Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B
276B. If a person fails to pay to the credit of the Central Government,—
(a) the tax deducted at source by him as required by or under the provisions of Chapter XVII-B; or
(b) the tax payable by him, as required by or under—
(i) sub-section (2) of section 115-O; or
(ii) the proviso to section 194B,
he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.
Punishment not to be imposed in certain cases.
278AA. Notwithstanding anything contained in the provisions of section 276A, section 276AB, or section 276B, or section 276BB no person shall be punishable for any failure referred to in the said provisions if he proves that there was reasonable cause for such failure.
Various Case Laws cases related to Section 276C of Income Tax Act, 1961 read with Section 278AA – Default in Payment of TDS
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Compounding of an offence committed u/s 276B, r/w. Section 287B – company deducted income tax from the salaries of its employees, under the provisions of Section 192 but had failed to deposit the tax so deducted to the credit of the Central Government within the time prescribed under Section 200 r/w. Section 204 BOMBAY HIGH COURT FOOTCANDLES FILM PVT. LTD., NIRAV DAMA, OF MUMBAI VERSUS INCOME TAX OFFICER – TDS – 1, MUMBAI, COMMISSIONER OF INCOME-TAX (TDS) , MUMBAI, CHIEF COMMISSIONER OF INCOME TAX (TDS) , MUMBAI UNION OF INDIA No.- WRIT PETITION NO.429 OF 2022 Dated.- November 28, 2022 |
As submitted petitioner no.1-company has deposited the TDS due, though beyond time-limit set down, but before any demand notice was raised – HELD THAT:- We find that this is a classic case for consideration by respondent no.3 for compounding of offence, inasmuch as petitioner no.1-company has deposited the TDS due, though beyond time-limit set down, but before any demand notice was raised or any show cause notice was issued. The Tax Deducted at Source was deposited along with penal interest thereon. A reply setting out detailed reasons for not depositing the same within the time stipulated under the law had been filed in reply to the show cause notice issued earlier. Though the petitioners had been convicted, a proceeding in the form of an appeal is pending before the Sessions Court, which is yet to be disposed of, and in which there is an order of suspension of sentence imposed on petitioner no.2 is operating.
Under these circumstances, we are of the view that the findings arrived at by respondent no.3 in the impugned order dated 1st June 2021, that the application for compounding of offence, under Section 279 of the Income Tax Act, was filed beyond twelve months, as prescribed under the CBDT Guidelines dated 14th June 2019, are contrary to the provisions of sub-section (2) of Section 279. The respondent no.3 has failed to exercise jurisdiction vested in it while deciding the application on merits and consideration of the grounds set out when the application for compounding of offence was filed before it. ORDER: (i) The impugned order dated 1st June 2021 passed by respondent no.3-Chief Commissioner of Income Tax (TDS), Mumbai, on the application filed by the petitioners for compounding of an offence, is quashed and set aside. (ii) Consequently, we remand the application, under the provisions of Section 279(2) of the Income Tax Act, of the petitioners back to respondent no.3 to consider afresh on its own merits. (iii) Respondent no.3 shall dispose of the application of the petitioners preferably within a period of thirty days from the date of receipt of this judgment. (iv) Until disposal of the application of the petitioners for compounding of offence, under sub-section (2) of Section 279 of the Income Tax Act, 1961, by respondent no.3, the proceedings, being Criminal Appeal No.127 of 2020, along with Criminal Miscellaneous Application No.407 of 2020, pending before the City Sessions Court, Greater Mumbai, shall remain stayed. (v) The challenge to the validity of clause 7(ii) contained in Circular F. No. 285/08/2014-IT(INV.V)/147 dated 14th June 2019, as raised in the present petition, is left open in the event the petitioners are aggrieved by a fresh order to be passed by respondent no.3. |
| Hon’ble Calcutta High Court in Shaw Wallace & Co. Ltd. v. CIT [2003] 264 ITR 243/[2004] 136 Taxman 346 (Cal.) | The provisions of Section 278AA of the IT Act, will no doubt be available to the assessee to its benefit if it is able to prove that it had sufficient and good reasons for committing the default |
| Discharging the accused for the offences punishable u/s 276B r.w.s. 278B confirmed by the High Court
SC ORDER-THE INCOME TAX DEPARTMENT VERSUS M/S JENIOUS CLOTHING PRIVATE LTD. AND ANR.-2022- 449 ITR 575 (SC) No.- Criminal Appeal No. 2040 of 2022 (Arising out of SLP (CRL.) No. 10027/2022) With Criminal Appeal No. 2041 of 2022 (Arising out of SLP (CRL.) No. 11160/2022) Dated.- November 23, 2022 |
HELD THAT:- Criminal complaints were filed against the Respondent-Company and one another, namely, S. Sunil V. Raheja, for the offences punishable u/s 276B r.w.s. 278B of the Act. In the complaints, accused No.2/S. Sunil V. Raheja is shown as Managing Director and is treated as the Principal Officer of the accused-Company.
