TDS Prosecution Quashed After Compounding Fee Paid and 40-Year Delay

Jyotsana Investments Company Limited Vs R. K. De (Calcutta High Court)

 The Calcutta High Court adjudicated a revisional application filed under Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of criminal proceedings in Case No. C-1271 of 1986 pending before the Metropolitan Magistrate, 4th Court, Calcutta. The prosecution had been initiated by the Income Tax Department under Sections 276B(ii) and 278B of the Income Tax Act, 1961, for alleged non-payment of Tax Deducted at Source (TDS) for Assessment Year 1983–1984. The complaint arose from a search operation conducted in 1983.

The procedural history revealed that in 1986, the Department filed approximately 54 criminal cases against the petitioner company and its directors. In 1988, a Division Bench of the High Court stayed the proceedings pending disposal of a compounding application filed by the petitioners.

In 2001, the Revenue quantified the compounding fee at Rs. 3,96,943/-, which the petitioner promptly paid. Despite this settlement and a subsequent fifteen-year period of judicial inactivity, the Trial Court revived the matter in 2015. On April 27, 2016, the Magistrate issued warrants of arrest and property attachment orders after concluding that no stay was in force. A warrant was issued against Accused No. 3, who had already deceased. The Court also ordered property attachment even after the petitioner paid an additional interest amount of Rs. 2,07,935/- on July 5, 2017, in order to satisfy all possible claims.