MADHUMILAN SYNTEX LTD. AND ORS. versus UNION OF INDIA & ANR.

Citation: [2007] 4 S.C.R. 378 · Decided: 23-03-2007 · Supreme Court of India · Bench: C.K. THAKKER · Disposal: Dismissed

Judgment (excerpt)

A 
B 
MADHUMILAN SYNTEX LTD. AND ORS. 
v. 
UNION OF INDIA & ANR. 
MARCH 23, 2007 
[C.K. THAKKERAND P. K. BALASUBRAMANYAN, JJ.] 
Constitution of India-Articles 136 & 142-lncome Tax Act, 1961-
Sections 2(20), 2(31), 2(35), 194C, 200, 276B, 278AA, 278B & 279-lncome 
C Tax Rules, 1962-Rule 30-Code of Criminal Procedure, 1973-Section 
245-Failure of assessee--company to deposit Tax Deducted at Source (TDS) 
to the credit of the Central Government within prescribed time-Tax deposited 
with interest subsequently-Show-cause notice issued against the Company 
and its Directors treating them as principal officers under the Act for initiatfon 
of criminal proceedings-Complaint before trial court by Revenue-
D Applications for discharge filed before trial court was rejected-Sessions 
Court and High Court dismissed the appeals-Correctness of-Held, failure 
to deposit TDS amount within prescribed period is a default liable to 
prosecution under the Act-Delayed deposit of tax with interest/penalty does 
not take away the power of the Revenue to initiate criminal proceedings 
enunciated under the Act. 
E 
Revenue issued a show-cause notice as to why prosecution under section 
276B read with section 200 of the Income Tax Act, 1961.should not be initiated 
against appellants-Company and its Directors-for failure to pay Tax 
Deducted at Source (fDS) to the credit of the Central Government within the 
F prescribed time. The appellants replied stating that there was reasonable cause 
for non-payment of the amount within the prescribed period; and that the 
amount ofTDS had been paid along with interest and hence it is not liable to 
prosecution under the Act 
Commissioner of Income T~x granted sanction to prosecute the 
G appellants under section 279 of the Act. Accordingly, a complaint was filed 
against the appellants before trial court. The appellants filed applications 
under section 245 Cr.P.C. before the trial court for discharging them from 
the case contending that the proceedings were initiated with ma/a fide 
intention. The appellants further stated that they could not be treated as 
H 
378 
i' ' 
MADHUMILAN SYNTEX LTD. v. U.0.1. 
379 
'principal officers' under section 2(35) of the Act and that in the complaint it A 
was not shown that they were in charge of and were responsible for the conduct 
of the business of the company. The trial court rejected the applications. The 
Revision Petition filed before Sessions Court was also dismissed. A 
Miscellaneous Criminal Petition filed by the appellants before High Court 
under section 482 Cr.P.C was dismissed for default of appearance. Later an B 
application for restoration filed was allowed, the matter was heard on the same 
day and was dismissed in limine by the High Court. 
In appeal to this Court, the appellants contended that, after allowing the 
restoration application, the High Court erred in insisting the appellant to 
argue the matter on the same day on merits; that the High Court erred in C 
dismissing the Petition in limine without recording any reasons; that there 
was not much delay in depositing TDS and that it had been deposited with 
interest and hence there was no reason to prosecute the Company and/or its 
Directors; that the Company is a legal or juristic person and hence it cannot 
be punished and thereby the Directors or Officers of the Company also cannot 
be punished; that the complaint filed against the appellants is ill-founded or D 
not maintainable; that the appellants 2-4 cannot be said to be 'principal 
officers' under the Act since the complaint does not state that such persons 
are connected with the management and administration of the Company; that . 
a separate notice ought to have been issued before issuance of show-cause 
notice that the Directors are to be treated as Principal Officers under the E 
Act; that, in view of 'reasonable cause' shown by them, their case is squarely 
covered by section 278AA of the Act and hence the proceedings should be 
dropped against them; that since almost two decades have passed after the 
commission of alleged default by them, this Court, by exercising plenary 
powers under Article 136 read with Article 142 of the Constitution, may order 
to drop the proceedings initiated against them. 
F 
The respondents, on the other hand, supported the order passed by the 
Courts below. 
Dismissing the appeal, the Court 
G 
HELD: 1. Appearance of a party or his advocate and prayer for recalling 
an order of dismissal for defa

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