2007 (2) TMI 150

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.....1 for the conduct of its business.  It was alleged by the Income Tax Department that the accused and its partners had concealed and evaded income to the tune of Rs.2,34,265/- and thereby committed an offence punishable under S. 276-C(1)(i) and 277(i) read with S. 278-B of the Income Tax Act, during the year 1979-80. The Income Tax Officer, after obtaining sanction from the Commissioner of Income Tax, filed complaint against the respondents / accused. 4. At the outset, it may be stated that respondent Nos. 2, 3, 5 and 6 were not served by the Department and their names were deleted on 24-8-1995. The trial was to proceed against the remaining accused. On behalf of the accused / respondent Nos. 1, 4, 7 to 11, an application was made f....

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....5. After perusal of the impugned order, it becomes clear that as far as respondent Nos. 9, 10 and 11 are concerned, they were not the partners of the firm on 31^st October 1978, when the alleged offence of evading the tax was committed. In paragraph 7 of the impugned order, the learned Additional Chief Metropolitan Magistrate noted that even in the order passed by the Second Income Tax Officer, B.S.D. (South) Bombay, it is averred that the firm was re-constituted as two partners Mr.  B. C. Krishnan and Y. K. Mani had retired from 31-10-1987 and Rajan Menon, Ravi Menon and Jayan Menon, who are respondent Nos. 9 to 11, had joined the firm with effect from 1-11-1978 as partners. In view of the assessment order passed by the Income Tax Off....

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....ersons in-charge and responsible to accused no.1 for the conduct of its business. Thus, in the complaint, there was specific averment that all the accused persons were in-charge of as well as responsible for the conduct of business of the firm. Whether accused Nos.  4, 7 and 8 were admitted to the partnership firm only for profits and whether they were sleeping or dormant partners and not active partners, could be decided on the basis of material which could be produced at the time of trial. In fact, this could be decided on the basis of the deed of partnership, which could specify role of the concerned partners.  If certain partners are admitted only for profit or certain partners are to be dormant partners, such terms of agreeme....

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....e before according sanction to prosecution is not necessary and that the Section 279(2) of the Income Tax affords only an opportunity to compound the matter, but it does not give a right to the party to insist for compounding. In Union of India and Anr. Vs. Banwarilal Agarwal [1998] 238 ITR 461 (SC) ; [1998] 7 SCC, 652, Their Lordships observed as  follows (page 463) : "We further find that sub-section (2) of Section 279 is a provision which enables the Chief Commissioner or the Director General to compound any offence either before or after the institution of proceedings. There is no warrant in interpreting this sub-section to mean that before any prosecution is launched, a show-cause notice should be given or an opportunity afford....