Homi Phiroze Ranina & Ors v/s State of Maharashtra & Ors

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Facts of the case 

A complaint came to be recorded by the Salary Charge Officer, TDS VI, Bombay, against the display applicants/accused as well as M/s. Unique Oil India Ltd. of which the applicants/accused are Executives as well as against Shri L.K. Khosla, Chairman and Managing Chief of denounced No. 1 Company as well as Gayatri Khosla another Executive and one Yogesh Khosla the whole-time Chief of blamed No. 1 Company sometime recently the Extra Chief Metropolitan Judge, 47th Court, charging them beneath section 276B read with 278B of the Income Tax Act, 1961. Summons were issued to all the denounced people counting the display candidates. On receipt of the summons, the candidates in this (blamed Nos. 4, 5, 6, and 7) recorded applications for release sometime recently the M.M. Court on 31-10-1996. By his arrangement dated 30-11-1996 the Officer rejected the release applications recorded by the applicants/accused Nos. 4, 5, 6, and 7.

The show application is for setting aside the said arrangement which the candidate’s claim is passed on deficiently fabric. It is particularly argued that the lower court has not taken into thought the prerequisites of section 194C, sections 204 and 2(35) of the Income Tax Act. It is fought that the display applicants/accused are as a matter of fact not the central officers of the charged No. 1 company and, thus, not dependable for the disappointment on the portion of the Company to store with the Central Government the charges deducted at source by the Company from four temporary workers specifically

  1. M/s. Allied Consulting Engineers (P) Ltd., 
  2. M/s. Shrinivas Plates and Structural (P) Ltd., 
  3. M/s. Excellite Insulators (P) Ltd. and 
  4. M/s. Kanaiya Construction Company. 

In spite of the fact that the company had deducted the charge payable by the said temporary workers whereas making installment to the Temporary workers the Company fizzled and dismissed to dispatch the charge deducted to the Treasury inside the stipulated time. As a matter of fact, there’s a delay in transmitting the assessment deducted to the Central Government. As required beneath section 194C, the assessment had to be credited to the Central Government by 7-5-1989. In any case, the same was paid to the credit of the Central Government as it were on 30-5-1989. The assessment deducted had to be credited to the Central Government within one week from the final date of the month in which the conclusion was made.


It is the dispute of the applicants/accused that they are not the foremost officers of the said Company Charged No. 1. They are as it were the non-executive Chiefs of the Company Charged No. 2. L.K. Khosla is the Chairman and Overseeing Executive and Charged No. 8 Yogesh Khosla is the whole-time Executive of the said Company and subsequently, the risk for deducting income tax and crediting to the Central Government is that of Charged Nos. 2, 8 and the Company, Denounced No. 1. It is additionally fought that no-take note was given by the Commissioner of Wage Charge to the applicant/accused earlier to his giving endorsement to indict the denounced beneath segment 279(1) of the Act. Standards of characteristic equity require that the take note got to have been given to the candidates by the Commissioner sometime recently agreeing to endorse.

The aforementioned entries were made by the candidates sometime recently the learned Judge at the time of hearing their application for release. In any case, the learned Judge rejected the said dispute by a talking arrangement. The learned Advocate, Mr. Ranina for the applicants/accused has submitted that the candidates being non-executive Executives are not concerned with the day-to-day undertakings of the Company which are looked after by the Overseeing Chief and whole-time Chief. As a matter of fact, no authoritative duties were carried by the candidates. Besides, candidates Nos. 1 and 3 are too honing Advocates and, thus, they cannot by law act as full-time Executives. They might as it acted as non-executive Chiefs not working out any regulatory powers or performing any organization obligations.

Dependence is set on sections 194C(1), 2(35), 204, and 279 of the Income Tax Act which cast an obligation on the company and its foremost officers for making installment of the sums deducted to the credit of the Central Government. Section 194C (1) makes the company/accused No. 1 mindful for making installment of sum deducted from the temporary workers and crediting it to the Central Government. Section 204(iii) states that people capable of crediting the said sum are the Company itself and the Foremost Officer of the said Company. In order to draw in the risk of the candidates for making the installment to the Central Government it was fundamental for the respondents to appear that the candidates were the Foremost Officers of the said Company. Dependence is set on section 2(35) of the Pay Assess Act which states who is the Vital Officer and makes it compulsory on the portion of the surveying officer to serve to take note of the said Officer of the Company of his deliberate to treat him as the him as the Principal Officer of the Company.

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It is submitted that within the showcase no take note as such was served upon the candidates by the evaluating officer unveiling his purpose of treating the applicants/Directors as Foremost Officers of said Company. 