Trial Court discharged both the accused on the ground that Respondent No.2 was wrongly treated as the Principal Officer by the Department. Reliance was placed on Section 2(35) of the Act. The order of discharge has been confirmed by the High Court, by the impugned judgment and orders passed in revision petitions. Number of submissions have been made by learned counsel appearing for the respective parties in support of their rival submissions on the respondent No.2-accused No.2/S. Sunil V. Raheja treated as a Principal Officer. After making some submissions, Mr. Preetesh Kapur, learned Senior Advocate, appearing for Respondent No.2, under the instructions, has stated at the Bar that if the orders passed by the learned trial Court discharging the accused confirmed by the High Court are set aside and the trial is ordered to be proceeded further in accordance with law and on its own merits and keeping all the defences which may be available to the accused open, respondents have no objection. We do not further enter into the rival submissions made on behalf of the respective parties. The order(s) passed by the learned trial Court discharging the accused for the offences punishable under Section 276B read with Section 278B of the Act confirmed by the High Court are hereby quashed and set aside. Now the trials are ordered to be proceeded further which shall be decided and disposed of by the learned trial Court in accordance with law and on its own merits. It goes without saying that all the defences which will be available to the accused shall be considered by the learned trial Court in accordance with law and on its own merits and on the basis of the evidence led. We direct the learned trial Court to conclude the trial within a period of 12 months from the date of receipt of the present order. |
| Compounding of offences punishable u/s 276B r.w.s.278B – repeated default in deposit of TDS – Rejection of Application for compounding –
DELHI HIGH COURT VIRAJ EXPORTS PRIVATE LIMITED & ANR. VERSUS THE CHIEF COMMISSIONER OF INCOME (TDS) , DELHI & ANR No.- W.P.(C) 6080/2022 & C.M.No.18277/2022 (for stay) Dated.- September 5, 2022 |
The petitioner has repeatedly defaulted despite receipt of show cause notice in 2014 and institution of complaints in 2016 – petitioner has admittedly been convicted by the criminal Court for FYs 2009-10, 2010-11 and 2011-12 for which inexplicably no compounding has been sought. The non-disclosure of the prior conviction in the compounding application is also admitted on record.
This Court in exercise of its power of judicial review, reviews the process adopted by the adjudicating authority and whether the decision suffers from error of jurisdiction. In the present case, it is noted that the competent authority has duly applied its mind to the petitioner’s application. It also issued a show-cause notice to the petitioner to explain the circumstances in which the material information pertaining to prior conviction was not disclosed in the petition. After considering the reply filed by the petitioner, respondent No. 1 has passed a reasoned order rejecting the compounding application of the petitioner. No infirmity in the impugned order passed by respondent No. 1 in exercise of his jurisdiction. The petitioner has not disputed the binding nature of the CBDT Guidelines, 2019 and in fact, in the judgment of K.M. Mammen [2022 MADRAS HIGH COURT] relied upon by the petitioner itself, the Court had noted that CBDT Guidelines, 2019 issued under Section 279 of the Act are strictly binding on the authorities. The Court therein observed that the 2019 Guidelines are in fact, intended to guide the officers to bring a closure of cases, where there are extenuating circumstances for compounding offences on application filed under Section 279 (2) – See Sangeeta Exports (P.) Ltd. [2008 – DELHI HIGH COURT] The facts of the present case are similar to the case of Anil Batra [2011 DELHI HIGH COURT] the petitioner in the said case i.e. the assessee was a repeat defaulter and had been successfully convicted in the complaints filed against him. In these circumstances, we hold that pending conviction orders with respect to FYs 2009-10, 2010-11 and 2011-12, which have been upheld by this Court on 15th October, 2018, until the said orders are set aside, there is no infirmity in the order of the respondent No. 1 in light of Para 8.1(iii) of the CBDT Guidelines 2019. We however, observe that in the event, the petitioner succeeds in the Special Leave Petition filed before the Supreme Court, the petitioner will be entitled to apply for compounding of the offences for the Financial Years 2013-14, 201415 and 2016-17 and the said application, as and when filed, shall be considered by the Commissioner in accordance with law. |
| Offence punishable u/s 276B – Responsibility of Principal Officer – person responsible for non-deduction and depositing of the TDS amount – application was filed before the Trial Court for discharge contending that he is not the Managing Director of accused No.1 and only Director and hence not falls under charging of Section 2(35)(b) of the Act, which requires a notice to treat him as the ‘Principal Officer’ of accused No.1 –
KARNATAKA HIGH COURT THE INCOME TAX DEPARTMENT, VERSUS M/S. JENIOUS CLOTHING PRIVATE LTD., ANDS. SUNIL V. RAHEJA, WARD -2 (1) , VERSUS M/S. JENIOUS CLOTHING PRIVATE LTD., ANDS. SUNIL V. RAHEJA, WARD -2 (1) , No.- CRIMINAL REVISION PETITION NO.388/2021 Dated.- March 11, 2022 |
HELD THAT:- There must be a specific averment in the notice that he was in charge of the day-to-day affairs of accused No.1 Company and the same is missing in the notice. Only referring the proviso under Section 276 of the said Act in paragraph No.4 of Ex.P.2, asked respondent No.2 that he is also responsible for non-deduction and depositing of the TDS amount and also asked for only show cause notice why he cannot be treated as Principal Officer and no specific averment is made that he has been in charge of the affairs of accused No.1. When such averments are missing, the Trial Court has not committed any error in considering Ex.P.2 and making an observation that even it is not stated that accused No.2 had been in charge of the day-to-day affairs of accused No.1.
