Supreme Court

Susela Padmavathy Amma vs. Bharti Airtel Limited (Neutral Citation: 2024 INSC 206)

MANU/SC/0202/2024

15.03.2024

Banking

Director of Company can be liable for dishonour of cheque, if he was in charge of day-to-day affairs of the company or a signatory to the cheque

The present appeals challenge the common judgment and order passed by the High Court, whereby the High Court rejected the prayer for quashing of complaint case in connection with the offence punishable under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881 (“the N.I. Act”).

The Appellant submitted that, the Appellant is an aged-lady and was not involved in the day-to-day affairs of the Company. It is submitted that even in the complaint there are no averments that the Appellant was in-charge of day-to-day affairs of the Company. It is further submitted that, the appellant was also not a signatory to the cheque in question. It was only the accused No.2 who was the signatory to the cheque. It is, therefore, submitted that the High Court has grossly erred in not allowing the petition for quashing of criminal complaints qua the appellant.

Merely because a person is a director of a company, it is not necessary that he is aware about the day-today functioning of the company. This Court held that there is no universal rule that, a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in charge of day-to-day affairs of the company or responsible to the affairs of the company. The position of a managing director or a joint managing director in a company may be different. This Court further held that these persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. To escape liability, they will have to prove that when the offence was committed, they had no knowledge of the offence or that they exercised all due diligence to prevent the commission of the offence.

It could thus clearly be seen that this Court has held that, merely reproducing the words of the section without a clear statement of fact as to how and in what manner a director of the company was responsible for the conduct of the business of the company, would not ipso facto make the director vicariously liable.

The only allegation against the present appellant is that the present appellant and the accused No.2 had no intention to pay the dues that they owe to the complainant. It is stated that the 2nd accused and the 3rd accused (appellant herein) are the Directors, promoters of the 1st accused being the Company. It is further averred that the 2nd accused is the authorized signatory, who is in-charge of and responsible for the day-to-day affairs of the Company, i.e., the 1st accused.

There is no averment to the effect that the present appellant is in-charge of and responsible for the day-to-day affairs of the Company. It is also not the case of the respondent that the appellant is either the Managing Director or the Joint Managing Director of the Company. It can thus clearly be seen that the averments made are not sufficient to invoke the provisions of Section 141 of the N.I. Act qua the appellant. The judgment and order passed by the High Court is quashed and set aside. Appeals allowed.

Tags : Cheque dishonour Liability Director

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Income Tax Appellate Tribunal

Shri Gangaparameshwari Uraban Co-operative Credit Society Ltd. Vs. Income-Tax Officer

MANU/IL/0061/2024

15.03.2024

Direct Taxation

For claiming deduction under Section 80P of IT Act, return of income has to be filed within due date specified under Section 139(1) of Act

The assessee is a co-operative credit society, registered under the Karnataka Co-operative Societies Act, 1959. For the assessment year 2018-2019, the return of income was filed declaring ‘Nil' income after claiming deduction under Section 80P of the Act, amounting to Rs.8,65,106. The assessment was completed, wherein the claim of deduction under Section 80P of the Act was denied. The reason for denying the claim of deduction under Section 80P of the Act was that the assessee had not filed its return of income within the due date prescribed under Section 139(1) of the Act.

Aggrieved by the order of assessment denying the claim of deduction under Section 80P of the Act, the assessee filed appeal before the first appellate authority. The CIT(A)confirmed the view taken by the Assessing Officer. The CIT(A) held that, in view of the amendment in section 80AC of the Act with effect from 01.04.2018, the return of income has to be filed for claiming deduction under Section 80P of the Act within the due prescribed under Section 139(1) of the Act.

In the instant case, assessee has not filed the return of income within the due date prescribed under Section 139(1) of the Act. For claiming deduction under Section 80P of the Act, the return of income has to be filed within the due date specified under Section 139(1) of the Act. In view of the provisions of Section 80AC of the Act, (which was introduced w.e.f. 01.04.2018), assessee cannot be allowed deduction under Section 80P of the Act. However, assessee has filed application under Section 119(2)(b) of the Act for condonation of delay in filing the return of income and the same is pending consideration by the PCIT.

The AO is directed to take a decision in accordance with law after the assessee's application for condonation of delay has been disposed off by the relevant authority. Appeal filed by the assessee is allowed.

