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

2. The first accused, Sh. M. R. Pratap, who was the Managing Director of the Company Rayala Corporation Private Ltd., is the appellant in the present appeals. The respondent/complainant is the Income-tax Officer, Central Circle III, Madras. The appellant is the first accused along with the second accused. A complaint was filed before the Chief Presidency Magistrate purporting to be under Sections 277 and 278 of the Income-tax Act, 1961 (hereinafter referred to as the Act) and Sections 120-B and 193 of the Indian Penal Code, relating to an offence said to have been committed during the assessment yearAccording to the complaint the first accused was the Managing Director of the Rayala Corporation Private Ltd., (hereinafter referred to as the Company) and the second accused was the Chief Accountant of the said Company. The company was an assessee under the Act. The return of the income of the company for the assessment year 1965-66 dated 17th November, 1976 was delivered to the respondent on 18th November, 1965 showing a total income of Rs. 21, 36, 785/- for the accounting year ended 31st March, 1965. The return so submitted was verified and signed by the first accused - the appellant herein. The accompanying statements were signed by the second accused. According to the complaint, as a result of a search at the premises of the company and the residence of both the accused and others, made under Section 132 of the Act, it was discovered that the return of income and the statements accompanying the said return were deliberately false, being less than the true income by more than Rs. 6 lakhs and the expenditure shown in the statements had been obviously inflated by at least Rs. 2, 69, 765/-. The complaint charged the appellant with making wilfully and knowingly false verification of the companys return of income and thereby committing an offence punishable under Section 277 of the Act. Besides this, the first and the second accused were charged with other offences also. However, for the purpose of the present appeals, we are not concerned with the rest of the charges made in theThe appellant herein filed a miscellaneous petition before the Magistrate as to be maintainability of the complaint against him in his capacity as the Managing Director. The Magistrate dismissed the miscellaneous petition by order dated 28th November, 1973. Against the said order the appellant filed a revision petition. The appellant also filed another petition being Crl. Misc. Petition No. 4813 of 1976 under Section 482 of the Code of Criminal Procedure praying to quash the complaint and the proceedings in pursuanceThe learned single Judge dismissed both the revision petitions as well as the petition under Section 482 of the Code of Criminal Procedure and upheld the prosecution of theNumerous contentions were urged before the learned single Judge but before this Court really one contentions was urged, namely - that the word "person" occurring in Section 277 of the Act would relate only to as assessee and not to any person other than the assessee and, therefore, the appellant who signed the return of income on behalf of the company in the capacity of Managing Director, cannot be included within the definition of the word "person" as used in Section 277 and, consequently, if a person other than the assessee is prosecuted, it would be avoid, because Section 277 contemplates an offence by an assessee against whom penalty is impossible and not by any person other than the assessee, viz. the Company

Court's reasoning:
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.