Sakthi and Co. and anr. Vs. Income-tax Officer (Hqrs.) - Court Judgment

Pratap Singh, J.

1. The accused Nos. 1 and 2 in E.O.C.C. Nos. 247 to 257 of 1988 on the file of the Additional Chief Metropolitan Magistrate (H. C. I.), Egmore, Madras, have filed these petitions under Section 482, Criminal Procedure Code, praying to call for the records in the aforesaid cases and quash the same.

2. In E. O. C. C. No. 247 of 1988, the respondent has filed the complaint against the petitioners arraying them as accused Nos. 1 and 2 under Section 276B of the Income-tax Act, 1961, for failure to deduct income-tax at source from the interest paid to the creditors under Section 194A of the Income-tax Act, 1961, during the financial year ended on March 31, 1983. The allegations in it are briefly as follows :

The Commissioner of Income-tax has authorised under Section 279(1) of the Income-tax Act, 1961, the preferring of this complaint for theoffences under Section 276B of the Income-tax Act, 1961, read with Section 278B of the Income-tax Act, 1961.

3. The first accused is a registered firm of which the second accused is the managing partner. He is the person responsible for the conduct of the business of the first accused firm which paid Rs. 50,784.95 towards interest to City Milk Distributors Private Limited for the financial year ended March 31, 1983, from which it failed to deduct income-tax at source as per the provisions of Section 194A of the Income-tax Act, 1961, of Rs. 5,078 from Rs. 50,784.95. As such, the first accused has committed an offence punishable under Section 276B of the Income-tax Act, 1961. The first accused is a firm and the second accused who is the managing partner and is in charge of and responsible to the firm for the conduct of the business of the firm are equally punishable under Section 276B of the Income-tax Act, read with Section 278B of the said Act. Hence, the complaint.

4. E. O. C. C. No. 248 of 1988 to E. O. C. C. No. 257 of 1988 are on similar allegations for their failure to deduct income-tax at source while interest was paid to Shri Surendran, Devi Family Trust, C. Ravindran and Co., Karthik Transports, C. Ravindran, C. Rajalakshmi, C. Surendran and Co., C. Rajendran, C. Surendran and City Milk Distributors Private Limited, respectively.

5. Mr. K. Ramagopal, learned counsel appearing for the petitioners, would contend that Section 194A of the Income-tax Act (which I shall hereafter refer to as 'the Act'), provides that at the time of payment of interest, income-tax shall be deducted at the rates in force and that failure to deduct the same was made punishable under the erstwhile Section 276B and in respect of companies under Section 278B. He would further contend that, after the amendment of the Act, which came into force on April 1, 1989, failure to deduct income-tax at the time of payment of interest is not made an offence punishable under the new Section 276B but it is made liable for penalty by the Deputy Commissioner of Income-tax under Section 271C. He would further contend that after the amendment, which came into force on April 1, 1989, failure to deduct income-tax at the time of payment of interest is not liable to be punished by a Magistrate and a substantive sentence cannot be imposed and only a penalty by the Deputy Commissioner can be imposed and thus there is a change of the authority regarding infliction of penalty and there is a change with regard to the mode of punishment. He would further contend that when there is such a change, even with regard to pendingmatters, the earlier provisions must be deemed to have been totally repealed and hence all these prosecutions are liable to be quashed. Per contra, Mr. Ramasami K., learned counsel appearing for the respondent, would contend that if the contention put forth by Mr, Ramagopal is accepted, it would lead to an anomalous situation where the petitioners would neither be liable to be punished under the provisions then existing at the time of launching the prosecution nor would they be liable to be punished under the new Section 271C which came into effect during the pendency of the prosecution.

