BHAGAWATI PROSAD HIMATSINGKA Vs. STATE OF WEST BENGAL

JUDGEMENT

(1.) The appellants before us filed a writ petition, in which they challenged the institution of Criminal Case No. C/284/93 by filing a complaint dated March 24, 1993, under Sections 276B and 278B of the Income-tax Act, 1961, and all proceedings, notices and orders relating thereto.

(2.) In the writ petition, the appellants contended that until March 31, 1994, they carried on business in partnership in the name and style of "Bhagwati Prasad Mahendra Kumar". On and from April 1, 1994, the said partnership firm has been dissolved and since then it is a proprietary concern of appellant No. 1. Until its dissolution, the said firm was an income-tax assessee assessed under the status of a "registered firm". The said firm maintained its accounts in accordance with the mercantile system of accountancy. During the accounting year ended on December 31, 1983, the assessment year 1984-85, the said firm credited the accounts of its creditors with the interest payable to them on the loans taken from them. Under Section 194A(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the said firm, at the time of crediting of such interest to the account of the payee or at the time of payment thereof, whichever is earlier, was obliged to deduct income-tax thereon at the rate in force and under Section 200 of the said Act was required to pay within the prescribed time, the sum so deducted to the credit of the Central Government. Though the said firm had credited interest payable and had shown deduction of tax therefrom, but due to paucity of funds and bad liquidity position could neither pay the interest to the creditors, nor could pay the tax so shown to have been deducted to the Central Government within the time so specified. However, subsequently the interest as well as the tax deducted was paid to the creditors and to the Central Government respectively. For the relevant assessment year deduction of tax on interest amounted to Rs. 2,17,476. Till March, 1990, a sum of Rs. 34,396 was paid and the balance of Rs. 1,83,080 was paid on February 19, 1991. Prior thereto on March 2, 1990, the said firm received a letter dated February 27, 1990, from the Income-tax Officer, Ward 3(6), Calcutta, wherein it was stated that although the said firm has deducted tax of Rs. 2,17,476, it has failed to deposit the same within the stipulated period and, therefore, the said firm was required to show cause why prosecution should not be launched under Section 276B of the said Act. In reply to the said letter dated March 2, 1990, the said firm submitted before the said Income-tax Officer that a sum of Rs. 34,396 has already been paid to the Central Government and the balance would be paid soon on realisation of funds and, subsequently, the balance was paid on February 19, 1991. Thereafter, in June, 1993, the appellants and the said firm received from the court of the learned Ninth Metropolitan Magistrate, Calcutta, a summons and a copy of a criminal complaint dated March 24, 1993, filed by the said Income-tax Officer against the appellants and the said firm, where it was stated that the said complaint was duly authorised by the Commissioner of Income-tax, West Bengal IX, Calcutta, by his order dated March 18, 1993. In the meantime and after receipt of the said letter dated February 27, 1990, the said firm did riot hear anything either from the said Income-tax Officer or from the said Commissioner of Income-tax. On March 24, 1993, learned Chief Metropolitan Magistrate took cognizance of receiving the said complaint and thereafter the appellants were enlarged on bail by the learned Ninth Metropolitan Magistrate. It was contended that the said criminal proceedings were not maintainable and should be dismissed. It was stated that no such criminal complaint could be filed against the partners of the said firm since the payer of interest alone was defined to be the person responsible for paying within the meaning of the appropriate provisions of the said Act and under the said Act the partnership firm and its partners are different entities and thus the said firm alone was responsible. It was also stated that the complaint so launched does not disclose an offence because the principal ingredients constituting the offence in a matter like this had not been alleged. It was stated that the authorisation accorded to initiate such criminal proceedings was made mechanically without taking into account the relevant factors and in particular the payment of the full amount of the tax deducted at source. In addition to that, various other grounds were taken to assail the matter complained of in the writ petition as mentioned above.

(3.) The writ petition was moved upon notice to the respondents before a learned single judge of this court when the matter was argued threadbare. The learned single judge of this court by an order dated April 28, 1995, summarily rejected the writ petition. After holding, inter alia, that the writ jurisdiction in a matter like this should be exercised only in rare cases, the present is not such a rare case and that it would be the obligation of the accused to make out some cause or excuse which is sufficiently reasonable for explaining non-payment of tax, but it would not be the obligation of the complainant, the Income-tax Officer, to plead or prove the negative. The learned single judge also felt that he is not called upon to make any comment upon the argument that because a partnership firm or a company cannot be sent to jail and compulsory imprisonment is provided for the offences, those would vanish altogether from the scene even in so far as the partners themselves are concerned. The learned single judge also observed that the complaints are not bad ab initio, they call for a good defence to be made out if the allegations in the complaint are substantiated before the learned Magistrate, without which a conviction would automatically follow, because, in the petition of complaint, there is no reasonable cause or excuse justifying non-payment. The learned single judge lastly observed that keeping the writ petition pending might unjustly affect the prosecution.