Company cannot face prosecution under compulsory-imprisonment tax offence; proceedings quashed, while officers may still be proceeded against.

Criminal prosecution under section 277 of the Income-tax Act could not be sustained against a company where the offence carried compulsory imprisonment and fine. The Court treated mens rea as an essential ingredient and held that, although the term "person" is wide enough to include a company, it cannot be applied so as to impose a sentence of imprisonment on a body corporate. The Court further noted that section 278B does not require prosecution of the company itself, and that responsible officers may still be proceeded against without prosecuting the company. The proceedings against the company were quashed.

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Issues: Whether criminal proceedings under section 277 of the Income-tax Act, 1961 could be continued against a company when the offence was punishable with compulsory imprisonment and whether the prosecution against the company was liable to be quashed.

Analysis: The relevant statutory scheme made false verification or false statement punishable with rigorous imprisonment and fine, and the Court treated mens rea as an essential ingredient of the offence. Although the definition of "person" was wide enough to include a company, the Court held that where imprisonment is compulsory, that expression cannot be read so as to make a body corporate liable in the same manner as a natural person, because a company cannot be sent to prison and the Court cannot alter the legislative scheme by substituting a different punishment. The Court also noted that section 278B does not compel prosecution of the company itself, and that officers in charge may be proceeded against without prosecuting the company.

Conclusion: The proceedings against the company were liable to be quashed.

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