Tags : Assessment Deductions Denial

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Supreme Court

Naresh Kumar and Ors. Vs. The State of Karnataka and Ors. (Neutral Citation: 2024 INSC 196)

MANU/SC/0193/2024

12.03.2024

Criminal

Mere breach of contract, by one of the parties, would not attract prosecution for criminal offence in every case

The Appellants before present Court have challenged the order of the High Court by which their petition under Section 482 of Code of Criminal Procedure, 1973 (CrPC) for quashing the FIR has been dismissed. The case of the Appellants before the High Court was that, the FIR which was instituted by the complainant i.e. Respondent No. 2 is primarily a civil dispute and has no criminal element and the entire criminal proceedings initiated against the Appellants is nothing but an abuse of the process and consequently, they had invoked the extraordinary powers of the High Court under Section 482 of the CrPC.

The dispute between the parties is primarily, civil in nature. It is after all a question of how many bicycles the complainant had assembled and the dispute between the parties is only regarding the figure of bicycles and consequently of the amount liable to be paid. This is a civil dispute. The complainant has not been able to establish that the intention to cheat the complainant was there with the Appellants right from the beginning.

In the case of Paramjeet Batra v. State of Uttarakhand, this Court recognized that, although the inherent powers of a High Court under Section 482 of the Code of Criminal Procedure should be exercised sparingly, yet the High Court must not hesitate in quashing such criminal proceedings which are essentially of a civil nature.

Essentially, the present dispute between the parties relates to a breach of contract. A mere breach of contract, by one of the parties, would not attract prosecution for criminal offence in every case, as held by this Court in Sarabjit Kaur v. State of Punjab and Anr. Similarly, dealing with the distinction between the offence of cheating and a mere breach of contractual obligations, this Court, in Vesa Holdings (P) Ltd. v. State of Kerala, has held that every breach of contract would not give rise to the offence of cheating, and it is required to be shown that the Accused had fraudulent or dishonest intention at the time of making the promise.

In the case at hand, the dispute between the parties was not only essentially of a civil nature but in this case the dispute itself stood settled later. There is no criminal element here and consequently the case here is nothing but an abuse of the process. The order of the High Court is set aside. Appeal allowed.

Tags : Civil dispute FIR Quashing of

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High Court of Delhi

Principal Commissioner of Income Tax (CENTRAL) - 1 Vs. Moon Star Securities Trading & Finance Co. Pvt. Ltd. (Neutral Citation: 2024:DHC:2007-DB)

MANU/DE/1857/2024

11.03.2024

Direct Taxation

Assessing Officer is not vested with an authority to travel beyond the net profit shown in the profit and loss account

The present appeal under Section 260A of the Income Tax Act, 1961 [ IT Act], at the instance of the Revenue, impugns the order passed by the Income Tax Appellate Tribunal ["ITAT"] for the assessment year ["AY"] 2011-12.

The limited controversy involved in the instant appeal which requires consideration pertains to whether the disallowance under Section 14A of the Act can be imported to Section 115JB of the Act, particularly in light of Clause (f) of Explanation 1 to Section 115JB of the Act, for computation of MAT.

A bare perusal of the provisions would signify that, sub-Section (1) prescribes the mode and manner for computing the total income of the assessee under Section 115JB of the Act. However, Clause (f) of Explanation 1 only alludes to the amounts of expenditure relatable to any income to which Section 10 (excluding provisions contained in Clause 38 thereof) or Section 11 or Section 12 apply. Thus, the said explanation nowhere mentions or denotes any mandate to import the disallowance as per Section 14A of the Act for computing MAT under Section 115JB of the Act.

Further, in the case of Apollo Tyres Ltd. v. CIT, the Hon'ble Supreme Court was of the opinion that, the AO is not vested with an authority to travel beyond the net profit shown in the profit and loss account and the said jurisdiction is confined to the extent provided in the Explanation to Section 115J of the Act.

The scheme of Section 115JB, particularly in relation to Clause (f) of Explanation 1 therein, does not envisage any addition of disallowance computed under Section 14A of the Act to calculate MAT as per Section 115JB of the Act. Rather, both the provisions stand separately as no correlation exists between them for the purpose of determining the taxable income. The addition of the concerned disallowance made by the AO while computing MAT is dehors the provisions of the Act and hence, cannot be sustained.

The arguments raised by the Revenue are bereft of any merit and thus, the question of law which arose in the instant appeal is answered against the Revenue. Consequently, there is no reason to interfere with the decision rendered by the ITAT. Appeal dismissed.

