Allowed

Sanghi Industries Ltd. and Another v. the Deputy Commissioner of It.,Rep.,Spl Pp

Telangana HC22 Sept 2023CRLP/8634/2016

Case brief

AI extract

What is this about?

The High Court quashed criminal proceedings against petitioners (company and directors) for alleged tax evasion under the Income Tax Act. The court held that vicarious liability is not applicable as the petitioner was a non-executive director without active role, and tax was paid before the complaint, negating willful evasion.

What did the court decide?

Criminal proceedings in C.C. No. 108 of 2016 against the petitioners/Accused are quashed.

Sanghi Industries Ltd. and Another Vs the Deputy… — Cheque Dishonour | Telangana HC (2023)

¶1

13251 |

¶2

¶3

IN THE HIGH COURT FOR THE^STATE OF^TELANGANA AT HYDERABAD

¶4

FRIDAY, THE TWENTY SECOND DAY OF SEPTEMBER TWO THOUSAND AND TWENTY^THREE

¶5

PRESENT

¶6

THE HONOURABLE SRI JUSTICE K.SURENDER

¶7

CRIMINAL PETITIO N Nos.: 8634 AND^{12664OF 2016}

¶8

CRIM INAL PETITION No.: 8634 OF²⁰¹⁶

¶9

Between:

¶10

Sanghi lndustries Ltd, Having^{registeredofficeat Sanghi Nagar, Koheda} Village, Hayath Nagar tr,4andal, Ranga Reddy District,^{repby its lvlanaging} Director, Sri.Ravi Sanghi.

¶11

Ravi Sanghi, S/o Sri Ramsharan Sanghi,^{Koheda Village, HayathNagar} lr/andal, Ranga Reddy District,^Telangana.

¶12

...PETITIONERSlAl and 2 in CC.No.108/2016

¶13

AND l

¶14

The Deputy Commissioner of^{lT., Circle- 3(1), 7th Ftbor, 'B' Block,} l.T.Towers, A.C.Guards,^lvlasab Tank,^{Hyderabad, Telangana.Repby} Standing Counsel for l. t. Dept

¶15

...RESPONDENT/ DEFACTO COMPLAINANT in CC 108/2016

¶16

Petition under Section 482 of Cr.P.C^{praying that in thecircumstances} stated in the lvlemorandum of^{Groundsof Criminal Petition,the HighCourtmay} be pleased to^quash the criminal^{proceedingsinitiated in C.C.No. 108 of 2016 on} the file of Special Judge^{for Economic Offences, Nampally, at Hyderabad,} holding it as abuse of^{processof court by invokingthe inherent jurisdiction under} section 482 of the Criminal^{procedure code.}

¶17

CRLPM P. NO:9451 OF 2016

¶18

Petition under Section 482 of Cr.P.C^{praying that in thecircumstances} stated in the Memorandum of Grounds^{of Criminal Petition,theHigh Courtmay} be pleased to stay all further^proceedin os in C.C.No. 108 of 2016 on the file of Special Judge for Economic Offences, 1.{ ampally, at Hyderabad, including^the presence of the petitioners.

¶19

:
''* +
'L.
ii, I
iI:

¶20

¶21

This Petition coming on for hearing, upon perusing the lVemorandum of ,^Gro undslbf Criminal Petition and upon hearing the arguments oi Sri N. Bharat Bab u, Advocate for the Petitioners and Sri Gadi Praveen Kumar, Advocate for the Respbndent. :* j CRIMINAL PETITION NO: 12664 OF 20.16: I Between:., .

¶22

r Sddhir Sanghi, S/o. Late Sri Ram Sharan Sanghi, Sanghi \agar, Koheda Village, Hayath Nagar Mandal, Ranga Reddy Dist. Presen y residing at 534, Road No. 12, Banjara Hills, Hyderabad - 500 034.

