Vicarious liability of non-executive directors under tax law requires specific averments of control, consent, connivance, or neglect.

A complaint for offences under the Income-tax Act against a non-executive director was held unsustainable where the pleading did not contain specific averments that he was in charge of and responsible for the company's business, or that the default occurred with his consent, connivance, or neglect. The court treated Section 278B as creating vicarious liability only when its foundational requirements are properly pleaded and shown. In the absence of such material, cognizance could not be maintained against the director, and the consequential criminal proceedings were quashed.

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Issues: Whether a complaint and cognizance against a non-executive director for offences under the Income-tax Act, 1961 could be sustained in the absence of specific averments showing that he was in charge of, and responsible for, the conduct of the company's business or that the offence was committed with his consent, connivance, or neglect.

Analysis: The complaint proceeded under Section 200 of the Code of Criminal Procedure, 1973 for offences punishable under Sections 276B and 278B of the Income-tax Act, 1961. The petitioner was only a non-executive director, and the complaint did not contain any specific allegation explaining his direct or indirect role in the default. Section 278B creates vicarious liability only in the situations contemplated by the provision, and such liability cannot be fastened in the absence of foundational pleadings showing involvement in the conduct of the business or consent, connivance, or neglect.

Conclusion: The prosecution against the petitioner was unsustainable and the cognizance and consequential proceedings were quashed.

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