more ][is]not o sufJicient or [adequate ]fulfillment [of ][the]require ments Llnder [Section ][141.] 27. I.Jnfortunatelg, tlrc [High ][Court ][did ][not]deal the issue tn [a ][proper ][perspectiue ][and]committed error in [dismissing ][tte ][u-trit ][petitions ][bA]holding that in the [Complaints ]frled [bg ][the]Respond.ent No. 2, specific [auerments utere ][made]against the Appeltant' [But ][on ][tle ][contrary, taking]th.e complaint as a whole, [it can ][be ][inferred ][that in]the entire complaint, [no ][specific role ][is ][attributed ][to]the Appellant in the [commission ][of ][offence' ][It ][is]settled latu that to attract [o ][case ][Under ][Section] 27. I.Jnfortunatelg, tlrc [High ][Court ][did ][not]deal the issue tn [a ][proper ][perspectiue ][and]committed error in [dismissing ][tte ][u-trit ][petitions ][bA]holding that in the [Complaints ]frled [bg ][the]Respond.ent No. 2, specific [auerments utere ][made]against the Appeltant' [But ][on ][tle ][contrary, taking]th.e complaint as a whole, [it can ][be ][inferred ][that in]the entire complaint, [no ][specific role ][is ][attributed ][to]the Appellant in the [commission ][of ][offence' ][It ][is]settled latu that to attract [o ][case ][Under ][Section] 141 o.l' the N-1. Act o. snt'crfic role must haue beenpLaged btt a Director rtl' the Compang for lasteninguicanous lrcbilitg. But in this case, the Appellantuas neith.er a Directrtr of the accused Compangnor in charge of or it uolued in the datl to dayaffairs oJ' the Companq ot the time of cornmissionof the ctLlcged offence. ['l'here ]is not euen a whisperor shred of euidence ott record to show that thereis ang act committed ba the AppellanL from tuhicha reasonable inferentt' can be clrautn thr.tt theAppellant could be uicanouslg held liablt: for theoffence tuith which she rs charged." 1 1. In POOJA RAVINDER DEVIDASANI'scase (1 supra), the Supreme Court allotued thequash pet ition not onlg on the ground that there isno specific role attributed to the appellant but alsoon the ground that th.e' appeLlant has resigned asDirector nruch prior to issuance of the cheque. TheSupreme [(Jouft ]taking into consideration its earlierdecisions in NationaL Sntall Industies Corporationu. Harmeet Singh Panital ft201o) 3 SCC 3301;GunmaLa Sales 7 Pnuate Ltd. u. Anu Mehta [(2015)I SCC 1O3l and Peltsi Foods Ltd. u. SpeciaLJudicial Magistrate (1998) 5 SCC 3431, reiteratedthe ratio that a complairLt, u.there no speciJic role isattibuted to the Director Accused, is Liable to bequ ashed . ["] -- 22. In Alka Khandu Avhad v. Amar Syamprasad Mishra and another2, it \\'as held by' the Honourable Supreme Courtas follows "8. 1 Section 14 I of the NI Act is reLating tothe offence by companies ctnd it cannot be madeapplicable to the indiuiduals. Learned counselappeartng on behalf of the onginal complainanthas submitted that "Compang" nleans ang bodycorporate and includes, a firm or other associationof indiuiduals and therefore in case of a jointliabilitg of ttuo or more persons it uill fall tuithin"other association of indiuiduals" and thereforewith tlrc aid of Section 141 of the NI Act, theappellant utho is jointlg liable to pay the debt, canbe prosecuted. The aforesaid cannot be accepted.Tuto piuate indiutduals cannot be said to be "otherassociation of indiuiduals'. Therefore, there is noquestion of tnuoking Section 141 of the NI Actagainst th.e appellant, as the liabilitg is tteindiuidual liabilitg (may be a joint liabilities), butcannot be said to be the offence committed bA acompany or by it corporate or firm or otLerassociations of indiuiduals. The appellant herein isneither a Director nor a partner tn ang firm uthoItas issued the cheque. Therefore, euen th_e , 2o2t (2) ^Lr [{crt.llsc) ][69 {D.ll.)] appellant ce.nnot be conuicted Luith the ctid ofSectiorr 1 1 1 oJ' the N I Ac't. Therefore, the Hiclh Couflhas cotn,nitted o graue error in not quaslirtg th.econploint against the oppellant for the offencepurtishrtble under Sectiort 138 r/ u,, Seclion 1 4l ofthe NI AcL. ['['he ]cnminctl complaint f.led against theappellant for the offence punishable under Section138 r/w Section 141 of the NI Act, therefore, canbe sctic) to be ctbuse of ytrocess of laut and tltereforethe sarne is requ.ired to be quashed and set aside." - , 2o2t (2) ^Lr [{crt.llsc) ][69 {D.ll.)] appellant ce.nnot be conuicted Luith the ctid ofSectiorr 1 1 1 oJ' the N I Ac't. Therefore, the Hiclh Couflhas cotn,nitted o graue error in not quaslirtg th.econploint against the oppellant for the offencepurtishrtble under Sectiort 138 r/ u,, Seclion 1 4l ofthe NI AcL. ['['he ]cnminctl complaint f.led against theappellant for the offence punishable under Section138 r/w Section 141 of the NI Act, therefore, canbe sctic) to be ctbuse of ytrocess of laut and tltereforethe sarne is requ.ired to be quashed and set aside." - 23. On considering the ratio laid dou,n by the