The notice Ex.P.2 was also taken note of by the Trial Court and comes to the conclusion that he was only asked to show cause why prosecution should not be initiated against him for the offence punishable under Section 276B of the Act, but nothing contains with regard to the contents of Section 2(35) of the said Act. When such being the factual aspects of the case, we do not find any error committed by the Trial Court in discharging respondent No.2 in coming to the conclusion that nothing is found on record that he has been in charge of day-to-day affairs of accused No.1. Hence, no merit in the petition to invoke the revisional jurisdiction. |
| Prosecution for commission of offence u/s 276B r/w 278B – Sanction u/s 279(1) – TDS deducted but not deposited in time – offence allegedly committed under section 276(B) and 278(B)
JHARKHAND HIGH COURT 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, VERSUS THE STATE OF JHARKHAND. SANDIP GANGULY, OFFICE OF ACIT, TDS CIRCLE, DHANBAD, No.- Cr.M.P. No. 2941 of 2018 with Cr.M.P. No. 2942 of 2018, Cr.M.P. No. 2943 of 2018, Cr.M.P. No. 2944 of 2018, Cr.M.P. No. 2948 of 2018, Cr.M.P. No. 2949 of 2018, Cr.M.P. No. 2950 of 2018, Cr.M.P. No. 2953 of 2018 Dated.- February 28, 2022 |
It is an admitted fact that the TDS amount in all these cases were deposited with interest and the chart with respect to the same is also annexed with the counter affidavit of the Income Tax Department, wherein the date of deduction and date of depositing the said amount has been mentioned – some delay occurred in depositing the TDS. Apart from one or two cases, the deducted amount are not more than 50,000/-. While passing the sanction u/s 279(1) the sanctioning authority has not considered the CBDT instructions, bearing F. No. 255/339/79-IT (Inv.) dated 28.05.1980, issued in this regard by the CBDT.
In CBDT instructions, it is mentioned that prosecution u/s 276(B) of the Act shall not normally be proposed when the amount involved and / or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit of Government. No such consideration will, of course, apply to levy of interest u/s 201(1A) – This is quoted in the case of Sonali Autos (P) Ltd. (Supra). Moreover after receiving the deducted amount with interest, the prosecution has been launched against the petitioners, which is not in accordance with law. If the petitioners failed to deposit the amount in question within the stipulated time, i.e. by the 7th day of the subsequent month, it was required to launch the prosecution immediately, which has not been done in the cases in hand. Moreover Section 278(AA) of the Act clearly states that no person for any failure referred to under Section 276(B)of the Act shall be punished under the said provisions, if he proves that there was reasonable cause for such failure. The judgment relied by Ms Amrita Sinha, the CBDT guidelines were not considered. On this ground these cases are distinguishable in view of the facts and circumstances of the cases relied upon by Ms. Amrita Sinha. 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 TDS 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. 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 u/s 276(B) and 278(B) of the Income Tax Act, pending in the Court of learned Special Judge, Economic Offences, Dhanbad, are hereby, quashed |
| Offences u/s 276(B) and 278(B) – TDS has been deposited by the petitioners a bit late – Person responsible for overall charge of the business
JHARKHAND HIGH COURT M/S. MAITHON POWER LIMITED, VERSUS THE STATE OF JHARKHAND., THE ASSISTANT COMMISSIONER OF INCOME TAX, TDS CIRCLE, DHANBAD, No.- Cr.M.P. No. 2193 of 2018 Dated.- February 14, 2022 |
HELD THAT:- In the case in hand, it is an admitted fact that on the basis of the letter of the State Bank of India, the credit initiation was made well within time. It might have been reflected in the account of the Central Government on the next day, as the Bank hours at that time was over before 11.00 o’clock, however, now this transaction in view of the Government of India guidelines are taking place now a days in 24 hours. Thus, this Court is placing reliance in the case of Rajiv Thapar & Ors.[2013 (1) TMI 932 – SUPREME COURT] and comes to a conclusion that the documents of the State Bank of India can be looked into by this Court, sitting under Section 482 Cr.P.C. The court is not in agreement with the learned counsel appearing for the O.P. No. 2, who submits that Sections 200 and 202 of the Cr.P.C. are required to be read simultaneously. It is an admitted fact that the petitioner No. 2 was stationed at Mumbai and seeing this, the learned Magistrate was required to follow the mandatory provision of Section 202 Cr.P.C., which has been amended in the year 2005 making it mandatory to postpone the issue of process, where the accused is not residing within the territorial jurisdiction of the magistrate concerned.