Tags : Assessment Provision Applicability

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High Court of Delhi

Pushpa Devi and Ors. Vs. Pawan Sehrawat and Ors. (Neutral Citation:2024:DHC:1950)

MANU/DE/1855/2024

11.03.2024

Civil

Inherent power under Section 151 of CPC, can be invoked in appropriate cases to re-open the evidence or to recall witness for further examination

The present petition has been filed by the Petitioners under Article 227 of the Constitution of India, 1950 for setting aside the impugned order passed by the Trial Court whereby the learned Trial Court allowed the application filed by Respondent no. 1 and 2 herein under Section 151 of Code of Civil Procedure, 1908 ("CPC") for seeking permission to lead defence, evidence and recalling of order dated 23rd November, 2022.

It is clear from the impugned order that, Respondent no. 1 and 2 have acted irresponsibly and even with negligence. The conduct of Respondent no. 1 and 2 certainly has invited criticism, yet the learned Trial Court exercised its discretion in favour of Respondent no. 1 & 2 by granting them a single opportunity to lead defence evidence subject to cost. It is also true, when Respondent no. 1 and 2 failed to lead evidence in defence, a right has accrued in favour of the Petitioners which is disturbed by opening the evidence of the Respondent no. 1 & 2.

The inherent power under Section 151 of CPC, subject to its limitations can be invoked in appropriate cases to re-open the evidence or to recall witness for further examination. The power under Section 151 of CPC will have to be used with circumspection and in cases, only where it is absolutely needed and not intended to be used routinely, otherwise it will defeat the very purpose of various amendments made to CPC to expedite trials.

In the present case, the plea of the Respondent no. 1 and 2 before the learned Trial Court for not-examining their witnesses on two occasions was that the son of Respondent no.1, who was following the trial of the case was undergoing depression therefore he could not be vigilant with respect to the proceedings of the case. In view of circumstance, the learned Trial Court has rightly exercised its discretion by permitting Respondent no. 1 and 2 to avail one opportunity for leading their evidence. Petition dismissed.

Tags : Recall order Permission Grant

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Income Tax Appellate Tribunal

Sarvottam Caps Pvt. Ltd., Kolkata vs. Principal Commissioner of Income Tax

MANU/IK/0105/2024

11.03.2024

Direct Taxation

Phrase "Prejudicial to the interest of the Revenue" is of wide import and is not confined to loss of taxes only

In facts of present case, the assessment was completed under Section 143(3) of the Income Tax Act, 1961 (IT Act). The assessee debited the provision for bad and doubtful debts amounting to Rs. 1,86,29,997 and the disallowance amounting to Rs. 77,08,984 under Section 14A of the Act. During computation of the book profit under Section 115JB of the Act both the amounts are not added with the book profit. Accordingly, during calculation of the MAT credit under Section 115JA of the Act, Assessing Officer had allowed more credit to the assessee which was amounted to Rs. 83,84,295. The Principal Commissioner of Income Tax by invoking sec 263 called the assessment order erroneous for wrong calculation of Section 115JB of the Act and prejudicial to the interest of revenue. The learned Pr. CIT by invoking Section 263 of the Act, issued the notice. The order under Section 263 of IT Act was passed by setting aside the assessment order. Being aggrieved the assessee filed appeal.

The assessee has failed to completely disclose its true and correct income by non-furnishing of details as required under provisions of I.T. Act. The A.O. has passed the assessment order without making enquiries or verification which should have been made in the instant case. Clause (a) of Explanation - 2 to Section 263(1) is attracted in this case. Accordingly, it is held that the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue.

Delhi High Court in the case of GEE VEE Enterprise vs. Addl. CIT has held that, the CIT may consider the order of the Assessing Officer to be erroneous not only if it contain some apparent error of reasoning or of law or of fact on the face of it but also because the Assessing Officer has failed to make enquiries which are called for in the circumstances of the case and it is an order which simply accepted what the assessee has stated in his return of income on the said issue. It is not necessary for the CIT to make further enquiries before cancelling the assessment order. The Commissioner can regard the order erroneous on the ground that the Assessing Officer should have made further enquiries.

Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT held that, the phrase "Prejudicial to the interest of the Revenue" is of wide import and is not confined to only loss of taxes. If the AO has accepted the claim of the assessee and with a wrong calculation of Section 1115JB of the Act there is a genuine loss of revenue which was prejudicial to the interest of the Revenue. Further, during calculation of MAT credit, the learned AO had made wrong and vitiated the entire proceeding. The impugned order of Principal Commissioner of Income Tax is upheld. Appeal dismissed.

Tags : Assessment MAT credit Calculation

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