Law:

Section:

Section 276C, read with sections 277 and 278B, of the Income-tax Act, 1961 - Offences and prosecutions - Wilful attempt of evade tax - Whether in spite of assessment proceedings pending before Tribunal or any other forums prosecution proceedings under section 276C or 277 or 278B could be initiated - Held, yes - Whether prosecution proceedings against nominee-directors would be initiated even though any act or any omission done by them was in good faith in discharge of their duties as directors - Held, yes - Whether in a prosecution case covered under section 278B, it is not necessary to determine 'principal officer' and, therefore, non-issuance of notices to all petitioners would not nullify prosecution proceedings - Held, yes FACTS For the assessment year 1980-81, the petitioner-company claimed exemption by way of stores consumption without even mentioning the names and addresses of the supplier. On the direction of the Assessing Officer, the petitioner in fact furnished the names and addresses of four suppliers, but on scrutiny, they were found to be non-existing persons, besides certain vouchers being bogus. The Assessing Officer, accordingly computed the petitioner's income after rejecting its claim for exemption. On appeal, the Tribunal remanded the matter to the assessing authority for fresh consideration. Accordingly, the assessing authority after affording adequate opportunities to the petitioner-company completed the assessment, confirming the earlier assessment. In the meantime, after the Tribunal passed the remand order, the department initiated prosecution proceedings under sections 276C, 277 and 278B against the petitioner-company and its directors and secretary. On writ, the petitioner contended (i) that the basis on which the prosecution was launched did not subsist the moment the Tribunal set aside the order of the Commissioner and remanded it for fresh disposal; (ii) that the nominees of the State Government and the Financial Institutions could not be prosecuted for any act not done or omitted to be done by them in good faith in discharge of their duties as directors and as such inclusion of these persons as accused in the complaint was born…

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