It is further argued that within the complaint recorded by the Commissioner it was not sufficient for the complainant just to state that the accused/directors are in charge and capable of the day-to-day administration of the Company. What is required is that there must be an amendment regarding the nature of the post and its obligations and it must be demonstrated within the complaint, how the Chief is in charge of and capacity for the conduct of commerce of the Company. Within the case of M.A. Unneerikutty v. Dy. CIT (1996) 218 ITR 606 (Ker) Kerala High Court watched as takes after:

“By ideals of section 2(35) of the Act, accomplices don’t come inside the definition of a foremost officer unless the Income Tax Officer had served to take note of his intention to treat them or any one of them as the vital officer of the firm associated with the administration or organization. It appears fundamental that the complainant must affirm and appear by a few worthy materials that the accomplices concerned were in charge of and mindful for the conduct of the commerce of the firm to form them too vicariously dependable together with it. An insignificant allegation to that impact will not. be adequate. There ought to be sound materials to appear their dynamic association within the conduct and administration of the trade of the firm. Briefly stating that they were in charge of and capacity for the conduct of the trade of the firm nothing had been specified within the complaints either almost their part or as to the degree of their risk, which ought to not have been cleared out to be gathered. At any rate, the charges appear to be deficient to form them at risk for the condemned act for which may be the firm and the central officer, on the off chance that any, alone would be at risk.”

The learned Officer in dismissing the application for release has watched that unless and until the indictment has been given an opportunity to lead prove, it cannot be decided at the organize earlier to the surrounding of the charge as to whether blamed 4 to 7 candidates in this were not in charge of the conduct of the trade of the company, and appropriately, held that the specialist alluded to by the candidates viz. Shital N. Shah v. ITO (1991) 188 ITR 376 (Frantic) cannot be depended upon. Within the said case the Madras High Court watched:

“In the event that the payer could be a company, the company itself counting the central officer thereof will be the ‘person capable for paying” Section 2(35) indicates that the Central Officer with reference to a Company would be any individual on whom the Income Tax Officer has served a take note of his deliberate of treating him as Vital Officer. As a matter of fact no such note was served upon the candidates. In spite of the said observations of the Madras High Court within the case of Shital N. Shah, the learned Metropolitan Judge has held that unless opportunity to the indictment is given to lead prove to substantiate or to demonstrate that the charged Nos. 4 to 7 were in charge and dependable for the conduct of the trade of the charged No. 1 Company, this resistance cannot be taken by the blamed at this organize but the denounced can raise this point at the time of surrounding of charge.

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It must be reasonably expressed that at the time of hearing of the said application for release, the consideration of the court was not drawn to the case of M. A. Unneerikutty, Kerala High Court clearly states that it is vital that the complainant must lead and appear a few worthy materials that the accomplices were in charge of and capacity for the conduct of the commerce of the firm. To form them too vicariously dependable together with it. A simple charge to that effect will not be adequate. There ought to be valid fabric to appear their dynamic inclusion within the conduct and administration of the commerce of the firm.

The complaint recorded by the Commissioner states that accused Nos. 2 to 9 at the fabric time were in charge of and mindful to denounced No. 1 for the conduct of its trade and, thus, lawfully at risk beneath section 194C (1) perused with section 204 of the said Act to deduct income-tax and to pay the charge so deducted to the credit of the Central Government inside one week from the final date of the month in which the derivation is made. Separated from the averment that accused/applicants were in charge of and dependable to the Company for the conduct of its commerce there’s no fabric at all which prima facie appears that the applicants/accused were in reality in charge of the issues of the Company and mindful for the conduct of its trade and day-to-day issues.

Unless the complaint unveiled a prima facie case against the applicants/accused of their risk and commitment as Foremost Officers within the day-to-day issues of the Company as Executives of the Company beneath section 278B, the candidates cannot be arraigned for the offenses committed by the Company. Within the nonattendance of any fabric within the complaint itself prima facie uncovering obligation of the blamed for the running of the day-to-day undertakings of the Company prepare may not have been issued against them. The candidates cannot be made to experience the trial of a trial unless it can be prima facie appeared that they are lawfully at risk for the disappointment of the Company in paying the sum deducted to the credit of the Company. Something else, it would be a tragedy of justice to arraign them and inquire them to demonstrate that the offense is committed without their information. The Supreme Court within the case of Pretense Sundar v. State of Haryana Discuss 1989 SC 1982 held as takes after:

“… It would be a tragedy of equity to arraign all accomplices and inquire them to demonstrate beneath the proviso to sub-section (1) that the offense was committed without their information. It is noteworthy to note that the commitment for the denounced to demonstrate beneath the proviso that the offense took put without his information or that he worked out all due perseverance to avoid such offense emerges as it were when the arraignment builds up that the imperative condition specified in sub-section (1) is set up. The imperative condition is that the accomplice was mindful of carrying on the trade and was amid the important time in charge of the trade. Within the nonappearance of any such proof, no accomplice can be convicted….” 

In the light of the over discourse, the application will have to be permitted. The revealed arrangement dated 30-11-1996 is set aside. The candidates stand released in case Nos. 248-S to 251-S of 1993.