PINAKIN KANTILAL PATEL vs. DY. COMM OF INCOME TAX AND ANR

Mr. S. A. Karmakar, APP for the Respondent-State. ______________________________________________________ CORAM : Jitendra Jain, J. DATED : 17 JULY 2025 PC. :-

By consent of the parties, the lead application being Criminal Application No.614/2011 is taken for the present adjudication.

This Criminal Application is filed for quashing of No.614/2011), 3126/SW/2013 (Criminal Application No.616/2011) seeking to prosecute the Applicant under Section 276C(2) read with 278B of the Income Tax Act, 1961 (IT Act).

The applicant was a part time director of accused No.1- Company-M/s. Maegaware Computers Limited, prior to his resignation on 18 February 1992. Criminal complaint is filed before the Chief Metropolitan Magistrate by the Complainant on the ground that accused No.1-company has defaulted in making payment of tax and since the applicant (accused No.7) is a director by invoking the provisions of Section 278 B of the IT Act has been made a co- accused in the complaint.

Mr. Jagushte, learned counsel for the applicant submitted that in the complaint, except making a bald averment that the applicant is a director of accused No.1 and he is in charge and responsible to accused No.1-for the conduct of business, there is no other averment or allegation against the applicant.

Learned counsel for the applicant also relied upon letter dated 27 April 1998 written by the applicant to the Deputy Commissioner of Income Tax where, in reply to SCN for prosecution, it is specifically averred that the applicant is only a part time professional director having no role to play in day- to-day activities of the company and he merely attends the board meetings and has not participated in the activities of the company. The applicant has further stated that he has resigned on 18 February 1992 and the issue of non payment arose on account of cheque dated 4 February 1993. 6. Learned counsel for the applicant further relied upon the orders passed by the Metropolitan Magistrate discharging accused No.10 and the said order having confirmed in Revision by the Sessions Court. He also relied upon the decision of the Supreme Court in Sunita Palita & Ors. vs. Panchami Stone Quarry1 and prayed for quashing of the complaint insofar as the applicant is concerned.

Mr. Chandrashekhar, learned counsel for the respondents relied upon the provisions of Section 276C and 278 B of the IT Act and submitted that the Court should not interfere and the proceeding should be allowed before the trial Court. He further submitted that the applicant has not proved that he was not in-charge of and responsible for day- to-day activities of accused No.

I have heard learned counsel for the applicant and the respondents and with their assistance have perused the documents which have been brought to my notice. At the outset, I wish to state that except what is recorded above, no other submissions were made by either of the parties. I also note that this criminal application was filed in 2011, and stay was granted on 9 December 2011, but till today no reply is filed by the respondent No.1. 1 (2022) 10 Supreme Court Cases 152 9. In the complaint, there is no specific averment that applicant was in charge of or responsible for day-to-day affairs of the company. There is bald statement that applicant is a director of accused No.1-Company. It is important to note that the cheque of Rs.48,68,122/- which is the subject matter of the present complaint was also not signed by the applicant. This is admitted in the complaint itself at page 4, where it is stated that the cheque was signed by accused No.1 and accused No.

The applicant vide letter dated 27 April 1998 has specifically stated that he was only a part time professional director having no role to play in day to day activities of the company. This has not been rebutted by the respondents till today.

The learned counsel for the applicant is justified in relying upon the orders passed by the Chief Metropolitan Magistrate discharging the accused No.10 who was the Technical Director. The Revenue challenged the said order dated 8 April 2008 before the learned Sessions Court in Revision and the learned Sessions Court vide order dated 28 July 2009 has also confirmed the same. I have not been shown any material to indicate that the order passed by the learned Sessions Court confirming the discharge of accused No.10 has been challenged further. Therefore, it would only mean that the said order has been accepted by the Revenue. I see no difference between accused No.10 and the applicant insofar as the present complaint is concerned .

Learned counsel for the applicant is also justified in relying upon the decision of the Hon’ble Supreme Court in the case of Sunita Palita (supra), wherein, although in connection with the proceedings under Section 138 of the Negotiable Instruments Act 1981, the ingredients required for satisfaction of Section 278B (2) of the Income Tax Act and Section 138/141 of the Negotiable Instruments Act are identical. The Hon’ble Supreme Court observed that there has to be a specific averment in the pleadings to substantiate involvement in the day to day affairs of the company or running of the business, and a mere statement that all directors are in-charge and responsible for conduct of the business of the company without anything more would not satisfy the ingredients for filing a complaint against the directors. In my view, the facts of the present case are similar to the facts before the Hon’ble Supreme Court and therefore, the said decision squarely applies to the facts of the present case.

I do not agree with the contention of the learned counsel for the Respondents that provisions of Section 278 B (2) of the IT Act are applicable in the facts of the present case. Section 278 B (2) of the IT Act provides that where an offence has been committed by a Company and it is proved that offence has been committed with the consent or connivance or is attributable to any neglect on the part of any Director, Manager or Secretary or any Officer then such Director, Manager, Secretary or Officer shall be deemed to be guilty and shall be liable to be proceeded against and punished accordingly. In my view there are no pleadings in the complaint that ingredients of Section 278 B (2) of IT Act are attracted. As observed by the Supreme Court in the case of Sunita Palita (supra) there has to be a specific allegation and in the facts of the present case the same are lacking.

In view of above, the present Criminal Application is allowed in terms of prayer clause (A) which reads as under: Criminal Application No.614 of 2011 “A) In Criminal Case No.103/SW/2013 for prosecution of offences punishable under Section 276C(2) read with Section278B of the Income Tax Act pending on the file of the Additional Chief Metropolitan Magistrate, 38th Court at Ballard Pier , Mumbai may kindly be quashed and set aside.” Criminal Application No.615 of 2011 “A) In Criminal Case No.3126/SW/2013 for prosecution of offences punishable under Section 276C (2) read with Section278B of the Income Tax Act pending on the file of the Additional Chief Metropolitan Magistrate, 38th Court at Ballard Pier , Mumbai may kindly be quashed and set aside.” Criminal Application No.616 of 2011 “A) In Criminal Case No.669/SW/2013 for prosecution of offences punishable under Section 276C(2) read with Section278B of the Income Tax Act pending on the file of the Additional Chief Metropolitan Magistrate, 38th Court at Ballard Pier , Mumbai may kindly be quashed and set aside.”

Applications are allowed in above terms by quashing No.614/2011), 3126/SW/2013 (Criminal Application No.616/2011) insofar as the present applicant is concerned. I make it clear that, the present order allowing the criminal applications will not preclude the respondents from proceeding against other accused and any observations made herein are restricted to the facts of the present applicant before this Court.

Any Interim Application, if filed in these proceedings would also not survive. (Jitendra Jain, J)