2023 (4) TMI 42 - HC - Income Tax

Prosecution u/s 276B read with Section 278B - rental and other payments made by the petitioner were subject to tax deduction but the tax deducted had not been deposited into the treasury as statutorily required - argument of the petitioner is that while admittedly there was some delay in remitting of taxes deducted in a significant number of instances, the rental and other amounts had been outstanding in some cases and in such an instance, the question of tax deduction does not arise. HELD THAT - The assessee had been given multiple and more than sufficient opportunities to explain its case before the authorities which were not assailed. It is only now, before this Court, that the petitioner pursues the explanation tendered in reply dated 23.03.2015. Revenue points out that there are admitted instances of delay and also that he is right. However, it is also a fact that the legal argument put forth by the petitioner in response dated 23.03.2015 has not been taken note of by the respondents. Thus, to balance the interest of both parties, as permit the petitioner to appear before the respondent on Friday i.e., 24.03.2023, without awaiting any further notice, on which date the respondents shall be heard on the legal submission. The impugned orders are set aside. Orders, as above shall be passed within a period of two weeks.

Summary

Issues involved: Challenge to order sanctioning prosecution under Section 276B read with Section 278B of the Income-Tax Act, 1961 for failure to deposit tax deducted at source.

Details of the judgment:

1. The petitioner, a Company, challenged an order sanctioning prosecution for failure to deposit tax deducted under the Income-Tax Act, 1961. The prosecution was proposed due to alleged non-deposit of tax deducted from rental and other payments made by the petitioner between April 2009 to February 2010.

2. The respondents relied on their system database to establish that tax was deducted but not deposited within the prescribed period. The petitioner argued that in cases where rental and other amounts were outstanding, the question of tax deduction did not arise. This argument was presented in a reply filed before the second respondent on 23.03.2015.

3. The petitioner contended that the delay in remitting taxes was due to outstanding amounts and losses incurred, not wilful misconduct. The officer's conclusion in the impugned order did not consider the specific submission that in some cases, no deduction was made as payments were not actually paid.

4. The legal submission made by the petitioner was supported by Section 276B of the Act, which deals with failure to pay taxes to the credit of the Central Government. The amendment to Section 276B in 1968 distinguished between the failure to deduct and failure to remit taxes.

5. The Court noted that the petitioner had been given sufficient opportunities to explain its case before the authorities. The Standing Counsel for the Revenue acknowledged instances of delay but did not address the legal argument put forth by the petitioner in its reply dated 23.03.2015.

6. In the interest of both parties, the Court permitted the petitioner to appear before the respondent for a hearing on the legal submission. The impugned orders were set aside, and new orders were to be passed within two weeks after considering any evidence filed by the petitioner.

7. The writ petitions were allowed, and no costs were awarded. Connected miscellaneous petitions were closed as a result of the judgment.