1997 (7) TMI 41 - HC - Income Tax

Court rules prior notice not required to initiate criminal proceedings under Income-tax Act, upholds charges against partnership firm.

The High Court upheld the trial court's decision, ruling that prior notice was not a prerequisite for initiating criminal proceedings under the Income-tax ... Interpretation OF STATUTES, Offences And Prosecution, Notice, Firm Issues involved: Framing of charges u/s 276B read with section 194A of the Income-tax Act, 1961 without prior notice, initiation of criminal prosecution against a partnership firm and its partners, failure to deduct tax at source, validity of Form No. 15-A submitted by accused-applicants.Framing of Charges without Prior Notice:The applicants challenged the order of the trial court on the grounds that no prior notice was given before filing the prosecution. The court deliberated on whether such notice was a prerequisite for launching prosecution. The High Court opined that the Income-tax Act does not mandate a notice before initiating criminal proceedings. The court cited precedents and emphasized that the Act allows compounding of offences either before or after the institution of proceedings. The court held that the absence of prior notice does not invalidate the prosecution, as the law does not require it. The court highlighted that the accused had the opportunity to compound the offence even after the proceedings in court. The belated objection raised by the applicants at the stage of framing of charges was deemed unsustainable.Initiation of Criminal Prosecution against Partnership Firm and Partners:The court examined section 278B of the Act, which specifies that both a firm and its partners can be prosecuted for offences under the Act. The provision allows partners to prove lack of knowledge or due diligence to prevent the offence. The absence of designation of a person as the principal officer of a firm does not affect the prosecution of the firm or its partners. The court clarified that the impact of the alleged omission to deduct tax at source without reasonable cause or excuse, as well as the validity of Form No. 15-A, would be assessed at a later stage based on evidence.Conclusion:The High Court upheld the trial court's order, citing the provisions of the Income-tax Act and emphasizing the permissibility of compounding offences before or after the institution of proceedings. The court aligned with the decision of the High Court of Madras and rejected the contention that prior notice was necessary before initiating criminal proceedings. The court dismissed the revision petitions, affirming the framing of charges against the partnership firm and its partners under section 276B read with section 194A of the Act.