2022 (3) TMI 83 - HC - Income Tax

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 - 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 1970 (8) TMI 83 - SUPREME COURT and Dayle De souza 2021 (11) TMI 67 - 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.

Issues Involved:
1. Quashing of the entire criminal proceeding, including the order dated 08.12.2017.
2. Prosecution under Sections 276(B) and 278(B) of the Income Tax Act.
3. Delay in depositing TDS and its implications.
4. Applicability of Section 202 Cr.P.C.
5. Vicarious liability under Section 278(B) of the Income Tax Act.
6. Civil liability vs. criminal liability in the context of TDS.
7. Interpretation of "in-charge" under Section 278(B) of the Income Tax Act.
8. Application of Section 95 of the Indian Penal Code.

Detailed Analysis:

1. Quashing of the entire criminal proceeding, including the order dated 08.12.2017:
The petitioners sought to quash the entire criminal proceeding, including the cognizance order dated 08.12.2017, passed by the Special Judge, Economic Offences, Dhanbad. The court examined the materials on record and concluded that the initiation of payment of TDS was made within the prescribed time, although the credit to the Central Government's account occurred the next day. The court found that the liability could not be fastened upon the petitioners, as the delay was not significant and interest for one day had already been paid.

2. Prosecution under Sections 276(B) and 278(B) of the Income Tax Act:
The prosecution was initiated under Sections 276(B) and 278(B) of the Income Tax Act for delayed credit of TDS. Section 276(B) prescribes punishment for failure to credit the deducted amount to the Central Government's account. The court noted that the petitioners had taken steps to credit the amount within the prescribed time, and the delay was only due to the banking hours.

3. Delay in depositing TDS and its implications:
The court acknowledged that the TDS amount was credited to the Central Government's account on 08.03.2013, although the payment initiation was done on 07.03.2013. The court emphasized that the interest for the one-day delay had been paid, and the delay was not substantial enough to warrant prosecution.

4. Applicability of Section 202 Cr.P.C.:
The petitioners argued that the Magistrate failed to comply with the mandatory requirement of Section 202 Cr.P.C., as the petitioner No. 2 was stationed in Mumbai, outside the Magistrate's territorial jurisdiction. The court agreed with this argument, citing the Supreme Court's decisions in Udai Shankar Awasthi v. State of U.P. and Vijay Dhanuka v. Najima Mamtaj, which held that the provisions of Section 202 Cr.P.C. are mandatory.

5. Vicarious liability under Section 278(B) of the Income Tax Act:
The court examined the applicability of Section 278(B) of the Income Tax Act, which deals with offenses committed by companies. It noted that the complaint did not disclose how petitioner No. 2 was overall in-charge of the business. The court relied on the Supreme Court's decisions in Girdhari Lal Gupta v. D.H. Mehta and Dayle De’souza v. Government of India, which interpreted "in-charge" to mean a person with overall control of the company's day-to-day business.

6. Civil liability vs. criminal liability in the context of TDS:
The court distinguished between civil liability (paying interest for delayed TDS) and criminal liability (prosecution for not depositing TDS). It referred to the Bombay High Court's decision in Income Tax Officer v. Sultan Enterprises, which held that recovery of the TDS amount with interest and penalty does not preclude criminal prosecution under Section 276B of the Income Tax Act.

7. Interpretation of "in-charge" under Section 278(B) of the Income Tax Act:
The court emphasized that Section 278(B) requires the person to be in overall control of the company's business to be held liable. It found that the complaint did not establish that petitioner No. 2 was in such a position, and thus, the prosecution under Section 278(B) was not warranted.

8. Application of Section 95 of the Indian Penal Code:
The petitioners argued that the harm caused by the one-day delay in crediting the TDS amount was so slight that no person of ordinary sense and temper would complain, invoking Section 95 of the Indian Penal Code. The court agreed, noting that the interest for the delay had already been paid, and thus, the harm was negligible.

Conclusion:
The court quashed the entire criminal proceeding, including the order dated 08.12.2017, against the petitioners for offenses under Sections 276(B) and 278(B) of the Income Tax Act, and allowed the criminal miscellaneous petition.

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