IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 06TH DAY OF SEPTEMBER 2019 BEFORE HON BLE MR. JUSTICE JOHN MICHAEL CUNHA WRIT PETITION NO.47514 OF 2017(GM-RES) BETWEEN: 1. DR VILOO PATELL MANAGING DIRECTOR M/S AVESTHAGEN LIMITED COMPANY INCORPORATED UNDER COMPANIES ACT, 1956 HAVING ITS NO 43/39, 4TH FLOOR WARD NO 91, PROMENADE ROAD, SECOND CROSS, BANGALORE KA 560005 2. M/S AVESTHAGEN LIMITED COMPANY INCORPORATED UNDER COMPANIES ACT 1956 HAVING ITS NO 43/39, 4TH FLOOR WARD NO 91, PROMENADE ROAD, SECOND CROSS BANGALORE KA 560005 REPRESENTED BY ITS MANAGING DIRECTOR DR VILLOO PATELL ... PETITIONERS (BY SRI: HARIKRISHNA S HOLLA, ADVOCATE) AND INCOME TAX DEPARTMENT BY DEPUTY COMMISSIONER OF INCOME TAX TDS CIRCLE -1(1) HMT BHAVAN 2 BANGALORE - 560022 ... RESPONDENT (BY SRI: K V ARAVIND A/W SRI: DILIP.M., ADVOCATES) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND 227 OF CONSTITUTION OF INDIA READ WITH SECTION 482 OF CODE OF CIVIL PROCEDURE PRAYING TO CALL FOR RECORDS ON FILE OF SPECIAL JUDGE, ECONOMIC OFFENCES, BANGALORE AND SET ASIDE ORDER DTD 05.04.2016 TAKING COGNIZANCE OF COMPLAINT IN CC.NO.95/2016 VIDE ANNX-G. THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN B GROUP THIS DAY, COURT MADE FOLLOWING:- ORDER Heard learned counsel for petitioners and learned Standing Counsel for respondent Income Tax Department. Petitioners are sought to be prosecuted under section 276- B of Income Tax Act, 1961 (hereinafter referred to as Act ) for failure to remit tax deducted at source during financial year 2010-2011 and 2011-2012 amounting to Rs.1,57,85,655/- and Rs.1,35,54,167/- respectively. 2. impugned action is assailed by petitioners on following grounds:- 3 First, show-cause notice is issued in respect of nine companies whereas prosecution is launched only against petitioners which is legally untenable. Company is juristic person and in terms of section 2(35) of Act, notice is required to be issued to each of companies individually and not composite notice as done in instant case. Hence, prosecution launched against petitioners suffers from basic vice. Second, show cause notice was issued only to petitioner No.1 namely Managing Director and not to Company petitioner No.2 and in that view also, prosecution launched against petitioners are defective and contrary to section 276 of Act. Third, impugned sanction in instant case has been accorded without application of mind. Tax deducted at source by petitioners was remitted much earlier to issuance of sanction order, which fact is not reflected in sanction order indicating that sanction order has been issued without 4 application of mind and on this score also, impugned proceedings are liable to be quashed. Lastly, it is contended that section provides for mandatory term of imprisonment coupled with fine in respect of offences committed by company. As held by Hon ble Supreme Court in case of ASSISTANT COMMISSIONER, ASSESSMENT-II, BANGALORE & Others vs. M/s.VELLIAPPA TEXTILES LTD., & Another, AIR 2004 SC 86, no criminal prosecution could be sustained for offences under sections 276, 277 and 278 of Act when offences are rendered punishable with fine and imprisonment. 3. None of contentions urged by learned counsel for petitioners merit acceptance. Insofar as contention based on Annexure- B is concerned, said notice was not issued as show cause notice preceding adjudication or prosecution, rather reading of said notice at Annexure- B indicates that it was issued to Dr.Villoo Morawala Patell who was Chairman and Managing Director of Avesthagen & Group companies. Captioned subject of said notice was to keep Managing 5 Director informed and to treat him as Principal Officer of Company. After narrating circumstances of notice, it is stated therein that said notice was issued to convey intention of Department to treat him as Principal Officer of above companies. It is not show cause notice. On other hand, in complaint, it is specifically stated that show cause notice was issued to accused on 14.08.2013. Petitioner has not referred to said document. Therefore, argument of learned counsel for petitioners based on Annexure- B is totally misconceived and cannot be ground to quash proceedings. 4. second contention urged by petitioners is also misconceived for reason that said argument is also built upon Annexure- B . Learned counsel has based his argument on impression that under said intimation, joint notice was issued to all Companies; but it is not so. On other hand, order passed under section 201(1) and 201(1A) of Act (Annexure- E ) makes it evident that order was passed only against petitioner Company and not against all Companies 6 as contended by learned counsel for petitioners. Therefore, even this plea is liable to be rejected. 5. Coming to next contention that sanction order issued for prosecution of petitioners does not reflect application of mind is concerned, I have gone through said sanction order wherein Commissioner of Income Tax/ Sanctioning Authority has narrated facts of case, referred to provisions of law applicable to facts and has observed that opportunity was given to assessee in default to make payment. Para 6 of sanction order dated 15.10.2015 reads as follows:- 6. Opportunity: This office has sent show cause notices dated 02.05.2014, 24.06.2014, 12.08.2014 under section 276B read with section 278B of Income Tax Act, 1961, requiring deductor to show cause why prosecution proceedings should not be initiated for said default of non-remittance of TDS to Central Government Account. Under said circumstances, if any amount was paid pursuant to said show cause notice, proof thereof could have been produced by petitioners so as to avoid criminal prosecution. 7 There is nothing on record to show that remittances made by petitioners have been brought to notice of Central Government. 