G M Infinite Dwelling India Pvt Ltd. Vs CIT (TDS) (Karnataka High Court)
Sanction for Prosecution under Section 276B r/w Section 278B — Requirement of Application of Mind, Reasonable Cause, and Limits of Criminalisation of TDS Defaults
Statutory Framework Involved
1. Section 276B — Failure to Pay Tax Deducted at Source
Section 276B provides for criminal prosecution where a person fails to pay to the credit of the Central Government:
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tax deducted at source under Chapter XVII-B, or
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tax payable under section 115-O(2).
The offence is punishable with:
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rigorous imprisonment ranging from three months to seven years, and
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fine.
The provision is penal in nature and therefore must be strictly construed.
2. Section 278B — Offences by Companies
Section 278B creates vicarious criminal liability by deeming every person who was:
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in charge of, and responsible for, the conduct of the business of the company
to be guilty of the offence, unless such person proves that the offence was committed without his knowledge or despite due diligence.
This section enlarges criminal exposure to directors and officers, making compliance with procedural safeguards critical.
3. Section 279(1) — Sanction for Prosecution
Section 279(1) mandates that no prosecution for offences under Chapter XXII shall be instituted except with prior sanction of the Principal Commissioner/Commissioner of Income-tax.
Judicially settled principles require that:
