DSK Legal successfully represented a High Networth Individual before the Bombay High Court
DSK Legal advised and represented a High Networth Individual (“Petitioner”) in criminal prosecution initiated under the
DSK Legal successfully represented a High Networth Individual before the Bombay High Court
DSK Legal advised and represented a High Networth Individual (“Petitioner”) in criminal prosecution initiated under the Income Tax Act, 1961 (“IT Act”). The Income Tax Department filed a complaint before the Magistrate against the company (of which the Petitioner was formerly a director) for failure to deposit tax deducted at source (TDS) within the prescribed period. The Petitioner was arraigned as an accused. Based on the complaint, the Magistrate issued summons to the Petitioner.
Under the IT Act, only the company and its principal officer can be held liable for such alleged failure to deposit TDS. A person can be a principal officer only if he is connected with the management or administration of the assessee company ‘and’ the assessing officer has served upon him a notice of his intention to treat him as such. Relying upon various judgments, we argued that the Petitioner (a nominee director on the company’s board) was neither connected with management / administration nor was any notice ever served on him. Thus, he could not be held responsible for any such default as a ‘principal officer’.
Further, even the principle of vicarious liability (which the IT Act provides for) could not be applied to make the Petitioner him responsible for the acts of the company – as there was not even a prima facie case that he was in charge of and responsible to the company for the conduct of its business (which is the threshold prescribed under IT Act for imputing vicarious liability).
On the basis of our arguments, particularly on the Income Tax Department’s failure to serve notice of its intention to treat the Petitioner as a principal officer, the High Court of Bombay concluded that the Magistrate had not applied his mind and quashed the entire complaint and the summons against the Petitioner.
The DSK Legal team comprised of Vikrant Singh Negi (Partner), Ekta Tyagi (Associate Partner), Priyamvada Singhania (Senior Associate), and Sneha Barange (Associate) and was led by Senior Advocate Vineet Naik.