Vicarious criminal liability for tax default cannot attach to a non-employee adviser absent control over compliance or specific overt act.

Criminal liability for non-remittance of tax deducted at source cannot be fastened on a person who was only a contractual finance adviser and not an employee or principal officer of the company. In the absence of any allegation or material showing control over day-to-day affairs, tax compliance, or a specific overt act linked to the default, there was no basis for vicarious liability under the Income-tax Act or the Indian Penal Code. The criminal proceeding and cognizance order against the adviser were quashed.

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Issues: Whether a contractual finance adviser who was not an employee of the company and had no control over its day-to-day affairs or tax remittance could be proceeded against for offences under the Income-tax Act and the Indian Penal Code.

Analysis: The petitioner was admittedly not an employee of the company and was engaged only as an adviser on retainer basis. On that basis, he did not control the company's affairs, including deduction and deposit of tax at source, and did not fall within the categories of assessee, principal officer, or employee for fastening criminal liability. The complaint also did not allege any specific overt act, responsibility for daily affairs, or any material connecting him with the alleged default. In such circumstances, there was no foundation for vicarious liability or for invoking penal provisions under the Income-tax Act or the Indian Penal Code.

Conclusion: The criminal proceeding and the order taking cognizance against the petitioner were quashed, and the challenge succeeded.

Final Conclusion: Criminal liability could not be fastened on a non-employee adviser in the absence of allegations or material showing control over the company's tax compliance or specific participation in the alleged default.

Ratio Decidendi: Criminal prosecution for non-remittance of tax deducted at source cannot be sustained against a person who is not an employee or principal officer of the company and against whom no specific overt act or responsibility for the default is alleged.

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