Prosecution u/s 276C against Official Liquidator of company. HC dismissed application

Prosecution u/s 276C of Official Liquidator of company. High Court dismissed the application of Income Tax Department

ABCAUS Case Law Citation:
ABCAUS 3311 (2020) (05) HC

Prosecution u/s 276C against Official Liquidator of company

In the instant case, the Principal Commissioner of Income Tax (PCIT) had made an application to the Hon’ble High Court for launching prosecution under Section 276C(2) of Income Tax Act, 1961 (the Act),  in case of  a company under Liquidation.

In the said application, it was alleged by the Income Tax Department that for two consecutive assessment years, the company had deposited income tax after the delay of four years and one year respectively from the date the return of income (ITR) of the company was due.

It was asserted that the Official Liquidator could not claim immunity  from the prosecution under Section 635A of the Companies Act, for  the reason that omission and commission of the Official Liquidator is not in good faith and non-compliance of  provisions  of Income Tax Act is a willful and deliberate failure to deposit sovereign  dues  within  time.  

Thus, prayer was made for granting permission for launching prosecution against the Company/ Official Liquidator.

On the other hand, the Official Liquidator stated that full Income Tax  amount could not be deposited at the time of filing of Return as the Bank had not given the credit for TDS on the interest income as on  the date of filing the Return and after filing of return, the Official Liquidator never got the demand letter from Income Tax Department,  as mandated under Section 143 of the Act nor the liability was visible  in the demand section of the Company’s login on e-filing Web Site of  the Department.

It was pointed out that the tax had been deposited immediately after   receiving notice of the prosecution.   

It was further stated that the Office of Official Liquidator is a Government Office and it is neither engaged in running any business nor is the Director or shareholder of the Company in liquidation and the transactions of the Companies under liquidation are under the supervision of the High Court. Therefore, Office of Liquidator cannot be said to have evaded the tax willfully.   

It was further stated that it was not a case of evasion of tax but simply a case of  late deposit of tax, whereupon appropriate interest has also  been levied and paid and the Official Liquidator had deposited the  balance Tax along with interest when tax liability was shown in  the electronic system of the Income Tax Department and the Tax liability was already disclosed by the Official Liquidator himself in the Income  Tax  Returns filed.

The Hon’ble High Court opined that the explanation rendered by the    Official Liquidator was satisfactory and it was not a fit case for granting approval for launching prosecution. Accordingly, the applications are dismissed  

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