Hemant Mahipatray Shah and another Vs Anand Upadhyay and another (Bombay High Court)
Bombay High Court dismissed the criminal prosecution of Hemant Mahipatray Shah and another director of Hubtown Ltd. for delayed TDS deposit under sections 276B and 278B of the Income Tax Act. The prosecution was quashed because the TDS, along with interest under section 201(1A), had already been deposited. The court highlighted that, as per CBDT Circulars dated 28th May 1980 and 24th April 2008, prosecution should not be initiated when tax is deposited. Additionally, no notice was issued by the Assessing Officer to treat any petitioner as the “Principal Officer” of the company, nor were any orders passed deeming the company or directors as “Assessee in Default.” The petitioners were directors, but the complaints lacked any allegation of their consent, connivance, or negligence, which is required under Section 278B(2) for prosecution. The department must prove such involvement for prosecution to proceed. The court noted that the CBDT Circular of 2008 takes precedence over the earlier Madhumilan Syntex Ltd case and prescribes launching prosecution within sixty days of default, which was not followed. Thus, the court quashed the prosecution, citing the precedence of the circulars and the lack of required legal formalities and evidence against the petitioners.