¶23

...PETITIONERYACCUSED No.3

¶24

I ...PETITIONERYACCUSED No.3 AND ti: r.it .; Commissioner Of lncome Tax, Circle -3(1), 7th Floor, B Block, l.T ,^{A.C. Guards,} Masab Tank , Hyderabad, Telangana. Represented by th8 Soecial Public Pro sector, Income Tax Department :pi i ..RESPONDENTiCOMPLAINANT **l^i, # r rrF.ft I . 2 Satghi lndustries Ltd., Having its registered office at Sanghi Nagar, Koheda Village, Hayath Nagar [4andal, Ranga Reddy District, represented by its Ivldnaging Director Sri Ravi Sanghi

¶25

Ravi Sanghi, S/o. Sri Ram Sharan Sanghi, Koheda Village, Hayath Nagar N4dndal, Ranga Reddy Districl. Telangana. ! , 't E ...ACCUSED NOS.1 AND 2/ i NOT NECESSI\RY PARTIES

¶26

¶27

Petition under Section 482 of Cr.P.C praying that in the ,:ircumstances stated in the N/emorandum of Grounds of Crimi nal Petition, the High Court may be n order quashing C.C. No. 108 of 201 6 on the lile of Special c Offences, Nampally at Hyderabad

¶28

, .:;
I

¶29

94 0F 2016

¶30

under Section 482 of Cr.P.C praying that in the oircumstances stated^'in e'ltrl emorandum of Grounds of Criminal Petition the High Court may be eased pLss an order staying all further proceedings in C.C. No. 108 of 201 6 ainl i'of Special Judge for Economic Offences, Nampally at Hyderabad, 3.

¶31

Nilemorandum of Sri Ch. Pushyam Advocate for the ent i,,los.2 and 3.

'.1i{:.,:-.i.

)I
J
fl:iiIfl'
i

THE HONOURABLE SRI JUSTICE K.SURENDER

¶36

CRIMINAL PETITION Nos.8634 & L2664 0F 2016

¶37

COMMON ORDER:

¶38

1.. Criminal Petition No.8364 of 2016 is filed by rhe petitioners/A1 and A2 ar-rcl Criminai Perrtion No.12664 of 20'16 is hled by the petitioncr/A3 to quash the proceedings in C.C.No. 108 of 2076 on the fi1e of Special .Iudge for Economic Offences, Nampally, Hyderabad. Both petitions are heard together and disposed by u,av ol this Common Order.

¶39

The petitioners are arral,cd as ,{1 to A3 in the complaint filed by the Deput-t Commissioncr of lnr:ome fix, Cir.te-:(1). The offence alleged is under Se ction 276-C(2.\ &, 278-8 of the Income Tax Act, 196 i

¶40

In the complaint filed, it is alleged that A I is Limited company, A2 and A3 arc ils Directors. A1/company filed return of income terx for the assessmcnt year 20lO-11 on 20.O9.2010 determining its net aggrcgatc liabiiity at Rs.2,56,O3,81O/-. The returns were llicd q,it}-rout payment of tax. The Assistant Commissioner of lncome Tax issued no[ice s on 21.O 1.201 1 under

¶41

¶42

¶43

Section 221{1J and 140,4 of Income^Tax Aci,¹⁹⁶ 1 to tl-rc accused ior non payment cf self assessment^{tax as liled bv} ihe^accl.sed

¶44

in response to the notice,^{repl]'' $} as^{givcn stating thatthe} cornpany was in financial crisis and^{timcu'as soughtlor pa5rmsnl} of tax. The Assistant Commissioner, illcome^{Ta-xpa-ssetlpenaltl'} imposing an amount of Rs.64,00,953/^{. Aggrieveclbv the order,} appeal was filed before the CIT^(A) and^{the penaltv rvas restricted to} Rs.10.00 lakhs. The decision of CIT-A^{u'as challengcd r'vhrchis} pending adjudication before the ITAT.

