Retrospective vicarious tax liability and imprisonment-only punishment could not sustain prosecution of a partner or firm.
A later amendment creating vicarious liability under section 278B of the Income-tax Act could not be applied to a false return filed before that provision came into force, so prosecution of the partner was not sustainable. The firm also could not be prosecuted for the alleged offence because, on the relevant date, section 277 prescribed imprisonment only, and a juristic entity cannot be sentenced to imprisonment. The complaint and connected proceedings were therefore treated as an abuse of process and quashed against the petitioners.
Issues: (i) Whether the accused partner could be prosecuted for an alleged false return filed before the insertion of section 278B of the Income-tax Act, 1961. (ii) Whether the firm could be prosecuted where, on the relevant date, the statutory punishment under section 277 of the Income-tax Act, 1961, was imprisonment only.
Issue (i): Whether the accused partner could be prosecuted for an alleged false return filed before the insertion of section 278B of the Income-tax Act, 1961.
Analysis: The alleged offence was tied to the filing of the return on 18 July 1973. Section 278B, which fastens liability on persons in charge of a company and includes a firm within the expression company, was introduced only with effect from 1 October 1975. The provision could not be applied to create criminal liability for conduct which, on the date of the alleged offence, was not governed by that provision. The complaint also did not disclose any subsequent return that could attract the amended regime.
Conclusion: The prosecution of the partner was not sustainable and was liable to be quashed.
Issue (ii): Whether the firm could be prosecuted where, on the relevant date, the statutory punishment under section 277 of the Income-tax Act, 1961, was imprisonment only.
Analysis: On the date of the alleged offence, section 277 provided only for rigorous imprisonment and did not provide for a fine. A firm, being a juristic entity, could not be sentenced to imprisonment. In those circumstances, prosecution of the firm for the alleged offence could not be sustained.
Conclusion: The prosecution of the firm was not sustainable and was liable to be quashed.
Final Conclusion: The criminal complaint and the connected proceedings were held to be an abuse of process and were quashed in respect of the petitioners.
Ratio Decidendi: A later amendment creating or expanding vicarious criminal liability cannot be applied retrospectively to an alleged offence completed before the amendment, and a juristic person cannot be prosecuted where the then applicable punishment is imprisonment only.
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AI Drafter ✕
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