Income Tax Act, 1961, Section
276B read with Section 278B
Prosecution--Offence under sections 276B and 278B--Delay in deposit of TDS--Delay
occurred on account of I.B. proceeding and restriction imposed due to COVID-19
pandemic
Conclusion: Where
delay on part of assessee-company in depositing TDS occurred on account of I.B.
proceeding suffered by assessee and restriction imposed due to COVID-19
pandemic and further, prosecution had been initiated against assessee by
opposite parties after receiving TDS along with interest, entire proceeding
arising out of complaint pending in the Court of Additional Chief Judicial
Magistrate and consequential proceedings arising therefrom qua the
assessee, stood quashed.
A statutory complaint was filed
against assessee-company by opposite parties on the ground that it violated
provisions of sections 276B and 278B by not depositing TDS for relevant
financial year within the statutory period and delay caused remained unexplained.
It was alleged by opposite parties that although TDS was deposited belatedly by
assessee by paying interest for belated period, still the statutory offence
under section 276B read with section 278B, was admittedly committed by it.
Assessee contended that due to general sluggishness in market price of iron ore
etc, it suffered huge loss. Apart from that, at the instance of one of its
financial creditor, a proceeding under Insolvency & Bankruptcy Code, 2016
was initiated against it. Thereafter, I.B. proceeding was admitted and
resolution plan was approved and after approval of the same, it gradually
started paying debts and statutory dues. Assessee also contended that due to
outbreak of COVID-19 pandemic, it could not deposit the TDS within the statutory
period and thus, there was no mens-rea involved in its unavoidable act
of not depositing the TDS in time. Held: Delay occurred on part
of assessee-company in depositing TDS to Revenue account, was well explained by
assessee, therefore, the authorities ought to have been taken into
consideration the same, particularly for the reasons that assessee suffered
I.B. proceeding and restriction imposed due to COVID-19 pandemic. Further,
prosecution had been initiated against assessee by opposite parties after receiving
TDS along with interest. Therefore, entire proceeding arising out of complaint
pending in the Court of Additional Chief Judicial Magistrate and consequential
proceedings arising therefrom qua the assessee, stood quashed.
Decision: In
assessee's favour
Followed: M/s.
D.N. Homes Pvt. Ltd., Khurda & Another v. Union of India [Crl Rev No. 408
of 2023, dt. 13-10-2023] : 2023 TaxPub(DT) 6992 (Ori-HC), M/s. Dev Multicom
Private Ltd. Jaya Devi, M/s. AT-Dev Prabha (JV), M/s. Dev Prabha Construction
Private Limited, M/s. AT-DEV PL (JV), Aarti Devi, Vishwa Vijay Singh, v. The
State of Jharkhand. Sandip Ganguly, Office of ACIT, TDS Circle, Dhanbad, (2023)
454 ITR 48 (Jharkhand) : 2022 TaxPub(DT) 2099 (Jhar-HC)
IN THE ORISSA HIGH COURT
SIBO SANKAR MISHRA
Sree Metaliks Ltd. v. UOI & Anr.
CRLMC No. 1921 of 2023
15 April, 2024
Petitioners by: Sidhartha
Ray, Senior Advocate
Opp. Parties by: Sidharth
Sankar Mohapatra Senior Standing Counsel, Income Tax. Mr. A. Kedia, Advocate
S.S. Mishra, J.
In the present petition, the petitioners are seeking
quashing of the complaint case registered as 2(c) CC Case No. 09 of 2023
pending in the Court of the learned Additional Chief Judicial Magistrate
(Spl.)-cum-Asst. Sessions Judge, Cuttack. The petitioners are also aggrieved by
the order dated 22-2-2023 passed by the learned Additional Chief Judicial
Magistrate (Spl.)-cum-Asst. Sessions Judge, Cuttack in 2(c) CC Case No. 09
of 2023 whereby the learned Court below has taken cognizance of the
offences under sections-276B/278B of the Income Tax Act, 1961 (In short The
Act ). The petitioners have also assailed the order dated 5-1-2023 passed by
the Commissioner of Income Tax according sanction under section 279(1) of the
Income Tax Act for prosecuting the present petitioners for the offences as
mentioned above.