¶45

Learned Senior Counsel appearing for^{the petitioners u'ould} submit that the entire amount of tax^{s'as in lact u'as paid even} prior to 14.O3.2O11. The complaint^{inquestion u'as filed on} 29.O3.2O16. Further, petitioner/A3^{was non-executive} l)romoter. He resigned as Director frorn¹⁷ .12.20^{11. The petitioner/43 being a} non-executive Director, was not^{responsiblefor the dal'. 1o 6.,} management of the company.

¶46

On the other hand,^learned counsel^{appearing for tl-e Income} Ta;< Department would submit thit thcse^{are question s of fact} which can only be decided during trial. Accordingly,^prayedto dismiss the petitions.

¶47

¶48

The offence allegcd is undcr Section 275^C(.21 of the Income Tax Act, 1961. It an,^per-sor'I rt,illfulll' attempts in any manner whatsoever to affect the^payment of^{ta-:<,penalt;',} cr^{interest under} the Act, he shall be punrshable rvith rigorous^{imprisonment for a} term which shall not be iess tt.ran three months but^whichmay extend to two year-s and shail also iiable to^fine..

¶49

8" Section 278-B of the Income Tax Act, i96 i deals with^the offences by Companies. When Lhe offence is cornrnitted by^the company, every^person 1'ho at ihe time of commission of^offence was in-charge and was rcsponsible lor conciucting^{business of the} ! company as well as the companr shall^{be dcemedto be guilty of the} offence and shall be liable for^punishment.

¶50

The petitioner/A3 is roped in by u'a1' of vicarious liability.^In the complaint, it is not stated as to how this^{petitioner was} responsible for the day today alfairs of the compaly.^{The twin} requirement for making a person responsible^{by way of vicarious} liability is that i) a person should have been^{responsiblefor} conduct of the business of the fompany; ii) and^{companyas a} whole. Unless both^{the ingredients} are satished,^{a person cannotbe} roped in to face criminal^prosecution.

t -,.

--..J

The Hon'ble Supreme Court^{in the casc of Sunil Bharti} Mittal v. Central Bureau of^{InvestigationL helC thata t)irector or} Malaging Director or Chairman of the^{compani coi-tici be meide} accused along rvith the company only^{if there is sr-lfltcienl material} to prove his active role coupled rvith criminal^intent.

¶56

As seen from the^{record,which are annual repolt lor the} years 20O9-2O1.O, 2OlO 2O11 and 2Ol1-2O12 of A1 company. pctitioner/A3 rvas shown as the promoter and^{non cxecutive} Director. Further, the day today management of the^{company ilas} conducted by the Vice-Chairman and Managing^Director

¶57

In the absence of any specific allegation in^{the complaintthat} petitioner/A3 was responsible for the filing of the returns^r.r'ithout payment and was responsible for day to day basis for tltr: conduct of the business and supervision of the affairs of the company,^the petitioner/A3 cannot be criminally proceeded rvith lor the^violation of the said provisions under the Act.

¶58

Learned Senior Counsel relied on the^judgments; i)^judgment in Criminal Miscellaneous No.3669f of 2OO7, dated O3.12.2OO9 of

¶59

'(201s)^{4 scc609}

¶60

¶61

High Court of Patna; iii .Judgmenr, tn Crir.ninai^{O.P (MD)|Jc. 13383} of 2019 and Cr1.M.P.(MD) Nos.8303 and 83C'+ of 2019^dated \2.O3.202O; iii) judgment of Gujarat High Court in the case of Vinaychandra Chandulal Shah r'. State cL Gujaiat⁽ 1995²¹ 3^ITR 307 Guj) and iv) order of the Income^'la-x Appeilate Tribunai in^iTA Nos.122 &,834lHYD/20 16, dated 01.10.2C19

¶62

In ali the^judgments, it^r.r'a s ftrund that uniess^{the prcsecution} establishes that the returns wcre filed it'ith an intention to evade tax,^proceedings cannot be continued

