Vicarious liability for tax deduction offences fails without proof of control over business or valid principal-officer notice.

Vicarious prosecution for tax deduction offences requires proof that the accused was, at the time of the offence, in charge of and responsible for the firm's business. Where the department relies on principal-officer liability, a valid notice treating the person as principal officer is necessary. On the facts, the accused was shown only to be an employee, and the materials did not establish responsibility for remitting the deducted tax. The prosecution under sections 276-B and 278-B was therefore not maintainable, and the proceedings were quashed.

---

---

Issues: Whether an employee of a firm could be prosecuted under sections 276-B and 278-B of the Income-tax Act, 1961 as a person in charge of and responsible to the firm for the conduct of its business; and whether, in the absence of a notice under section 2(35) of the Income-tax Act, 1961 treating him as principal officer, the prosecution was maintainable.

Analysis: The firm was treated as a company for the purposes of the Act, but vicarious liability under section 278-B attached only to a person who, at the time of the offence, was in charge of and responsible to the firm for its business. Section 204 identified the person responsible for paying, and section 2(35) became relevant where the department intended to treat a connected person as principal officer. The petitioner was shown to be only an employee, there was no notice under section 2(35), and the materials did not establish that he was the person responsible for remitting the deducted tax. The ruling followed the earlier view that prosecution cannot be sustained against persons who are neither principal officers nor shown to be in charge of the firm's conduct of business.

Conclusion: The prosecution against the petitioner was not maintainable and the charge under sections 276-B and 278-B could not stand.

Final Conclusion: The revision succeeded, the order of the lower court was set aside, and the proceedings against the petitioner were quashed.

Ratio Decidendi: Vicarious prosecution under section 278-B of the Income-tax Act, 1961 requires proof that the accused was in charge of and responsible for the conduct of the business of the firm, and where principal-officer liability is relied on, a valid section 2(35) notice is necessary.

---