6. Learned counsel for petitioners has produced copies of communication obtained from Office of Assistant Commissioner of Income Tax (TDS), Circle-I(1), Bangalore along with challan details report for making payments. It reflects that on 10.09.2014 sum of Rs.1,52,675/- and another sum of Rs,1,69,974/- was remitted not by petitioners herein, but by Avestha Gengraine Technologies Private Limited. said remittances do not relate to case in hand. As result, even sanction order does not reflect any errors warranting interference by this Court. Hence, this argument is also rejected. 7. last contention, urged by learned counsel for petitioners is no more res integra in view of Constitution Bench decision of Hon ble Supreme Court in STANDARD CHARTERED BANK vs. DIRECTORATE OF ENFORCEMENT, (2005) 8 145 Taxman 154 (SC). It may be useful to refer to paras 30 to 33 of said judgment which reads thus; 30. contention of appellants is that when offence is punishable with imprisonment and fine, court is not left with any discretion to impose any one of them and consequently company being juristic person cannot be prosecuted for offence for which custodial sentence is mandatory punishment. If custodial sentence is only punishment prescribed for offence, this plea is acceptable, but when custodial sentence and fine are prescribed mode of punishment, court can impose sentence of fine on company which is found guilty as sentence of imprisonment is impossible to be carried out. It is acceptable legal maxim that law does not compel man to do that which cannot possibly be performed [impotentia excusat legem]. This principle can be found in Bennion s Statutory Interpretation 4th Edn. At page 969 All civilized systems of law import principle that lex non cogit imposibilia . As Patternson J. said law compels no 9 impossibility . Bennion discussing about legal impossibility at page 970 states that, If enactment requires what is legally impossible it will be presumed that Parliament intended it to be modified so as to remove impossibility element. This Court applied doctrine of impossibility of performance [Lex non cogit ad impossibilia] in numerous cases [State of Rajasthan v. Shamsher Singh 1985 (Suppl.) SCC 416; Special Reference No.1 of 2002 under Article 143(i) of Constitution of India [2002] 8 SCC 237]. 31. As company cannot be sentenced to imprisonment, court has to resort to punishment of imposition of fine which is also prescribed punishment. As per scheme of various enactments and also Indian Penal Code, mandatory custodial sentence is prescribed for graver offences. If appellants plea is accepted, no company or corporate bodies could be prosecuted for graver offences whereas they could be prosecuted for minor offences as sentence prescribed therein is custodial sentence or fine. We do not think that intention of Legislature is to give complete immunity from 10 prosecution to corporate bodies for these grave offences. offences mentioned under Section 56(1) of FERA Act, 1973, namely those under Section 13, clause (a) of sub-section (1) of section 18; section 18A; clause (a) of sub- section (1) of section 19; sub-section (2) of section 44, for which minimum sentence of six months imprisonment is prescribed, are serious offences and if committed would have serious financial consequences affecting economy of Country. All those offences could be committed by company or corporate bodies. We do not think that legislative intent is not to prosecute companies for these serious offences, if these offences involve amount or value of more than one lakh, and that they could be prosecuted only when offences involve amount or value less than Rupees one lakh. 32. As company cannot be sentenced to imprisonment, court cannot impose that punishment, but when imprisonment and fine is prescribed punishment court can impose punishment of fine which could be enforced against company. Such discretion is to be read into section so far 11 as juristic person is concerned. Of course, court cannot exercise same discretion as regards natural person. Then court would not be passing sentence in accordance with law. As regards company, court can always impose sentence of fine and sentence of imprisonment can be ignored as it is impossible to be carried out in respect of company. This appears to be intention of Legislature and we find no difficulty in construing statute in such way. We do not think that there is blanket immunity for any company from any prosecution for serious offences merely because prosecution would ultimately entail sentence of mandatory imprisonment. corporate bodies, such as firm or company undertake series of activities that affect life, liberty and property of citizens. Large scale financial irregularities are done by various corporations. corporate vehicle now occupies such large portion of industrial, commercial and sociological sectors that amenability of corporation to criminal law is essential to have peaceful society with stable economy. 12 33. We hold that there is no immunity to companies from prosecution merely because prosecution is in respect of offences for which punishment prescribed is mandatory imprisonment. We overrule views expressed by majority in Velliappa Textiles Ltd. s case (supra) on this point and answer reference accordingly. Various other contentions have been urged in all appeals, including this appeal, they be posted for hearing before appropriate bench. 8. In light of these discussions, I do not find any ground to accede to prayer made in petition. Consequently, petition fails and same is dismissed.s Sd/- JUDGE Bss Viloo Patell / Avesthagen Limited v. Income-tax Department By Deputy Commissioner of Income-tax, TDS Circle-1(1), Bangalore