6. Mr. Ramasami K., learned counsel appearing for the respondent, straightaway took me to the ruling rendered by my learned brother Justice Arunachalam in Criminal Miscellaneous Petition No. 7552 of 1985 and batch of cases (C.A. Baloo v. Union of India : [1992]197ITR545(Mad) ), where an identical contention was raised by the accused in those cases and such a contention did not find acceptance by Justice Arunachalam. In that batch of cases, on the allegations made in the complaint that the accused were liable to be punished under the old Section 276DD which provided for punishment for failure to comply with the provisions of Section 269SS, complaints were filed. The punishment was imprisonment for a term which may extend to two years and also fine equal to the amount of such loan or deposit. The section was deleted by virtue of the Amendment Act, 1989. In its place, Section 271D became applicable. As per Section 271D, if a person takes or accepts any loan or deposit in contravention of the provisions of Section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. The Deputy Commissioner of Income-tax is the authority to impose penalty. In the above backdrop, the contention that was put forth before Justice Arunachalam was that Section 271D, as it stands now, imposes only penalty for violation of Section 269SS and prosecution for such violation has been done away with and the authority to impose penalty will be the Deputy Commissioner of Income-tax and, therefore, after the introduction of Section 271D, prosecution can no longer be maintained especially when the earlier Section 276DD had merely been repealed without any saving clause to sustain the pending prosecutions. In that batch of cases also, Mr. K. Ramasami had appeared for the respondent and he had put forth the contention that, after April 1, 1989, prosecution for violation of Section 269SS may not be available but pending prosecutions cannot be deemed to have been obliterated and that Sections 6 and 6A of the General Clauses Act would save pending prosecutions. The learned judge has pointed out that acceptance of the arguments oflearned counsel for the petitioner would result in a rare and strange position and the petitioners will not be liable to pay any penalty under Section 271D and, prior to that date, when that law was not in the statute book, they cannot be proceeded against. The learned judge has laid down as follows (at page 548) :

'... If the prosecution also cannot be launched under the then existing Section 276DD of the Act, the resultant position would be that there can be neither a prosecution nor a penalty proceeding against these petitioners though violation of Section 269SS has been alleged and the respondent was prepared to substantiate his case by oral and documentary evidence. This certainly could not have been the intention of the Legislature.'

7. I am in total agreement with the observations of Justice Arunachalam. As I have already indicated, the acceptance of such an argument would lead to rather absurd consequences. Even if such contravention is proved by evidence, the petitioners would not be liable at all either under the provisions of the Act which were applicable at the time of launching the prosecution or under the new provisions which came into effect on April 1, 1989. In view of the above, I do not accept the contention put forward by learned counsel for the petitioners. I am clear that the prosecution initiated against the petitioners can definitely survive. From the insertion of the new sections, while omitting the earlier sections referred to above in the Income-tax Act, it is not possible to gather any intention that the Legislature desired that prosecutions which were permissible under Section 276DD of the Act and already initiated before insertion of the new section be erased.

8. Mr. Ramagopal, learned counsel appearing for the petitioners, relied upon the following passage at page 195 of Maxwell on the Interpretation of Statutes :

' A special rule applies to penal statutes. If a later statute again describes an offence created by an earlier one, and affixes a different punishment to it, or varies the procedure applicable, the earlier statute is impliedly repealed by the later.'

9. He also relied upon the following passage which is found at page 390 of the Interpretation of Statutes by Vepa P. Sarathi :

'But by giving a different punishment, for example, a penalty of fine is altered to a penalty of fine for a larger amount, there is an implied repeal of the earlier enactment.

If however there is a variation in the procedure as when a right of appeal is given when none existed before, there is an implied repeal of the earlier statute.'

10. The above passages are not applicable to the facts of this case. Any interpretation of a statute cannot lead to a situation where an accused person against whom the offence is proved is allowed to go scot free without any punishment under the law existing at the time of launching of prosecution or with a penalty which would be the consequence after the amendment of the Act. Hence, I am clear that these propositions regarding interpretation of statutes would not apply to a case like the one before us.

11. In view of the above, the prosecutions will survive and hence all these petitions will have to be necessarily dismissed and shall stand dismissed.