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of <h1>Court quashes tax case against company & accused, citing no imprisonment for companies.</h1> <h3>Biyar Rubbers Pvt. Limited Versus RL. Rinawma, Deputy Commissioner Of Income-Tax</h3> Biyar Rubbers Pvt. Limited Versus RL. Rinawma, Deputy Commissioner Of Income-Tax - [1993] 200 ITR 717, 115 CTR 292 Issues Involved:1. Prosecution of a company u/s 276C and 277 of the Income-tax Act.2. Validity of sanction accorded by the Commissioner of Income-tax.3. Allegations against the company to implicate other accused persons.4. Principles of natural justice in granting sanction.Summary of Judgment:Issue 1: Prosecution of a company u/s 276C and 277 of the Income-tax ActThe petitioners argued that a company, being a juristic person, cannot be imprisoned and thus cannot be prosecuted under sections 276C and 277 of the Income-tax Act. The court referred to various High Court decisions, including Modi Industries Ltd. v. B. C Goel, which stated that a company cannot be subjected to bodily punishment or imprisonment. The court concluded that prosecuting a company under these sections is unpurposeful since a company cannot be imprisoned, and thus the proceedings against the company (A-1) are quashed.Issue 2: Validity of sanction accorded by the Commissioner of Income-taxThe petitioners contended that the sanction by the Commissioner did not specifically grant sanction but only recorded satisfaction about the commission of the offences. The court held that the sanction order, when read as a whole, indicated that sanction was indeed accorded, and thus the order is not vitiated on this ground.Issue 3: Allegations against the company to implicate other accused personsThe petitioners argued that the complaint did not allege that the company contravened any provisions of law, which is necessary to make other accused persons liable. The court found that the complaint did contain detailed allegations against the company (A-1) and how the other accused (A-2 to A-4) were involved. Thus, this contention was rejected.Issue 4: Principles of natural justice in granting sanctionThe petitioners argued that the principles of natural justice were violated as they were not given an opportunity to be heard before the sanction was accorded. The court agreed that the principles of natural justice must be followed, especially when provisions for compounding offences exist. The court held that the sanctioning authority should have given the petitioners an opportunity to be heard, and thus, the proceedings against all accused (A-1 to A-4) are quashed. However, the Commissioner is at liberty to reconsider the sanction after giving the petitioners a reasonable opportunity to be heard.Conclusion:The court quashed the proceedings against the company (A-1) under sections 276C and 277 of the Income-tax Act, as a company cannot be imprisoned. The proceedings against all accused (A-1 to A-4) were also quashed due to the violation of principles of natural justice in granting sanction. The Commissioner may reconsider the sanction after providing a reasonable opportunity to the petitioners to be heard.
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