Pre-sanction hearing not required; company prosecution may proceed even where imprisonment cannot be imposed, with fine still available.

Prior hearing was not required before the Commissioner granted sanction for prosecution under the Income-tax Act, because sanction is an administrative act authorising prosecution and the accused can defend at trial; the Commissioner need only assess whether a prima facie case exists. A company could also be prosecuted for offences prescribing mandatory imprisonment and fine, since a juristic person may be tried and convicted where the statute fastens liability on it, with imprisonment not being executable and fine remaining available on conviction. The prosecution against the company and managing director could therefore proceed, and the sanction challenge failed.

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Issues: (i) Whether prior hearing was required before the Commissioner granted sanction for prosecution under the Income-tax Act; (ii) Whether a company could be prosecuted for offences carrying mandatory imprisonment and fine.

Issue (i): Whether prior hearing was required before the Commissioner granted sanction for prosecution under the Income-tax Act?

Analysis: Sanction under the Act is only an administrative act authorising institution of prosecution. It is not an adjudication of guilt, and the accused gets a full opportunity to defend at trial. The statutory scheme does not require a pre-sanction hearing, and the Commissioner need only consider the material placed before him and decide whether a prima facie case exists.

Conclusion: The issue is answered against the assessee. No opportunity of hearing was required before granting sanction.

Issue (ii): Whether a company could be prosecuted for offences carrying mandatory imprisonment and fine?

Analysis: The majority held that a juristic person can be prosecuted and convicted where the statute makes the company liable, but the sentence of imprisonment cannot be imposed on it. The offence may still be tried and, upon conviction, fine can be imposed. The dissenting view held that where the statute mandatorily prescribes imprisonment plus fine, and no legislative provision permits substitution of fine alone, the court cannot rewrite the penal provision to fit a company.

Conclusion: By majority, the issue is answered in the affirmative for prosecution and conviction of the company, with imprisonment not being executable against it.

Final Conclusion: The prosecution could proceed against the company and the managing director, but the sanction challenge failed and the company could not escape prosecution merely because imprisonment could not be imposed on it.

Ratio Decidendi: A company may be prosecuted for a statutory offence even where imprisonment is prescribed, if the statute creates liability for the company and the punishment can be worked out by imposing fine on conviction; pre-sanction hearing is not required unless the statute expressly provides for it.

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