Orissa HC Quashes TDS Prosecution for Explained Delay & Payment with Interest

Yash Marothia Vs Union of India (Orissa High Court)

In Yash Marothia vs. Union of India, the petitioner challenged the order dated 22.02.2023 by the Additional Chief Judicial Magistrate (Special Court), Cuttack, which took cognizance of offenses under Sections 276B and 276BB of the Income Tax Act. The Revenue alleged that the petitioner failed to deposit deducted TDS of ₹59,02,093 and collected TCS of ₹57,27,898 for the financial year 2019 within the stipulated timeframe, with delays ranging from 1 to 173 days. In defense, the petitioner cited disruptions caused by COVID-19 but affirmed that the amounts, along with interest, were subsequently deposited. Despite this, the Revenue proceeded with the complaint, leading to the present challenge.

The Orissa High Court, relying on its previous ruling in Sree Metaliks Limited vs. Union of India, found the petitioner’s case to be covered under similar circumstances. The Court noted that the petitioner had adequately explained the delay and had already remitted the amounts with interest, making the prosecution unnecessary. Additionally, Circular No. F No 285/90/2008-IT(Inv-I)/05 dated 24.04.2008 supported the petitioner’s case. Since the Income Tax Department did not dispute the applicability of the Sree Metaliks judgment, the Court quashed the proceedings against the petitioner.

FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT

1. In the present petition, the petitioner is assailing the order dated 22.02.2023 passed by the learned Addl. Chief Judicial Magistrate (Special Court), Cuttack in 2(c) CC Case 13 of 2023 whereby the cognizance for the offences under Sections-276B and 276BB of the Income Tax Act, 1961 has been taken against the petitioner.

2. The complaint case was filed by the Revenue, inter alia, alleging that the petitioner has deducted TDS of Rs.59,02,093/- and collected TCS of Rs.57,27,898/- for the financial year 2019, but the same was not deposited with the revenue within the stipulated time frame. There was delay in depositing the said amount ranging from 1 day to 173 days. On the basis of the aforementioned allegation, the complaint was filed against the petitioner by the Revenue.

3. The petitioner in the defence submitted that the delay in depositing the TDS and TCS amount was caused due to the prevailing COVID-19 restriction then. However, subsequently the amount has been deposited with interest. The following chart would indicate the extent of delay caused in depositing the amounts as alleged:

4. Despite the aforementioned explanation, the revenue went ahead and filed the complaint. Learned trial Court, without appreciating the peculiarity of the present case, has taken cognizance of the offence vide the impugned order. Hence, the petitioner seeks indulgence of this Court at this stage and prays for quashing of the entire proceeding.

5. Rudra Prasad Kar, learned Senior Counsel along with Mr. A. Khandelwal, learned counsel appearing for the petitioner has relied upon the judgment of this Court dated 15.04.2024 passed in the case of Sree Metaliks Limited and others vs. Union of India and another in CRLMC No.1921 of 2023. Mr. Kar, learned Senior Counsel submits that the case of the present petitioner is squarely covered by the aforementioned judgment of this Court. He relies upon paragraph-10 of the above judgment, which reads as under:

“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 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.”

 The case of the petitioner is also covered by the Circular No F No 285/90/2008-IT(Inv-I)/05 dated 24.04.2008, which has been in extensor reproduced in the judgment of Sree Metaliks Limited (supra).

6. Subash Chandra Mohanty, learned Senior Standing Counsel for the Income Tax Department does not dispute the fact that the case of the petitioner is covered by the judgment of this Court in Sree Metaliks Limited (supra).

7. Taking into consideration the submissions made by learned counsels for the parties at the Bar and relying upon the judgment of this Court in Sree Metaliks Limited (supra), I am of the considered view that the present petition deserves merit. Accordingly, the same is allowed.

8. The order dated 22.02.2023 passed by the learned Addl. Chief Judicial Magistrate (Special Court), Cuttack in 2(c) CC Case No.13 of 2023 and the consequential proceedings arising there from are quashed qua the petitioner.

9. There shall be no order as to cost.