Vipul Agarwal Vs ITO (Delhi High Court)
Date-19th July, 2022
Sub-Delay of 10 days in filing the return by the Company of which the petitioner was a director- Prosecution u/s 276CC launched by the department-No notice to treat the director as Principal officer u/s 2(35)- Effect of ?

The Delhi High Court in this case considering a situation where the petitioner had digitally signed the return of income which was filed after delay of 10 days and prosecution was launched against the petitioner as well as company u/s 276CC of the Act. The petitioner contended that there was no notice to treat him as Principal Officer u/s 2(35) of the Income-tax Act,1961 and moreover the sanction required to be obtained u/s 279 was not obtained. The Department argued that the petitioner had digitally uploaded the return of income and as such there was no need for specifically treating him as the Principal Officer. However, the Court brushed aside these arguments by saying that merely because, for the purpose of statutory compliance of this notice, as well as Section 140 of the IT Act, the petitioner appended his digital signatures to the ITRs would not suffice to meet the requirements of a notice in terms of Section 2(35) (b) of the IT Act. The act of appending the digital signatures by the Director of the Company being in compliance with the Section 140 of the IT Act cannot be an estoppel against such Director, here the petitioner, on the principles of holding out. The decisive factor is the intention of the Assessing Officer and not any act performed by the Assessee. It has to be held that whenever an Assessing Officer intended to treat a Director as a Principal Officer, he has to serve a notice and it is only if there is an acceptance of such treatment by the noticee, including by not objecting to it, that such a Director would become a Principal Officer under the IT Act and not otherwise. Thus the prosecution was quashed.

This judgement once again brings out the fact that the concept of Principal officer is an important concept and also the compliance of the provisions of the law is paramount and even for delay of 10 days , prosecution can be launched .

Ramesh Patodia
20-07-2022