TaxTMI 
TaxTMI 
2014 (9) TMI 794
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....Registry) 2. With the consent of learned counsel for the parties, the appeals are taken up for final hearing. 3. The issue pertains to the assessment years ("AYs"), i.e., AY 1982-83, 1983-84, and AY 1984-85. With respect to the three AYs, show cause notices ("SCNs") under Section 276-B read with Sections 194 A and 200 of the IT Act were issued by the Inspecting Assistant Commissioner, Income Tax (Assistant), Range XV, New Delhi addressed to "The Principal Officer, M/s. Anil Batra & Associates (P) Limited, Batra Cinema, Dr. Mukherjee Nagar, Delhi" regarding failure to pay the tax deducted at source under Section 276 B of the IT Act. 4. As regards AYs 1983-84 and 1984-85 the trial Court by its judgment dated 9th August 1995 convicted the company and its two directors, i.e., Mr. Anil Batra and Mr. C.L. Batra, Accused Nos. 2 and 3 ("A-2 and A-3) respectively. While all the three accused were directed to pay Rs. 7,000 each as fine, A-2 and A-3 were sentenced to undergo simple imprisonment ("SI") for three months each and in default of payment of fine, A-2 and A-3 were to undergo SI for a further period of three months each by an order on sentence dated 11th August 1995. 5. A....
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....ssessing Officer has to issue notice under Section 2 (35) of the IT Act expressing his intention to treat such directors of a company as "principal officers". It was held that it would be sufficient compliance if in the SCN issued to the company it is mentioned that the Assessing Officer intends to treat the directors as principal officers of the company under the IT Act. 9. A careful reading of the decision of the Supreme Court in Madhumilan Syntex Limited (supra) reveals that it had arisen in identical circumstances where the ITD had prosecuted a company under Section 276 B read with Section 278 B IT Act. The only distinction between the case of Madhumilan Syntex Limited (supra) and the case on hand is that in that case the SCN issued expressly stated that the directors were considered to be treated as "principal officers". However, it appears that the Supreme Court also perused the complaint filed by the ITD in which it was stated that the directors were considered as principal officers. The relevant paragraphs of the decision in Madhumilan Syntex Limited (supra) read as under: "44. In the case on hand, in the show cause notice dated March 11, 1991 issued under Section 276....
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....ompany as defined under Section 2 (35) of the IT Act, which reads as under: 'Section 2 (35) "principal officer", used with reference to a local authority or a company or any other public body or any association of persons or anybody of individuals, means (a) the secretary, treasurer, manager, or agent of the authority, company, association or body, or (b) any person connected with the management or administration of the local authority, company, association or body upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof;' 12. The term "principal officer" is also mentioned under Section 305 of the Code of Criminal Procedure 1973 ("Cr PC") which prescribes the procedure to be followed where a company is an accused. It is possible that at that stage of issuance of the SCN the ITD may not be aware who are the directors in-charge of the company. That requirement flows from Section 278 B of the IT Act which is a deeming provision and is attracted when the offence is committed by a company. Section 278 B reads as under: "278B. Offences by companies (1) Where an offence under this Act has been committed....
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....n of the ITD that it was proceeding against the directors was to enable the directors to explain why they should not be proceeded against. Even if in the SCN there was no express mention that the directors were considered as "principal officers", in the complaint filed by the ITD it was clearly stated that "Accused Nos. 2, 3 and 4 are the directors/principal officer of the said company and were in charge and responsible to Accused No. 1 for the conduct of ........." 14. In Madhumilan Syntex Limited (supra) it was held that the proceedings against the Directors would be maintainable as long as the complaint clearly stated that they were being treated as principal officers of the company. Even otherwise for the purpose of Section 278 B of the IT Act, once the offence is shown to have been committed by the company, then the liability of the directors in charge of its affairs is attracted. The burden then shifts to such directors to show that the offence occurred without their knowledge or that they had exercised all due diligence to prevent the commission of such offence. The law as explained by the Supreme Court in Madhumilan Syntex Limited (supra) has not been noticed by the DJ&A....