Former Director Not Liable for Company’s ITR Filing Default: Madras HC Quashes Criminal Case against Gautham Vasudev Menon [Read Order]

The Madras High Court has quashed criminal proceedings initiated against filmmaker Gautham Vasudev Menon in a prosecution relating to failure of a company to file income tax returns, holding the former director cannot be prosecuted for the company’s ITR (Income tax returns) filing default.

The case was initiated by the Income Tax Department against Photon Kathaas Production Pvt. Ltd. and its directors for alleged failure to file income tax returns for the Assessment Year 2013-14.

According to the department, the company had earned taxable income during the financial year 2012-13, including professional income, contractual income, and cash deposits, but failed to file its return of income within the due date prescribed under Section 139(1) of the Income Tax Act, 1961.

After issuance of a show cause notice and alleged non-response by the company, the department initiated prosecution under Section 276CC of the Income Tax Act for failure to furnish returns of income.

Gautham Vasudev Menon was arrayed as Accused No. 3 in the complaint on the ground that he had been one of the directors of the company.

Before the High Court, the petitioner, Gautham Vasudev Menon contended that he had ceased to be a director long before the relevant assessment year. He submitted that although he had been inducted as director on June 1, 2010, he had resigned from the company with effect from May 2, 2011.

He also submitted Form No. 32 which was filed before the Registrar of Companies (ROC), with certified records issued by the ROC.

The Income Tax Department opposed the petition, arguing that the issue should be decided only during trial and that the documents produced by the petitioner required formal proof before the trial court.

The department further argued that merely filing Form No. 32 before the ROC would not automatically absolve the petitioner from liability under Section 278B of the Income Tax Act, which deals with offences committed by companies and persons in charge of their affairs.

However, Justice G.K. Ilanthiraiyan rejected the department’s arguments and observed that the ROC documents produced by the petitioner were undisputed public records and clearly established that he had resigned from the company nearly two years before the relevant assessment year.

The High Court said that since the alleged offence related to Assessment Year 2013-14, the petitioner was not a director of the company during the relevant period when the default allegedly occurred. Therefore, he could not be treated as a person responsible for the conduct of the company’s business at the time of commission of the offence.

Therefore, the Court quashed the criminal proceedings insofar as they related to Gautham Vasudev Menon. However, the Court clarified that the prosecution against the company and the remaining accused directors would continue independently before the trial court.

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