2015 (5) TMI 589 - HC - Income Tax

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 - 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.

Summary

Issues:
1. Writ of certiorari to quash a show-cause notice dated 28/29.10.2014 issued by the respondent regarding delayed tax deposit.
2. Interpretation of Sections 276B and 279(1)(2) of the Income Tax Act, 1961.
3. Discretion of authorities in launching prosecution proceedings under section 276B.
4. Compounding of offences under the Act before or after institution of proceedings.

Analysis:
The judgment involves the petitioner seeking a writ of certiorari to quash a show-cause notice issued by the respondent regarding delayed tax deposit. The notice alleged that the petitioner deposited tax into the Central Government Account after the due date prescribed under the Income Tax Act, 1961. The court decided not to interfere at this stage, emphasizing that the petitioner should reply to the notice as various factual aspects need consideration. These include the dates of tax deduction and payment, and whether the delay warrants prosecution proceedings under section 276B of the Act. The court highlighted that prosecution is not mandatory in every case of default in tax deduction.

The judgment delves into the interpretation of Sections 276B and 279(1)(2) of the Income Tax Act, 1961. Section 279(1) specifies that prosecution under section 276B requires previous sanction from the Commissioner or appropriate authority, indicating that launching prosecution is not mandatory. The Proviso to section 279 allows the Chief Commissioner or Director General to issue instructions for proceedings, but they are not obligated to do so. Subsection (2) of Section 279 further clarifies that offences, including those under section 276B, can be compounded before or after institution of proceedings, demonstrating the discretionary power of authorities in deciding whether to prosecute.

The judgment emphasizes that even if an offence is established, prosecution proceedings are not obligatory. The petitioner can argue against prosecution based on the circumstances or apply to compound the offence. If the application is accepted, prosecution will not be pursued. The court underlines that these decisions rest with the authorities under the Act, and interference at this stage is unwarranted. The petitioner is granted time to take appropriate action if the decision is adverse, ensuring fairness in the process.

In conclusion, the writ petition is disposed of with a direction that if the decision goes against the petitioner, the respondents should refrain from implementation for six weeks. The judgment elucidates the discretionary nature of prosecution proceedings under the Income Tax Act, highlighting the importance of considering individual circumstances before initiating legal actions.