Tax deduction liability requires proof of principal officer status and actual deduction; ex post facto prosecution barred by Article 20(1).

Liability for tax deduction at source required proof that the accused were the statutory principal officers and that tax was actually deducted from dividends. The court noted that a managing director is not automatically a principal officer under section 2(35) of the Income-tax Act, 1961, and no notice treating the respondent as such was shown. The evidence was also uncertain on whether dividends were validly distributed and whether tax was in fact deducted. A prosecution under the 1961 Act could not be sustained for conduct already completed under the 1922 Act, and Article 20(1) barred ex post facto prosecution. The acquittal was therefore maintained.

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Issues: (i) Whether the respondents were the principal officers of the company at the relevant time and whether the tax was in fact deducted from the dividends; (ii) Whether a prosecution under the 1961 Act could be sustained for conduct alleged to have been completed under the 1922 Act, in view of Article 20(1) of the Constitution of India.

Issue (i): Whether the respondents were the principal officers of the company at the relevant time and whether the tax was in fact deducted from the dividends.

Analysis: The definition of "principal officer" in section 2(35) of the Income-tax Act, 1961 covers specified managerial persons or a person connected with management only if notice of intention to treat him as such is served. A managing director is not automatically the same as a manager for this purpose, and no notice treating the respondent as principal officer was shown to have been issued. On the evidence, the material relied on by the prosecution was uncertain as to whether dividends were actually distributed in the statutory sense or whether tax was actually deducted. Payment by mere credit entries in shareholders' accounts was not treated as an approved mode of dividend payment under the Companies Act, 1956.

Conclusion: The respondents could not be fastened with liability as principal officers, and the factum of deduction of tax from dividends was not proved.

Issue (ii): Whether a prosecution under the 1961 Act could be sustained for conduct alleged to have been completed under the 1922 Act, in view of Article 20(1) of the Constitution of India.

Analysis: The alleged default, if any, was complete under the 1922 Act and the prosecution was not founded on the corresponding provision of that Act. Section 276(d) of the Income-tax Act, 1961 required a failure to deduct and pay tax under Chapter XVII-B of the 1961 Act, and that statutory basis was absent on the facts found. The court also held that the accused were protected by the constitutional bar against prosecution for an act not punishable under the law in force at the time of its commission.

Conclusion: The prosecution under the 1961 Act was not maintainable for the alleged pre-1961 conduct, and the Article 20(1) objection succeeded.

Final Conclusion: The acquittal was sustained because the prosecution failed to prove the necessary factual foundation for liability and could not shift the alleged pre-existing offence into the later statutory regime.

Ratio Decidendi: For criminal liability under the tax deduction provisions, the prosecution must prove both the statutory status of the accused as the person legally bound to act and the actual deduction and failure to remit tax; a pre-existing offence completed under an earlier enactment cannot be prosecuted under a later provision that requires the act to have occurred under that later enactment, especially where constitutional protection against ex post facto prosecution applies.

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