Prima facie prosecution of company directors under Income-tax Act cannot be stopped at discharge when complaint alleges responsibility for business.

Where a complaint under the Income-tax Act alleges that directors were principal officers and were in charge of and responsible for the company's day-to-day business, the court at the discharge stage examines only whether a prima facie case is disclosed. It should not weigh the defence that no valid notice was served or that the accused were not actually responsible for the business. Relying on the principles under Sections 276B and 278B and the accompanying notices treating the accused as principal officers, the court concluded that criminal process could not be terminated at the threshold. The discharge order was therefore unsustainable and had to be set aside.

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Issues: Whether the order discharging the accused was liable to be set aside on the ground that the complaint and accompanying material disclosed that he was a principal officer and was in charge of the day-to-day affairs of the company for the purposes of prosecution under the Income-tax Act, 1961.

Analysis: The complaint specifically alleged that the company had failed to remit deducted tax at source and that the accused directors were in charge of and responsible for the conduct of its business. The record also contained notices treating them as principal officers under Section 2(35) of the Income-tax Act, 1961. At the stage of discharge, the court was required to examine only whether the material disclosed a prima facie case, and not to evaluate the defence that no valid notice had been served or that the accused were not actually responsible for the business of the company. The governing principles under Sections 276B and 278B of the Income-tax Act, 1961, as explained in the cited precedent, show that where necessary averments are made that directors were principal officers or were in charge of and responsible for the company's business, criminal process cannot be terminated at the threshold and the issue is one for trial.

Conclusion: The discharge order was unsustainable and was liable to be set aside; the accused could not be discharged at the pre-trial stage on the material then available.

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