A person, who at the time of offence was committed, was in-charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. It has not been disclosed in the petition that as to how the petitioner no. 2 is overall in-charge of the business and the case of Girdhari Lal Gupta [SUPREME COURT] and Dayle De’souza [2021 – SUPREME COURT] are helping the petitioners. There might be a case of slight harm in not crediting the TDS amount by 07.03.2013 and in fact considering that the interest has already been paid, it can be safely said that the harm has not taken place. The entire criminal proceeding whereby cognizance has been taken against the petitioners for the offences under Sections 276(B) and 278(B) of the Income Tax Act, pending in the Court of learned Special Judge, Economic Offences, Dhanbad, are hereby, quashed. |
| Offences u/s 276 B read with 278B – petitioners paid TDS amount collected from the employees, belatedly after a period of eight months
MADRAS HIGH COURT M/S. KAJAH ENTERPRISES PRIVATE LIMITED, HAJI A. ABDUL RAHIMAN SAHIB, HAJI ABDUL SALAM, HAJI A. ABDUL RASHEED, HAJI A. ABDU AZEES, HAJI A. ABDUL RAWUF, 7. HAJI A. ABDUL RAFEEQ, HAJI A. ABDUL HZEEB, HAJI A. ABDUL SHAFEEQ, HAJI A. ABDUL ZUHIN, A. ANWAR HUSSAIN, K. ABDUL GAFOOR, A. ABDUL AZIM VERSUS INCOME TAX DEPARTMENT, MADURAI. No.- Crl.O.P(MD)No.22216 of 2016 And Crl.M.P(MD)No.11500 of 2016 Dated.- June 18, 2021 |
HELD THAT:- In this case, the petitioners have taken out a reasonable cause for the failure on their part in paying the TDS amount that due to financial constraints faced by the company, it was only recorded in the registers, as if salary to the employees was paid, but in fact, the salary was paid to the employees only in the month of September 2012 and immediately they have also remitted the TDS amount with interest for the delayed payment to the department.
It is for the competent authority to take a call on the documents to be produced by the petitioners for substantiating their case that they are having reasonable cause for such failure for payment of the TDS amount and therefore, the matter is remitted to the first respondent to consider the issue afresh, as per the provisions u/s 278AA and 279 (2) of the Income Tax Act and pass appropriate orders on merits and the petitioners are permitted to produce the documents in their support to the first respondent. |
| Complaint filed u/s 276 B read with Section 278 B of the Income Tax Act – accused company has not deposited the TDS – non-service of notice or defect in notice u/s 2(35)
TIS HAZARI COURTS, DELHI INCOME TAX DEPARTMENT VERSUS M/S. PARSVNATH DEVELOPERS LTD. Ct.Case No.528997/2016 Dated.- March 31, 2021 |
HELD THAT:- As the complaint does not mention about the mode of service of notice and order u/s 2(35) Ex CW1/7 and Ex CW1/8 of the Income Tax Act; CW1 and CW2 confirmed that no proof of service is placed on record and the diary number on CW1/8 was incomplete and no clarification was brought on record despite court observation. Merely, on the basis of partial diary number written on the notice, it cannot be safely presumed that the notice and order u/s 2(35) of the Income Tax Act Ex CW1/7 and Ex CW1/8 have been served upon the accused no.2. From the record, it is clear that the complainant has failed to prove the service of notice and order u/s 2(35) of the Income Tax Act upon accused no. 2. From the mandate given in Roshni Cold Storage [1998 – MADRAS HIGH COURT] and M.R. Pratap [1983 MADRAS HIGH COURT] it is clear that in the absence of proof of service of notice u/s 2(35) the contention of accused that he cannot be proceeded with for the delayed payment of the tax amount by the company, is a wellfounded one.
Whether accused was not personally responsible for the deposit / collection of the TDS with the complainant department? – From the evidence on record, it is clear that complainant has failed to prove that accused no 2 Sh. Pradeep Kumar Jain as Managing director for the relevant period, the service of notice and order under section 2 (35) Income Tax Act, 1961 on accused no 2 is not proved and the document Form 27A shows that it was Mr. Yoginder Singh who was responsible for the deduction and collection of TDS. In view of the aforesaid, accused no 2 Sh. Pradeep Kumar Jain is given benefit of doubt and acquitted for the offence u/s 276B r/w S. 278B of the Income Tax Act, 1961. Financial Difficulties – As the case of accused will be covered u/s 278 AA of the Income Tax Act, if he is able to prove the reasonable cause existed when the default was committed. There is initial onus on prosecution to establish the ingredients of offence alleged and prove absence of the reasonable cause on the part of the accused / assessee. The reasonable cause shall be fair, not absurd, not irrational and not ridiculous. Reasonable cause would mean a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or for want of bonafides. The tax deducted as source cannot be equated with the payment of other liabilities like service tax or sales tax whose payment may be dependent upon the actual realization of money. TDS is deducted in advance by the assessed before making any payment for the scheduled items. The assessee acts as custodian of tax/TDS amount and needs to deposit the same within stipulated period as per Rule 30. Merely because the business suffered from recession and the working capital stifled, cannot be a termed as sufficient cause for nonpayment of TDS amount. A company cannot be permitted to use the TDS amount for channelizing and fulfilling its working capital deficit. DW1 Sh Ashish Verma in his cross examination admitted that the company was making payment of various loans to its directors and its associate companies during the relevant period. Therefore, when the company is able to discharge its other liabilities, the ground for recession cannot be cited as an excuse for nonpayment of the TDS amount. In the sanction order Ex CW1/2 the CIT (TDS) has also appreciated the financial exigencies cited by the company and has concluded that the payment of TDS has nothing to do with the liquidity of the deductor company. Though the audit reports DW1/3 to DW1/6 specifies the liabilities and the loans of the accused no 1 company, but it does not pinpoint the reasons for failure make the payment of TDS amount. Reasonable cause would mean a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or for want of bonafide. In present facts and circumstances the company has failed to show any circumstances which has prevented the company from payment of TDS amount especially when the payment to the associate companies and directors were continuing. Merely because there was recession in the market cannot be considered as reasonable cause for noncompliances because a company is supposed to keep its working capital reserves or overdraft facilities to meet these lean period patches. The case of the accused company is clearly not covered u/s 278AA Income Tax Act, 1961 and accordingly the accused no 1 company is convicted for the offence u/s 276 B Income Tax Act, 1961 for delay in depositing the of the TDS amount. |
| Prosecution u/s 276-B – failure to remit the tax deducted at source during the financial year 2010-2011 and 2011-2012 –
KARNATAKA HIGH COURT DR. VILOO PATELL AND AVESTHAGEN LIMITED VERSUS INCOME TAX DEPARTMENT No.- Writ Petition No. 47514 Of 2017(GM-RES) Dated.- September 6, 2019 |
as per petitioner show-cause notice is issued in respect of nine companies whereas the prosecution is launched only against the petitioners which is legally untenable – HELD THAT:- After narrating the circumstances of notice, it is stated therein that the said notice was issued to convey the intention of the Department to treat him as the Principal Officer of the above companies. It is not a show cause notice. On the other hand, in the complaint, it is specifically stated that show cause notice was issued to accused on 14.08.2013. Petitioner has not referred to the said document. Therefore, the argument of learned counsel for petitioners based on Annexure-‘B’ is totally misconceived and cannot be a ground to quash the proceedings.
