2022 (9) TMI 1100 - HC - Income Tax

Company Directors Face Tax Charges, Petitioner's Death Halts Proceedings, Non-Executive Status Questioned

Dr. A.M. Arun M/s. Vasan Health Care Pvt Ltd., Smt. Meera Run Versus Income Tax Department, O/o. The Commissioner of Income Tax (TDS) Coimbatore, Represented by Deputy Commissioner of Income Tax, TDS Circle, Madurai.

Dr. A.M. Arun M/s. Vasan Health Care Pvt Ltd., Smt. Meera Run Versus Income Tax Department, O/o. The Commissioner of Income Tax (TDS) Coimbatore, ... Issues Involved:1. Criminal complaints against the Company and its Directors under Section 276(B) r/w 278(B) of the Income Tax Act, 1961.2. Status of the first petitioner due to death.3. Classification and responsibility of the second petitioner as a non-executive director.4. Applicability of previous judgments and legal precedents.5. Whether the second petitioner can be treated as a principal officer under Section 2(35) of the Income Tax Act.6. Request to dispense with the presence of the second petitioner during trial proceedings.Detailed Analysis:1. Criminal Complaints Against the Company and its Directors:The income tax department filed criminal complaints against the Company and its Directors for delayed payment of tax deducted at source, punishable under Section 276(B) r/w 278(B) of the Income Tax Act, 1961. The complaints for different assessment years were substantively the same.2. Status of the First Petitioner Due to Death:During the pendency of the proceedings, the first petitioner expired. Consequently, the proceedings abated concerning the first petitioner, and the court only considered the stand of the second petitioner.3. Classification and Responsibility of the Second Petitioner as a Non-Executive Director:The second petitioner claimed to be a non-executive director, not involved in the day-to-day affairs of the Company. The petitioner's counsel referenced Form-32 and Supreme Court judgments (GUNMALA SALES (P) LTD. vs. ANU METHA AND OTHERS and POOJA RAVINDER DEVIDASANI vs. STATE OF MAHARASHTRA AND ANOTHER) to argue that non-executive directors cannot be treated as Principal Officers.4. Applicability of Previous Judgments and Legal Precedents:The petitioner's counsel cited a Gujarat High Court judgment (IONIC METALLIKS AND 3 OTHERS vs. UNION OF INDIA AND 3 OTHERS) and a previous order by the Madras High Court (Crl.O.P(MD)Nos.16082 etc., of 2018) to support quashing proceedings against non-executive directors. However, the Department's counsel argued that these precedents applied to nominee directors, not non-executive directors, and referenced other orders where similar pleas by the second petitioner were dismissed.5. Whether the Second Petitioner Can Be Treated as a Principal Officer:The court examined the Supreme Court judgment in MADHUMILAN SYNTEX LTD., AND OTHERS vs. UNION OF INDIA AND ANOTHER, which held that whether directors are principal officers under Section 2(35) of the Act must be determined at trial. The court noted that notice was issued to the second petitioner treating her as a principal officer, and such averments were made in the complaint. This determination could only be made at trial, not in a quash petition.6. Request to Dispense with the Presence of the Second Petitioner During Trial Proceedings:Considering the request, the court dispensed with the second petitioner's presence, allowing her to be represented by counsel, except during questioning under Section 313 Cr.P.C. and at the time of passing judgment. The court emphasized that the second petitioner could raise all grounds before the trial court, which should consider them on their merits.Conclusion:All criminal original petitions were dismissed. The Judicial Magistrate No.1, Tiruchirappalli, was directed to dispose of the cases within three months. The second petitioner's presence was dispensed with, except for specific stages of the trial.