2019 (4) TMI 1857 - HC - Income Tax

Offence punishable u/s 278B(a) r/w 278 B - non deposit of TDS amount within the prescribed time - willful attempt to evade payment of TDS amount OR not - HELD THAT - In the case on hand, the offence in question related to non deposit of TDS amount within the prescribed time. It amounts to the offence punishable under Section 276B(a) r/w 278B of the Income Tax Act 1961. Though the Act provides for imposition of penalty for non payment of tax, it does not take away the power to prosecute accused persons if the offence has been committed by them. Circular dated 07.02.2013, vide F.No.285/90/2013- IT(Inv.) issued for the procedure for prosecution in case of TDS default, in which where the tax deducted in between ₹ 25,000/- and ₹ 1,00,000/- and the same is not deposited by the due date prescribed under the Income Tax may be processed for prosecution depend upon the facts and circumstances of cases like repeated defaults and/or tax has not been deposited till detection. Thus, the petitioners have committed the offence punishable under Section 276B(a) r/w 278B of the Income Tax Act 1961. Therefore the grounds raised by the petitioners cannot be considered and the petition is liable to be dismissed. Considering the facts and circumstances of the case, the trial Court is directed to complete the trial proceeding within a period of six months from the date of the receipt of a copy of this Order.

Issues Involved:
1. Maintainability of the complaint under Section 276B(a) r/w 278B of the Income Tax Act, 1961.
2. Prima facie case against the petitioners for prosecution.
3. Jurisdiction and authority to initiate criminal action.
4. Timeliness and legitimacy of TDS remittance.
5. Applicability of penalties and prosecution for non-payment of TDS.

Detailed Analysis:

1. Maintainability of the Complaint:
The petitioners argued that the complaint under Section 276B(a) r/w 278B of the Income Tax Act, 1961, was not maintainable as no prima facie case was made out. They contended that they had remitted the TDS amount on rents and salaries paid, and hence, no provisions of the Income Tax Act were attracted against them. Additionally, they claimed that since the assessment was completed to the satisfaction of the authority, there was no withholding of information, suppression of income, or evasion of tax, making the prosecution unwarranted.

2. Prima Facie Case Against the Petitioners:
The respondent, represented by the Special Public Prosecutor (Income Tax), countered that the petitioners had indeed deducted TDS amounting to ?16,46,579/- but failed to remit it to the Central Government within the stipulated time. The petitioners admitted the belated payment of TDS and sought pardon, citing ignorance of the law. The respondent argued that the petitioners' admission of delayed payment and lack of proper accounting challans substantiated the prima facie case for prosecution under Section 276B(a) r/w 278B of the Income Tax Act.

3. Jurisdiction and Authority to Initiate Criminal Action:
The petitioners claimed that the revenue had no jurisdiction to initiate criminal action once the assessment was completed. They argued that the time limit for concluding assessment proceedings was two years from the end of the assessment year, and no willful attempt to evade payment of TDS was made. The respondent, however, maintained that the failure to remit TDS within the prescribed period warranted prosecution, irrespective of the assessment's completion.

4. Timeliness and Legitimacy of TDS Remittance:
The court noted that the petitioners had filed a compounding application, which was later withdrawn due to financial constraints. The petitioners' admission of belated payment to the respondent indicated a breach of Sections 200 and 204 r/w Rule 30 of the Income Tax Rules. The court emphasized that the assessment proceedings involved determining taxes payable and were unrelated to the remission of TDS deducted, which was a legitimate due payable to the exchequer.

5. Applicability of Penalties and Prosecution for Non-Payment of TDS:
The court referenced several judgments to highlight that the imposition of penalties for non-payment of tax did not preclude the power to prosecute. The Supreme Court's judgment in Madumilan Syntex Ltd & ors Vs. Union of India stated that non-payment within the stipulated period constituted a default, warranting prosecution. Similarly, the judgment in Universal Supply Corporation and Ors. vs. State of Rajasthan and Anr. established that interest/penalty proceedings and prosecution under the Income Tax Act were independent, and charging interest did not obliterate prosecution. The court concluded that the petitioners' actions amounted to an offence punishable under Section 276B(a) r/w 278B of the Income Tax Act, 1961.

Conclusion:
The court dismissed the petition for quashing the proceedings, directing the trial court to complete the trial within six months. The petitioners' failure to remit TDS within the prescribed period, despite admitting the belated payment, substantiated the prosecution's case under the relevant sections of the Income Tax Act. Consequently, the Criminal Original Petition was dismissed, and connected miscellaneous petitions were closed.

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