Show cause notice was issued only to petitioner No.1 namely Managing Director and not to the Company – petitioner No.2 and in that view also, the prosecution launched against the petitioners are defective and contrary to section 276 – Second contention urged by petitioners is also misconceived for the reason that the said argument is also built upon Annexure-‘B’. Learned counsel has based his argument on the impression that under the said intimation, a joint notice was issued to all the Companies; but it is not so. On the other hand, order passed under section 201(1) and 201(1A) (Annexure-‘E’) makes it evident that the order was passed only against petitioner – Company and not against all the Companies as contended by learned counsel for petitioners. Therefore, even this plea is liable to be rejected. Tax deducted at source by the petitioners was remitted much earlier to the issuance of sanction order, which fact is not reflected in the sanction order indicating that the sanction order has been issued without application of mind – Coming to the next contention that the sanction order issued for prosecution of petitioners does not reflect application of mind is concerned, I have gone through the said sanction order wherein the Commissioner of Income Tax/ Sanctioning Authority has narrated the facts of the case, referred to provisions of law applicable to the facts and has observed that an opportunity was given to the assessee in default to make the payment. If any amount was paid pursuant to the said show cause notice, the proof thereof could have been produced by petitioners so as to avoid criminal prosecution. There is nothing on record to show that the remittances made by petitioners have been brought to the notice of the Central Government. Petitioners has produced the copies of the communication obtained from the Office of Assistant Commissioner of Income Tax (TDS), Circle-I(1), Bangalore along with challan details report for making payments. It reflects that on 10.09.2014 a sum of ₹ 1,52,675/- and another sum of Rs,1,69,974/- was remitted not by the petitioners herein, but by Avestha Gengraine Technologies Private Limited. The said remittances do not relate to the case in hand. As a result, even the sanction order does not reflect any errors warranting interference by this Court. Hence, this argument is also rejected. Section provides for mandatory term of imprisonment coupled with fine in respect of the offences committed by a company – The last contention, urged by learned counsel for petitioners is no more res integra in view of the Constitution Bench decision of the Hon’ble Supreme Court in Standard Chartered Bank v. Directorate of Enforcement [2005 – SUPREME COURT] we hold that there is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for which the punishment prescribed is mandatory imprisonment |
| Compounding of offence u/s 276-B – approval for compounding u/s 279(2) with a direction for payment of compounding charges – guidelines issued by CBDT (F.No.285/35/2013 IT) dated 23/12/2014 – compounding fees as first application @ 3% OR as second (subsequent) application @ 5% – failure to pay the TDS/TCS –
MADHYA PRADESH HIGH COURT-M/S. PEB STEEL LLOYD (INDIA) LTD. VERSUS PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX-[2020] 423 ITR 29 (MP) No.- Writ Petition No.3813/2019 Dated.- April 29, 2019 |
HELD THAT:- The petitioner did submitted an application for compounding fees for the Financial Year 2013-14 and 2014-15 on 19/07/2017 in the office of Dy CIT (TDS), Indore instead of submitting it before the CCIT/DGIT and it was a mandatory requirement to submit an application before the CCIT (Pr. CCIT, Bhopal) keeping in view the instructions dated 02/11/2018 and also as per the Income Tax Act, 1961.