2. The case against the
opposite parties put forth in the statutory complaint filed by the opposite
party no. 1 is that the petitioners have violated the provisions of
sections-276B and 278B of the Act by not depositing the TDS amount for the
financial year 2019-20 within the statutory period prescribed under law and
delay caused by them remained unexplained.
3. It is contended by the
opposite parties that although the TDS amount was deposited belatedly by paying
interest for the belated period by the petitioners, still the statutory offence
under section-276B read with section-278B of the Act has been admittedly
committed by the petitioners. Admittedly, the petitioners have delayed in
depositing the amount collected on behalf of the govt. ranging from 15 days to
394 days. Since the delays are beyond one year, the competent authority has
rightly accorded sanction under section-279(1) of the Act for prosecuting the
petitioners for having committed the offences under section 276B read with
section-278B of the Act.
4. Mr. Sidhartha Ray,
learned Senior Counsel appearing for the petitioners, inter alia, contended
that due to general sluggishness in the market price of iron ore etc, the
petitioners-company suffered huge loss. Apart from that at the instance of one
of the financial creditor, a proceeding under section-7 of the Insolvency &
Bankruptcy Code, 2016 was initiated against the petitioner company. The I.B.
proceeding was admitted on 30-1-2017 and resolution plan of the resolution
applicant was approved on 7-11-2017. After approval of the resolution plan, the
company gradually started paying the debts and statutory dues on the basis of
the case flows of the company. Therefore, the delay has been caused in making
payment of the TDS amount to the revenue. The petitioners have also contended
that due to the outbreak of COVID-19 pandemic in the month of March, 2020, they
could not deposit the TDS amount for the financial year 2019-20. Therefore,
there is no mense rea involved in the unavoidable act of the petitioner in depositing
the TDS amount with the Revenue belatedly. Despite general explanation afforded
by the petitioners, the opposite parties have mechanically dealt with those
explanations and proceeded to file the statutory complaint against the
petitioners. Hence, the petitioners seek, indulgence of this Court.
5. My Ray, learned Senior
Counsel to begin with has relied upon a Circular No F No
285/90/2008-IT(Inv-I)/05 dated 24-4-2008 and contended that the benefit of
the said Circular ought to have been extended to the petitioners. The relevant
part of the Circular reads as under:-
Subject:- Streamlining of
procedure for identification and processing of case for prosecution under
Direct Tax Laws- matter reg.-
xxx xxx xxx xxx
2. xxx xxx xxx xxx
3. Identification and processing
of potential prosecution cases:
3.1 The following categories of
offences shall be processed for launching prosecution:-
(i) Offences under section 276B:
Failure to pay taxes deducted at source to the credit of Central Government
Cases, where amount of tax
deducted is Rs. 25,000 or more, and the same is not deposited even within
12 months from the date of deduction, shall be processed for prosecution
in addition to the recovery steps as may be necessary in such cases.
The authority for processing the
prosecution under this section shall be the officer having jurisdiction over
TDS cases. The prosecution shall preferably be launched within 60 days of such
detection. If any such default is detected during search/survey, the processing
ADIT/DDIT or the authorized officer shall inform the assessing officer having
jurisdiction over TDS forthwith.
6. Mr. Ray, learned Senior
Counsel to buttress his aforementioned argument, relied upon the judgment of
the Jharkhand High Court in the case of Dev Multicom Pvt. Ltd. and
another v. State of Jharkhand and Another reported in (2023) 454 ITR 48
(Jharkhand) : 2022 TaxPub(DT) 2099 (Jhar-HC). The relevant
portion of the said judgment reads as under:
The amount has already been
deposited with interest and there is no reason why the criminal proceeding
shall proceed and the criminal proceeding was launched after receiving the said
amount with interest, had it been a case that the case was immediately
instituted and thereafter the tax deducted at source amount has been deposited
with interest, the matter would have been different. As such the continuation
of the proceedings will amount to an abuse of the process of the Court.
Accordingly, the entire criminal
proceedings and the cognizance orders in their respective cases, passed by the
learned Special Economic Offices, Dhanbad, in the respective C. O. cases,
whereby cognizance has been taken against the petitioners for the offences
under sections 276B and 278B of the Income-tax Act, pending in the court of the
learned Special Judge, Economic Offences, Dhanbad, are hereby, quashed.
