Former director liability quashed where resignation predated the return-filing default period under the Income-tax Act.

A former director could not be prosecuted for the company's alleged failure to file its return under the Income-tax Act where the record showed his resignation had taken effect before the statutory due date and before the default period. The court held that he was not in charge of the company when the return was required to be filed, so no offence was made out against him under the complaint invoking sections 139, 276CC, 278B and 278E. The Revenue's reliance on compounding guidelines was rejected because those guidelines presuppose commission of an offence by the applicant. The criminal process and revisional order were quashed insofar as they applied to him.

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Issues: Whether the criminal process issued for an alleged offence under Section 276CC of the Income-tax Act, 1961 could be quashed against the petitioner, who claimed to have ceased to be a director before the relevant default period.

Analysis: The complaint alleged non-filing of the return for Assessment Year 2014-15 and invoked Sections 139(1), 139(4), 276CC, 278B and 278E of the Income-tax Act, 1961. The record showed that the petitioner's resignation as director was accepted and reflected in the company records with effect from 30 December 2013, whereas the alleged default period arose only during 31 March 2014 to 30 September 2014. On that basis, the petitioner was not in charge of the company during the period when the return was required to be filed. The compounding guidelines relied upon by the Revenue were held inapplicable because they presuppose commission of an offence by the applicant.

Conclusion: The process and the revisional order were quashed and set aside qua the petitioner, as no offence was made out against him.

Ratio Decidendi: A person who had ceased to be a director before the statutory due date and before the alleged default period cannot be proceeded against for the company's failure to file its return, and criminal process in such circumstances is liable to be quashed.

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