Later on again an application was filed for Financial Year 2013-14 and 2014-15 on 15/01/2018, which was received in the office of Pr. CIT on 17/01/2018. Not only this, the petitioner also submitted an application for compounding in respect of Financial Year 2015-16 on 16/10/2017 and thereafter, he submitted an application for compounding offence in respect of Financial Year 2013-14 and 2014-15 on 15/01/2018, which was received on 17/01/2018. Hence, the Pr. CCIT was justified in levying compounding fee for the aforesaid financial years treating the same as second occasion. Order passed by Pr. CCIT is in consonance with the guidelines issued by the Central Board of Direct Taxes. The guidelines issued by the CBDT for the purposes of compounding fee have not been struck down in any of the judgment. It is purely a question of fact i.e. whether, the application should be treated as second application for the Financial Year 2013-14 and 2014-15 or as first application. Pr. CCIT was justified in treating the application as second applications / occasions and therefore, this Court does not find any reason to interfere with the order passed by the Pr. CCIT. The writ petition is accordingly dismissed. |
| Offences punishable u/s 276B r.w.s. 278B of the Income-tax Act, 1961 – non-payment of tax deducted at source – whether the prosecution of the petitioners for the offence punishable under section 276B of the Income-tax Act could be sustained without determination of the liability of the petitioners under section 201?
KARNATAKA HIGH COURT- – [2019] 416 ITR 399 (Kar)- No.- Criminal Petition No. 868 of 2014 Dated.- April 26, 2019 |
HELD THAT:- In order to get over the penal consequences that follow on account of non-payment of tax deducted at source, it is open for the accused persons to come clean of the said charge by showing reasonable cause for failure to deposit the said amount. In the light of this provision, contentions urged by the learned counsel for the petitioners cannot be accepted.
Since the material placed on record prima facie discloses that the petitioners have deducted tax at source but failed to credit the same to the account of the Central Government within the prescribed time, the petitioners cannot escape from the rigour of section 276B of the Act. The alternative argument canvassed by petitioners that without determining the penalty, the respondent was not entitled to resort to criminal prosecution of the petitioners under section 276B also cannot be accepted for the reason that the petitioners/ accused have not disputed their liability. The question of determining the liability and consequent imposition of penalty would arise only in the case of dispute with regard to the liability to remit the deducted tax. In the instant case, the facts alleged in the complaint clearly indicate that the amount was credited subsequent to the survey. As a result, even this defence is not available to the petitioners. Contention urged by the petitioners that the circular/instruction issued by the Department have binding force though needs to be accepted as a principle of law, but in the instant case, none of the parties have placed the said instruction or circular for perusal of this court. No material is available to show that the petitioner No. 1-company has deposited the amount within the extended time. On the other hand, the allegations are to the effect that survey itself was conducted on September 27, 2011. According to prosecution, the amount was deposited subsequent to survey conducted by the Department. Under the said circumstances, even on question of fact, the above principle does not come to the aid of the petitioners. As a result, no merit in the contentions urged by the petitioners. Consequently, the petition is dismissed. |
| Prosecution u/s 276B r.w.s. 278B – failure to deposit TDS deducted to govt account – consequences of failure to deduct or pay u/s 201
KARNATAKA HIGH COURT ONORA HOSPITALITY PVT. LTD. VERSUS ASSISTANT COMMISSIONER INCOME TAX DEPARTMENT (TDS) CIRCLE 2 (1) No.- CRIMINAL PETITION NO. 5202/2015 Dated.- April 5, 2019 |
HELD THAT:- In order to get over the penal consequences that follow on account of non-payment of tax deducted at source, it is open for the accused persons to come clean of the said charge by showing reasonable cause for failure to deposit the said amount. In the light of this provision, contentions urged by the learned counsel for the petitioners cannot be accepted.
Since the material placed on record prima facie discloses that the petitioners have deducted tax at source but failed to credit the same to the account of the Central Government within the prescribed time, the petitioners cannot escape from the rigour of Section 276B. Alternative argument canvassed by the petitioners that without determining the penalty, the respondent was not entitled to resort to criminal prosecution of the petitioners u/s 276B, also cannot be accepted for the reason that the petitioners/accused have not disputed their liability. The question of determining the liability and consequent imposition of penalty would arise only in case of dispute with regard to the liability to remit the deducted tax. In the instant case, the facts alleged in the complaint clearly indicate that the amount was credited subsequent to the survey. As a result, even this defence is not available to the petitioners. Lastly, the contention urged by the petitioners that the circular/instruction issued by the department have binding force though needs to be accepted as a principle of law, but in the instant case, none of the parties have placed the said instruction or circular for perusal of this Court. No material is available to show that the petitioner No.1-Company has deposited the amount within the extended time. On the other hand, the allegations are to the effect that survey itself was conducted on 20.09.2014. According to prosecution, the amount was deposited subsequent to survey conducted by the Department. Under the said circumstances, even on question of fact, the above principle does not come to the aid of the petitioners. As a result, no merit in the contentions urged by petitioners. – Decided against assessee |
| Compounding of offences – default u/s 276B read with section 278B – delay in depositing the tax deducted at source – compounding applications rejected on the ground that nobody attended the proceedings when the first application was being taken up and the subsequent fresh applications cannot be entertained as the first one was rejected
BOMBAY HIGH COURT DURGESHWARI HI-RISE & FARMS DURGESHWARI HI-RISE & FARMS VERSUS THE CHIEF COMMISSIONER OF INCOME TAX (TDS) AND ANR. No.- WRIT PETITION NO. 10973 OF 2018 Dated.- October 23, 2018
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Held that:- We do not find that the respondents have applied their mind to the compounding applications by dealing with the merits thereof. The applications have been dismissed only on the ground that nobody attended the proceedings when the first application was being taken up and the subsequent fresh applications cannot be entertained as the first one was rejected. All this hardly indicates any application of mind.