Honourable ApexCourt in the decisions reported above, it is cleer that theprosecution must specifica-ll,t mention in the complaint as to therole played by the appellant in the management of the companyMerely saying that the appellants are responsible for the day to-day affairs ol the Accused No. 1 Company is not sufficient. It isalso expected to a-llege 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 responsible for theday-to-day affairs of the appellant No. 1 Company will not servethe purpose 24. Appellant No.l company has filed an application underScction 39 I of the Codc of Criminal Proccdurc along u,ith [the]appeal for receiving (l ) Dossier Reports ol the appellant companyfor the assessment year 2008-09, (2) Filcs pertaining to TROProceedings pertaining to the appellant company and (3) entireproceedings pertaining to the sanction order in the appeal. It issubmitted by the learned counsel for thc appellants thatsanction u,as accorded for prosecution r.r'itholrt assigning cogentreasons and in order to prove that the appellants have notwillfully evaded the payment of taxes, the liles pcrtaining to thesaid order and all communications betr.r,ce n the assessing oflicerand the sanctioning authority are crucial documents. 25. Appellant No.1 company has filed another applicationunder Section 391 of the Code of Criminal Procedure along withthe appeal for receiving common order dated 22.05.2015 passedby the Appellate Tribunal. It is submitted by the learnedcounsel for the appellants that in view of the common orderdated 22.05.2015 passed by the Income Tax Appellate Tribunal,the Assessing Officer has to re compute the income of theassessee. Thus, the question of tax liability as per the fresh asscsslnerlt u'ollld comc into question. Hencc, thc proscct-rtior-rinitiatecl ll' tl'rc Inc'omt: 1lx Departmcnt on tl'rc basis oI rtrder,u,hich is not ir-r cxistencc is not maintainable 26. Considering the same and on hearing both sides, this Court is ol the opinion that these documents are ver)'relevant toconsider tl-rr: grounds raised in the appeals on hand, thercbvthesc docrtmcnts arc rccc ived 27. ln vie-,r, of the zrbove discussion and on pcrusal of thegrounds ol appeal, il is evident that the appellants have raisedcertain substantial issues including that the appellant Compan-r,has 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 carl be paid duly towards income tax on behalf of theappellants, but same was not considered; the appellart Nos.2 to4 are not the principle officers and thereby they cannot be heldto be responsible for the acts committed by the companyFurther, the :rppellants har,e [rled petitions under Section 391 ofthe Code of Ctriminal Procedure to receive (l ) Dossier Reports ofthe appellarrt company for the assessment year 2OOg_09, (2) Files pertaining to [Proceedings ][pertain ][ing ][to ][the ][appcllant]entire [proceedings ][pertaining to ][t ][hc ][sauc[ion ][order]company, [(3) ]in the appeal and [(4) ][common ][order ][dated ][22.O5.2O ][l5 ][passed ][by]the Appellate Tribunal and [according$ the ][said ][documents ][!\:ere]received. Files pertaining to [Proceedings ][pertain ][ing ][to ][the ][appcllant]entire [proceedings ][pertaining to ][t ][hc ][sauc[ion ][order]company, [(3) ]in the appeal and [(4) ][common ][order ][dated ][22.O5.2O ][l5 ][passed ][by]the Appellate Tribunal and [according$ the ][said ][documents ][!\:ere]received. 28. Considering the above, this Court [is ]of [the ][considered]opinion that the trial Court is required to be directcd [to]re consider all the issues that are raised bv Lhe appellant in thisappeal and the documents filed under Section 39 I of the Code ofCriminal Procedure and give finding afresh by giving opportunityto both sides 29. Accordingly, both these criminal appeals are disposed ofsetting aside the conviction and sentence dated O9.O1 .2014recorded by Specia-l Court for Economical Offences at Hyderabadand C.C.No. 133 of 20 I 1 is remanded back to the tria,l 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 III il III As a seclr tcl. qrcndirtg [rntsccllancous ][applications. ][il ][anr] shall stand cioscd Sd/- K. SRINIVASAoJOINT REGISSECTIFFICER //TRUE COPY// Toii tre Speciat Judge for Economic Offences, at Hyderabad'ii tre Speciat Judge for Economic Offences, at Hyderabad' Speciat Judge i. rf'r" O'V. Cormis"sioner [oitncome-tax, ][Central ][iircle-9' ][Room ][No ][813' ][8th]- ii""i'Arvrtir Bhavan, Basheerbagh, Hyderabad-500004'- ii""i'Arvrtir Bhavan, Basheerbagh, Hyderabad-500004' 3. One CC to [G. ] [REDDY, ][Advocate ][ ] 4. One CC to [SRl. B NARASIMHA ][SARIVA, ][Advocate ][ ] 5. One CC to [V. ][Surender ][Rao, ][Advocate ][(OPUC)] 6- Two CD CoPies -,l\<1v]. II I HIGH COURT DATED:17tO6tZO22 sR [Tll=][ :.,]C,t'[[!,)')]]0 6 ,t51i l.i2g2j coMMoN JUDGMENT [[!,)')]]l.i CRLATR.No.63 AND tS of 2018, DISPOSING OF THE BOTH CRL.APPEALS 5\)-}hv il