Retrospective vicarious liability barred for directors, while company conviction for TDS default was sustained on admissions and records.

Failure to deposit tax deducted at source was proved against the company on its own admissions and supporting records showing deduction from salaries and delayed non-deposit, so conviction for the substantive default was justified. Directors could not, however, be made criminally liable for those offences because the provision extending vicarious liability to persons in charge of the company came into force only later; applying it to offences from 1965 to 1969 would create unconstitutional ex post facto liability barred by Article 20. The company remained liable, while the directors were not.

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Issues: (i) Whether the offence of failure to deposit tax deducted at source was established on the company's own admissions and documents. (ii) Whether the directors could be fastened with criminal liability for the offence committed before the insertion of the provision imposing liability on persons in charge of the company.

Issue (i): Whether the offence of failure to deposit tax deducted at source was established on the company's own admissions and documents.

Analysis: The company's communication admitted delay in salary payments, deduction of tax from salaries actually paid, and non-deposit of the deducted tax in time. The record also showed that some deposits were made later in respect of earlier deductions. On that material, the ingredients of the offences stood proved against the company.

Conclusion: The offence was established against the company, and its conviction was justified.

Issue (ii): Whether the directors could be fastened with criminal liability for the offence committed before the insertion of the provision imposing liability on persons in charge of the company.

Analysis: Section 278B of the Income-tax Act, 1961, which extends liability to the director in charge of the company's business, came into force only on 1 October 1975. Since the offences related to 1965 to 1969, that provision could not be applied retrospectively without creating an ex post facto criminal liability, which is barred by Article 20 of the Constitution of India.

Conclusion: The directors were not liable to be convicted for the pre-1975 offences.

Final Conclusion: The company was held liable and fined, while the directors were acquitted of criminal liability for the same transactions.

Ratio Decidendi: Penal liability cannot be imposed retrospectively on directors for company offences committed before the statutory provision creating such vicarious liability came into force, though the company itself may still be convicted on proof of the substantive default.

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