It is in these circumstances and in facts peculiar to this case, without this order being treated as a precedent, we allow the writ petition. We direct that the application for compounding the offences made as early as on 20th February, 2014 (Exhibit ‘K’) be considered and a fresh order be passed thereon as expeditiously as possible and in any event within a period of two months from the date the petitioners pay the requisite fees on that application. The application shall be decided by a speaking order. |
| Compounding of offences punishable u/s 276B r.w.s.278B – admitted default in deposit of TDS – lapse of over 12 to 17 months – Proof of mens rea to deprive the State or to withhold public monies for private good
– petitioner retained and misappropriated the monies for that period and illegally enjoyed the benefits therefrom – petitioner submits that upon the petitioner realising its mistake, on its own it paid all the monies into the Treasury DELHI HIGH COURT VIRAJ EXPORTS P. LTD. VERSUS INCOME TAX OFFICE (ITO) THR. NARINDER JUYAL No.- CRL. REV. P. 340/2018 & Crl. M. (Bail) No. 641/2018, CRL. REV. P. 341/2018 & Crl. M. (Bail) No. 642/2018 and CRL. REV. P. 342/2018 & Crl. M. (Bail) No. 643/2018 Dated.- October 15, 2018
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HELD THAT:- Court is not persuaded by the petitioner‟s arguments, because the monies belong to the Government, and the petitioner could not have held on it because it knew fully well of the imperative to deposit it as per statutory requirements. Instead, it misused the government monies for its private benefits. If it had discovered that it had to pay the monies after 6 months or 8 months or 12 months or 17 months or whenever the “so-called” realization dawned upon it, it should have explained the same to the Income Tax Department, prior to the issuance of the show-cause notice.
It is only upon the petitioner‟s taking such action, its plea of bona fides may have been considered. There could be no bona fides when a petitioner is issued a show-cause notice after 4 or 5 years of such default. The Court would note that the monies were due in the Government Treasury in the year 2009, which was offered in the year 2011 or so. Income Tax Department noticed the anomaly in the refund of monies much later. If the petitioner raises the plea of financial inability as a constraint for not paying the collected TDS earlier on account of bankruptcy of his importers, then the submission implies that it surely was aware of its statutory liability to deposit the TDS with the Income Tax Department. The argument of absence of mens rea is untenable, in view of the conflicting pleas of inadvertent lapse and simultaneous financial hardship. Hence, a show-cause notice was issued on 28.07.2014. It was open to the petitioner to have intimated the Income Tax Authorities about his alleged lapse and the difficulties in recovering such monies from his importers, who had become bankrupt. Be that as it may, the bankruptcy of a foreign company has nothing to do with the TDS in India – the Court finds no infirmity in the aforesaid reasoning. There is no merit in the petitions. Accordingly, the petitions, alongwith pending applications, stand dismissed. |
| Compounding of offense u/s 276B – failure to deposit the compounding amount – Failure to deposit the amount of TDS, after collection to the government account – initiation of prosecution proceedings under the provisions of Chapter XVIIB of the Income Tax Act, 1961 – The main grievance of the petitioners is that when there is a genuine dispute about the quantum of compounding fee payable by them, it was not open to the respondents to reject the application for compounding, without first resolving the dispute.
TELANGANA AND ANDHRA PRADESH HIGH COURT M/S SAGAR ASIA PVT. LTD., MR. V. VIDYASAGAR, S/O MR. V. AYODHYA RAMULU VERSUS THE PRL. CHIEF COMMISSIONER OF INCOME TAX, A.P. & TELANGANA, HYDERABAD, No.- Writ Petition No.14702 of 2018 Dated.- May 1, 2018 |
Held that:- The amount of compounding fee is statutorily fixed. The question of raising any dispute on the same does not arise. Actually, the dispute with regard to the quantum raised by the petitioners was on the basis of a CBDT Circular – But these guidelines are applicable only to compounding applications filed after 01-01-2015. The application of the petitioners in this case was filed on 26-8-2014. Therefore, the compounding fee was liable to be calculated at the rate of 5%, as per the guidelines existing as on the date of filing of the compounding application.
It appears that the compounding fee was stipulated at 5% at the time when the petitioners filed their application for compounding. It was reduced to 3%, after 01-01-2015. Today, the petitioners want to apply the CBDT guidelines to their case, taking the date of acceptance of the application for compounding as the basis. – But the above claim of the petitioners is an argument of convenience. Every proposition of law could prove to be a double edged weapon, but it can never be invoked or condemned depending upon convenience or consequences. Therefore, the 1st respondent was right in applying the guidelines that were in existence as on the date of the filing of the compounding application and the petitioners cannot question the correctness of the same. It is not too late for the petitioners to mend their ways. – the petitioners could be permitted to pay the compounding fee and get the offence compounded. – Decided partly in favor of assessee |
| Cognizance of the offence u/s 276B – after lapse of about three years from the date of deposit of due tax and interest –
PATNA HIGH COURT- SONALI AUTOS PRIVATE LIMITED VERSUS THE STATE OF BIHAR, THE COMMISSIONER OF INCOME TAX, TDS CIRCLE, PATNA, THE DEPUTY COMMISSIONER OF INCOME TAX, TDS CIRCLE, PATNA No.- Criminal Miscellaneous No. 16498 of 2014 Dated.- August 2, 2017 |
Held that:- Petitioner immediately deposited the amount of tax along with interest in the year 2010 itself. Section 278AA specifically says that no person shall be punished for any failure referred to under the said provisions if the assessee proves that there was reasonable cause for such failure. Reasonable cause would mean a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bonafides.
