Case: M.R. Pratap Vs. V.M. Muthukrishnan

to file the verified return. He also submitted that according to the newly introduced Sections 278B and 278C (introduced on 1st October, 1975) a director in the case of the company and a karta in the case of a Hindu Undivided Family, can be prosecuted, and, therefore, by virtue of the said new amendments, the legislature in its wisdom has thought it fit to bring the managing director also along with the company as accused person only by this amendment which takes effects from 1st October 1975, and this introduction of the amendment will go in support of the appellants contention that the legislature itself had not, during the relevant period in this case, intended the managing director to be included and so the managing director cannot be prosecuted at all in this case. If was urged that if the contention of the prosecution that the managing director can be prosecuted before 1st October, 1975 is correct, then there was no necessity for this amendment to fill up the lacuna, and, therefore, before 1st October, 1975, in view of Section 279(1A), the assessee alone can be prosecuted10. Learned counsel for the respondent in reply to this argument submitted that the main decision of the Supreme Court in Kapurchands case, 1969 AIR(SC) 682) (Supra) that the karta cannot be detained in a civil jail, rests on Section 222 which specifically uses the word "assessee" and, therefore, the conclusion arrived at in that case, while dealing with Section 222, cannot be availed of by the appellant in this case. Before the learned single Judge reliance was also placed on the decision of the Madras High Court in Inspecting Assistant Commissioner of Income-tax v. Chotabhai Javerbhai 1941 (9) ITR 604 : 1941 AIR(Mad) 941), wherein Horwill, J., while dealing with Section 52 of the Indian Income-tax Act, 1922 (corresponding to Section 277 of the 1961 Act), has held that the word "person" in that section does not necessarily mean the assessee and that it must be given its ordinary dictionary meaning and that it includes a person duly authorised 11. It appears that in view of the dictum of this Court in Kapurchands case, 1969 AIR(SC) 682)(Supra) we are unable to accept the arguments advanced by the learned counsel for the appellant. On the other hand we are of the view that the appellant cannot escape on the plea that the word "person" used in Section 277 refers only to an assessee but not the person who has made the verification on behalf of the said assessee 12. It has been found by the learned single Judge that the verification of the return which was signed by the appellant was signed by him in his capacity as principal officer. Learned counsel for the appellant submitted that Parliament has now, by the Taxation Laws (Amendment) Act of 1975, which took effect from 1st April, 1976, removed the expression "the principal officer" occurring in Section 140(c), insofar as it related to a company, and instead has substituted the words "the managing director ... or, where there is no managing director, by any Director thereof". It was thus contended that the substitution of the words "managing director" for the term "principal officer" is an indication to show that the expression "principal officer" will not relate to the managing director and that is why the above substitution has now taken place 13. We are afraid we cannot also agree with this submission of the learned counsel for the appellant. Section 2(35) of the Act defines the term "principal officer" and Section 2(20) of the Act defines the term "director". Section 2, sub-section (24) of the Companies Act defines the word "manager". At the relevant time Section 197A of the Companies Act provided that no company shall appoint or employ at the same time more than one of the following categories of managerial personnel, viz., the managing director and the manager. In the present case the appellant admittedly was the Managing Director of the Company and he was thus the principal officer thereof. Rule 12(1) of the Income-Tax Rules states that the return of income shall, in the case of a company, be in Form No. 1 and be verified in the manner indicated therein. In view of Section 139 read with Section 140(c) of the Act the return has to be signed by the principal officer of the company. A statutory obligation is cast on the principal officer to sign the tax returns. The substitution of the words made under the new Amendment Act will not in any way alter the position with regard to the operation of the provisions of the Income-Tax Act as against a managing director of a company when he has signed the return of the company in such capacity. The effect of the amended Section 140(c) of the Act is that the companys return of income should be signed only by the managing director or by any director, when there is no managing director, and not by the secretary or the treasurer, who are however included within the meaning of "principal officer" under Section 2(35) of the Act. By the introduction of Section 278B by the Taxation Laws (Amendment) Act of 1975, with effect from 1st October, 1975, it is enacted that where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The effect of the new section is to make every person connected with the affairs of the company, apart from the managing director who has signed the return, liable to be proceeded against and punished14. We are in complete agreement with the reasonings and conclusion of the High Court. No other point was urged.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We are afraid we cannot also agree with this submission of the learned counsel for the appellant. Section 2(35) of the Act defines the term "principal officer" and Section 2(20) of the Act defines the term "director". Section 2, sub-section (24) of the Companies Act defines the word "manager". At the relevant time Section 197A of the Companies Act provided that no company shall appoint or employ at the same time more than one of the following categories of managerial personnel, viz., the managing director and the manager. In the present case the appellant admittedly was the Managing Director of the Company and he was thus the principal officer thereof. Rule 12(1) of the Income-Tax Rules states that the return of income shall, in the case of a company, be in Form No. 1 and be verified in the manner indicated therein. In view of Section 139 read with Section 140(c) of the Act the return has to be signed by the principal officer of the company. A statutory obligation is cast on the principal officer to sign the tax returns. The substitution of the words made under the new Amendment Act will not in any way alter the position with regard to the operation of the provisions of the Income-Tax Act as against a managing director of a company when he has signed the return of the company in such capacity. The effect of the amended Section 140(c) of the Act is that the companys return of income should be signed only by the managing director or by any director, when there is no managing director, and not by the secretary or the treasurer, who are however included within the meaning of "principal officer" under Section 2(35) of the Act. By the introduction of Section 278B by the Taxation Laws (Amendment) Act of 1975, with effect from 1st October, 1975, it is enacted that where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The effect of the new section is to make every person connected with the affairs of the company, apart from the managing director who has signed the return, liable to be proceeded against and punished14. We are in complete agreement with the reasonings and conclusion of the High Court. No other point was urged.