¶63

In the present case, the entirc ra-ri liable "vas paid before 14"O3.2011, even prior to lodging of the complarnt on 28.03.20^11. The said payment is not disputed by the prosecution. Sub-section 2 of Section 276C would be attr:rcted onll' '"r'hen^{a person} willfully attempts in any manner r.l,hatsoever to el'ade the^payment of^any tax, penalty or interest under the Act anci^{not otherwise. In viewof} the payment being made by the petitioners even^{before the lodging} the complaint after receiving the notice, it cannot^{be said that there} was any willful evasion. Furthe6o the ta-.< was^accepted by^the department without any reserva^t ion.

¶64

\ .. i--

¶65

¶66

iir^i,he resuit, thc proceeriings against petitronersirrl to A.3 ir.r C.C.No. 108 oi 2A16 on the irle of Special Judge [or Economic Offer-rces, Narnl:aliy, Hvderabaci, are hereby quashed.

¶67

Accordingl,v, both the Criminal petitrons arc :rllorve<i Consequently, miscellaneous applications pending, if anr,, sltarll

¶68

stand ciosed

¶69

Sd/-,.V.S.PRASAD ASSISTANT REGISTRARREGISTRAR //rRUE GoPY// GoPY// (ih

¶70

,:.::.
ASSISTANT REGISTRARREGISTRAR
//rRUE GoPY// GoPY// (ih
I .1. $ i
a
t II I j sECtloN oFFlcERoFFlcER
Ir &1t To ;tl Ii
: ,.i., 1. Thb Sipecial Judge for Economic Offences Nampally at Hyderabad'
z. 'orfb CC to Sri N. Bharat Babu, Advocate [OPUC]
';
e. lorYe CC to Sd Gadi Praveen Kumar (Dy. Solicitor General Of lrdia) [OPUC]
4.rorfe CC to Sri J.V. Prasad, Advocate[OPUC]
CC to Sri Ch. Pushyam Kiran, Advocate[OPUC]
'. .t. o.' CD Copie6 ';
plp
,a
t.t:
J 1.ItI:I
;n 1: I
lrl aI
i
r'{
1
i

¶71

sECtloN oFFlcERoFFlcER

¶72

i"ltr!:3:Il,'aEBEt1t-

¶73

':l'-'::l: i
t
... ,j .,..
,'r,.' {fr}'
H G URT;:
ia
1; .:
':I "t
Ftt D 210912023
,t
i
l
t
1:
il
'i
'.1 ...l.,,t
' '.1 $
tr ;b:
({. i
coM N ER
f: iii:{,
-
CR .8634 and 12664 of 2016'
I
't i- a .
:
III
,.,. ' .J-: It
I
,i
,i
OTH ...:
l,
jl , i
l , ,,:l
l :,',.di:,
: i: r:i' I
.:,: .4,.'
t, n
:
...1 . .1. i::.
I
i i'
,i'4.'lt r
';,',.SS

¶74

ti
/,'
\i,! tfsi
i',. IJ

Sanghi Industries Ltd. and Another v. the Deputy Commissioner of It.,Rep.,Spl Pp

Case brief

What is this about?

What did the court decide?

Sanghi Industries Ltd. and Another v. the Deputy Commissioner of It.,Rep.,Spl Pp

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Smt Vijaya Devi Mamidi Vs the State of Telangana.,Rep.,Pp and Another

Smt Chittaluri Dhanalakshmi Vs State of a.P., Rep by P.P and Another

Yousufunnisa Begum and 3 Others Vs the State of Telangana, Rep by P.P and Another

Repalle alias Repalle Thrilochan Rao Vs Katlakunta Pedda Gangaram

Repalle @ Repalle Thrilochan Rao (died on 07.02.2022) Vs Katlakunta Pedda Gangaram

Repalle @ Reballe Thrilochan Rao Vs Katlakunta Pedda Gangaram