Oversight on the part of the Accountant, who was appointed to deal with Accounts and Income Tax matters, can be presumed to be a reasonable cause for not depositing the tax within time. The petitioner immediately after noticing the aforesaid defects by the Statutory Auditors of the petitioner-company deposited the amount of ₹ 1,43,029/- along with interest amounting to ₹ 23,595/- as required under Section 201(1A) of the Act in the year 2010 itself. Instant prosecution has been launched against the petitioner on 14.05.2013 after lapse of about three years from the date of deposit of due tax along with interest by the petitioner under Section 201(1A) of the Act, which is contrary to the instructions bearing F. No.255/339/79-IT (Inv.) dated 28.05.1980 (Annexure-1 to the Counter Affidavit) issued by the CBDT in this regard. Moreover, Section 278 AA clearly states that no person for any failure referred to under Section 276 B of the Act shall be punished under the said provisions if he proves that there was reasonable cause for such failure. This Court on the basis of explanation submitted by the petitioner, as mentioned above, is of the view that the petitioner has been able to prove the reasonable cause for not depositing the aforesaid tax amount within the specified time limit. This Court is of view that continuance of the criminal proceeding against the petitioner is mere harassment to him and abuse of process of the Court. |
| Prosecution proceedings under section 276B – tax deducted by the petitioner of an amount of ₹ 1.04 crores had been deposited by it into the Central Government Account after the due date prescribed under the Income Tax Act, 1961
PUNJAB & HARYANA HIGH COURT M/S KUDOS CHEMIE LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME TAX (TDS) , CHANDIGARH No.- Civil Writ Petition No. 26441 of 2014 (O&M) Dated.- May 12, 2015 |
Held that:- Sub section (1) of Section 279 provides that a person shall not be proceeded against for an offence under section 276B “except with the previous sanction of the Commissioner or Commissioner (Appeals) or the appropriate authority”. Thus, if there is no sanction from the Commissioner or Commissioner (Appeals) or the appropriate authority, a person cannot be proceeded against for an offence under section 276B. This indicates that launching a prosecution is not mandatory. Sub section (1) clearly contemplates cases where prosecution may not be launched though there is a failure as contemplated by section 276B.
That it is not mandatory to launch prosecution proceedings is clearer still from sub section (2) of Section 279 of the Act which provides that any offence under the Chapter, which includes one under section 276B, may be compounded by the Chief Commissioner or a Director General “before or after institution of proceedings”. The authority to compound the offence before institution of the proceedings makes it abundantly clear that it is left to the discretion of the authorities concerned whether or not to institute prosecution proceedings in respect of an offence under section 276B of the Act. If the offence is compounded before institution of the proceedings there would be no question thereafter of instituting proceedings for a failure referred to in section 276B of the Act. Even assuming, therefore, that there was an offence by the petitioner as alleged in the show cause notice, it is not necessary that the prosecution proceedings would be launched against it. It will be open, for the petitioner to contend that in the facts and circumstances of the case it ought not to be proceeded against for the alleged failure referred to in section 276B of the Act. It would also be open to the petitioner to apply to have the offence, if any, compounded. If the application is accepted, there would be no question of instituting prosecution against the petitioner.These are issues, however, which must in the first instance be decided by the authorities under the Act. Interference with the show cause notice at this stage is not warranted – Decided in favour of assessee. |
| SUPREME COURT
[2007] 290 ITR 199 (SC) MADHUMILAN SYNTAX LIMITED AND OTHERS VERSUS UNION OF INDIA AND ANOTHER-Dated.- March 23, 2007 |
Failure to credit TDS to the Central Government as required by section 276B – The appellants had thus committed an offence punishable under section 278B – We may not be understood to have expressed any opinion one way or the other on the merits and as and when the matter will come up for trial, it will be decided strictly on its own merits – question raised by the appellants have to be decided as to maintainability of the criminal complaint |
| DELHI HIGH COURT
[2008] 303 ITR 86 (Delhi) SUSHIL SURI AND SANJAY SURI VERSUS STATE AND OTHERS No.- 323-28 and 337 of 2005 Dated.- November 6, 2006 |
Default in depositing TDS – offence – summoning order – held that a Managing Director was a “principal officer” of a company and that if he signs and verifies a return on behalf of the company which later turns out to be false, he would be liable – there is not need to issue separate notice to Managing Director – prosecution could continue in respect of petitioner, Managing Director and the company – but summoning order against those who are not “principal officer” is set aside |
| SUPREME COURT
[2004] 265 ITR 562 (SC), 2004 (2) SCC 731 KC BUILDERS AND ANOTHER VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX No.- CRL.A. 212 OF 1998 Dated.- January 28, 2004 |
Once the finding of concealment and subsequent levy of penalties under section 271(1)(c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order under section 154 of the Act as per the directions of the Tribunal – When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants cannot survive for further consideration |
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