Karnataka HC Restores Criminal Proceedings against Director in TDS Default u/s 276B, Overturns Trial Court Discharge [Read Order]
The High Court noted that the trial court’s finding that there was no material against accused Nos.2 to 6 regarding their role in daily affairs had already been set aside by the coordinate bench in respect of the Managing Director. The same was applied here.
The Karnataka High Court has restored criminal proceedings against a company director for alleged failure to deposit Tax Deducted at Source (TDS) under Income tax act, 1961 within the prescribed time.
The court set aside a trial court order that discharged him from prosecution under Section 276B of the Income Tax Act.
As per the facts, a criminal revision petition was filed by the IncomeTax Department challenging the order of the Special Court for Economic Offences, Bengaluru, which had discharged multiple accused directors, including the respondent.
The matter was related to a prosecution relating to TDS default by the company. The complaint had been filed against the company and its key officers alleging commission of offence punishable under Section 276B for non-remittance of TDS.
Before the High Court, the Department argued that the trial court had erred in discharging accused directors on the ground that there was no evidence to show they were in charge of and responsible for day-to-day affairs of the company.
It was pointed out that in a connected revision case relating to the Managing Director (accused No.2), a coordinate bench of the High Court had already set aside a similar discharge order and revived prosecution.
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The Income Tax Department further contended that the reasoning taken by the trial court was common for all directors and once that reasoning had been overturned for the Managing Director, the same could not survive for the other discharged directors.
According to the respondent director - the 6th accused defended the discharge by contending that he was only an operational director and not involved in the daily management of the company. He said that in such circumstances, he could not be held vicariously liable for the company’s TDS default.
The High Court, after hearing both sides, noted that the trial court’s finding that there was no material against accused Nos.2 to 6 regarding their role in daily affairs had already been set aside by the coordinate bench in respect of the Managing Director.
The court used the same reasoning to decide the same matter as well. Therefore, the bench of Justice Vishwajith Shetty allowed the criminal revision petition filed by the income tax department and set aside the trial court order.
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