1991 (7) TMI 26 - HC - Income Tax

Summary

Issues:
1. Whether the failure to deduct income tax at the time of payment of interest is punishable under section 276B of the Income-tax Act, 1961.
2. Whether the amendment of the Act, which came into force on April 1, 1989, affects the liability for penalty in cases of failure to deduct income tax at source.
3. Whether pending prosecutions for failure to deduct income tax at source can be maintained after the introduction of new provisions.

Analysis:
1. The accused filed petitions under section 482 of the Criminal Procedure Code to quash the complaints against them for failure to deduct income tax at source under section 276B of the Income-tax Act, 1961. The complaints alleged that the accused, a firm and its managing partner, failed to deduct income tax from interest payments to various creditors, thereby committing an offense under section 276B. The Commissioner of Income-tax authorized the complaints under section 279(1) of the Act. The accused argued that post-amendment, failure to deduct income tax is not punishable under section 276B but is subject to penalty under section 271C. However, the court held that the prosecutions can survive despite the amendment, as there was no intention by the Legislature to erase pending prosecutions initiated under the previous provisions.

2. The defense contended that the amendment of the Act, effective from April 1, 1989, changed the authority for imposing penalties for failure to deduct income tax at source. The defense argued that the amendment shifted the penalty imposition authority from the Magistrate to the Deputy Commissioner of Income-tax under section 271C. The court rejected this argument, emphasizing that the amendment did not imply a repeal of earlier provisions regarding pending prosecutions. The court held that the accused could not escape liability based on the change in penalty imposition authority post-amendment.

3. The defense relied on legal principles related to the interpretation of statutes and implied repeal to support their argument that the pending prosecutions should be quashed due to the amendment. However, the court found these principles inapplicable to the case at hand. The court emphasized that an accused person should not evade punishment for proven offenses based on statutory amendments. Therefore, the court dismissed the petitions and upheld the prosecutions, stating that the propositions regarding the interpretation of statutes did not apply to the situation in question.