7. Mr. Ray, learned Senior
Counsel has also relied upon the judgment of our own High Court in the case of M/s.
D.N. Homes Pvt. Ltd., Khurda and another v. Union of India passed in CRL REV
No. 408 of 2023, dt. 13-10-2023 : 2023 TaxPub(DT) 6992 (Ori-HC), the
relevant paragraphs of which reads as under:
20. The legislative intent would
be well discernable when simultaneously, we glance at the provision of section
201 and 221 of the Income Tax Act which says that penalty is not leviable when
the Company proves that the default was for 'good and sufficient reasons',
whereas, the expression used in section-278AA is 'reasonable cause'. The
legislature has carefully and intentionally used these different expressions in
the situations envisaged under those provisions.
22. Coming to the case before us,
the prosecution has been launched against the petitioners for delay in deposit
of the collected TDS for the financial year, 2020-21 (Accounting Year,
2021-22). The collected TDS was admittedly not deposited with the Central
Government by the due date. The petitioners thus have failed to deposit
the collected TDS within the time stipulated as ordained under provision of the
Income Tax Act and Rules. They have deposited the said amount in phase manner
with the delay in making the deposit which begins with the minimum of 31 days,
ending at 214 days. It is not in dispute that the petitioners have by the
time of consideration of the matter as to launching of the prosecution for such
delayed deposit, had deposited the entire TDS with the interest as they were
liable to pay as per this statutory provision for such delayed deposit of the
TDS. The collected TDS with interest as above has been accepted and gone to the
State Exchequer when by then no loss to the Revenue was standing to be viewed.
8. Mr. Ray submits that in
the instant case also the opposite parties have accepted the delayed interest
on the TDS amount as per the provision of law and after receiving the TDS
amount along with interest initiated the Criminal Prosecution against the petitioners.
Therefore, the criminal prosecution launched against the petitioners is not
sustainable under law as has been authoritatively held by our own High Court
and the High Court of Jharkhand. Apart from that the petitioners are entitled
to be exempted for criminal prosecution under the Departmental circular dated
24-4-2008 Therefore, he seeks indulgence of this Court.
9. Mr. Mohapatra, learned
Senior Standing Counsel appearing for the Income Tax opposed the prayer made by
the petitioners and contended that the distress financial condition of the
petitioners company and the COVID-19 pandemic situation cannot be taken as an
alibi for late deposit of TDS into the Government account, as the amount was
collected on behalf of the Government and due diligence was supposed have been
taken for depositing the tax amount within the stipulated time frame. Mr.
Mohapatra further contends that the COVID-19 pandemic restriction measures were
only imposed during the month of March, 2020. However, the delay in remittance
is not limited to that period. Mr. Mohapatra further contends that the Circular
dated 24-4-2008 relied upon by the petitioners will not come to their aid
because the delay is beyond one year. The petitioners could have escaped the
prosecution, had the delay been within a period of 12 months. In that view of
the matter, the sanction accorded by the competent authority under section
279(1) of the Act cannot be faulted with.
10. Taking into
consideration the rival contentions of learned counsels for the parties and the
judgments relied upon by the petitioners, I am of the considered view that the
maximum delay of 394 days for depositing the TDS amount to the revenue account
have been well explained by the petitioners, therefore, the authorities ought
to have been taken into consideration same, particularly for the reasons that
the petitioners-company has suffered the I.B. proceeding and the restriction
imposed during the COVID-19 pandemic, I am of the view that the petitioners
case is directly covered by the judgments cited in the case of Dev
Multicom Pvt. Ltd. (supra) and M/s. D.N. Homes Pvt. Ltd. Khurda &
another (supra), because the prosecution indeed has been initiated by
the opposite parties against the petitioners after having received the TDs
amount along with the interest. Therefore, the entire proceeding arising out of
2(c) CC Case No.09 of 2023 pending in the Court of the learned
Additional Chief Judicial Magistrate (Spl.)-cum-Asst. Sessions Judge, Cuttack
and the consequential proceedings arising therefrom qua the petitioners stands
quashed.
11. Accordingly CRLMC is
allowed.