An employer or the principal officers of an organisation are liable for criminal prosecution if they fail to pay Income Tax to the government, the Supreme Court has held.

"It is true that the Act (Income Tax) provides for imposition of penalty for non-payment of tax. That, however, does not take away the power to prosecute accused persons if an offence has been committed by them," a Bench of Justices C K Thakker and P K Balasubramanyan said, while dismissing an appeal filed by Madhumilan Syntex Limited, a company engaged in the production of yarn.
 
The company had filed an appeal challenging the criminal prosecution launched by the Income Tax Department for non remittance of Rs 1,29,348 tax deducted at source (TDS) collected from the employees for the assessment year of 1989-90.

Though the company subsequently paid the amount with interest, the Income Tax Department launched criminal proceedings against the company officials including a lady director Chandraprabha Modi, in the court of the Additional Chief Judicial Magistrate (Economic Offences), Indore.

The directors were made criminally liable as they were deemed to be the Principal Officers of the organisation responsible under the Act for collection and remittance of the TDS.

Upholding the department's action, the Bench said that once a statute prescribes payment of tax, it was obligatory on the part of the assessee to pay the same.

"Once a statute requires to pay tax and stipulates period within which such payment is to be made, payment must be made within that period. If the payment is not made within that eriod, there is default and an appropriate action can be taken under the Act," the Bench said in justification of the proceedings launched against the appellants.

Noting that the proceedings had been prolonged on account of the various cases filed by the company against the prosecution, the Bench rejected the plea of the appellants that the case be quashed as the matter was 15 years old.

However, the Bench clarified that it was not entering into the merits of the case involving the department and the company and it was left to the trial court to decide the same.