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Vipul Aggarwal vs. Income Tax Office - (High Court of Delhi) (19 Jul 2022)

If there is no sanction, no cognizance of the complaint can be taken by trial Court and complaint cannot be proceeded further


Direct Taxation

The Petitioner has been arrayed as an accused in complaint case which has been filed against him as well as the company ASM Traxim Pvt Ltd. for violation of Section 276-CC read with Section 278-B of the Income Tax Act, 1961 (IT Act). The petition has been filed for the quashing of the said complaint and all proceedings arising therefrom including the order of the ACMM (Special Acts) Central District, directing the framing of charge against the Petitioner and the order passed by the Special Judge dismissing the revision petition preferred by the Petitioner against the said order.

As per the scheme of the Act, before proceeding for prosecution, a notice under Section 142(1)(i) of the IT Act has to be issued. The second requirement is that prosecution could be only with the previous sanction of the appropriate authority under Section 279 of the IT Act. While the Petitioner claims neither condition stands fulfilled in this case, the Respondent claims full and complete adherence to the procedure prescribed. From the record, it is evident that the notice that was served by the Respondent under Section 142(1)(i) in the present case, was admittedly, addressed to the Managing Director/Principal Officer/ ASM Traxim (P) Ltd. The previous notice dated 26th July, 2013, requiring the filing of the return in accordance with the provisions of Section 140 of the Act by 2nd August, 2013, was addressed to the "Principal Officer" of ASM Traxim (P) Ltd.

A "person" could be a person as referred to in Section 278B being "every person" who was in-charge of or was responsible to the company for the conduct of its business. However, that "person" cannot be proceeded against for the offence under Section except with the previous sanction of the Principal Commissioner/appropriate authority. Previous sanction is essential for prosecution. In the absence of sanction, naturally, the "person" cannot be proceeded against in a court of law. If there is no sanction, no cognizance of the complaint can be taken by the Trial Court and the complaint cannot be proceeded further.

The sanction is specifically to institute a criminal complaint against the Company ASM Traxim Pvt Ltd. It is crystal clear that the sanction has been accorded for the prosecution only of the "person" named as the "assessee", namely the Company ASM Traxim Pvt. Ltd. There is no sanction qua the Petitioner, even as a "person" being a director/being responsible to the conduct of the business of the company.

Since the law provides that without sanction under Section 278B of the IT Act, the Department cannot proceed against a person found liable to prosecute him for the offence under Section 276 CC of the IT Act, the present prosecution must fail qua the Petitioner. In the absence of a specific sanction for prosecuting the Petitioner, the learned ACMM could not have taken cognizance of the complaint against him and then framed charge against him. The complaint and all proceedings emanating therefrom, including the impugned orders qua the petitioner stand quashed. Petition allowed.


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