2024 (10) TMI 111 - HC - Income Tax

Summoning order u/s 278-B - delayed payment of Tax Deducted at Source (TDS) - Contention of applicants is that they had the liability of paying the Tax Deducted at Source amount which admittedly has been paid belatedly and beyond time but for which period they have also paid interest to the department. HELD THAT - As argued once admittedly the applicants have paid the TDS amount late as such, they are liable for the penal action as provided under the aforesaid provisions of the Act, 1961 and consequently, merely because they paid the interest for the delayed period, the same would not allow them to wriggle out of the strict provisions of the Act, 1961 and the prosecution which has been lodged against them for non compliance of the aforesaid provisions of the Act, 1961. Opposite Party also contends that the aforesaid circular may not come to rescue of the applicants inasmuch as the said circular would be applicable in normal circumstances but the applicants herein are habitual defaulter who have repeatedly delayed payment of the TDS amount within the time stipulated. Applicants states that the instant application may be disposed of with liberty to the applicants to raise the aforesaid argument before the learned trial Court and the learned trial Court may be directed to consider the said objections in accordance with law. To the aforesaid proposition, Opposite Party learned counsel for the respondents has no objection.

Summary

Issues:
Challenge to summoning order under Section 278-B of the Income Tax Act, 1961 based on delayed payment of Tax Deducted at Source (TDS). Interpretation of circular by Department of Revenue regarding prosecution for non-payment of TDS. Applicability of judgment in Madhumilan Syntex Ltd Vs. Union of India on timely payment of taxes. Consideration of habitual default in late TDS payments.

Analysis:
The judgment by the High Court of Allahabad dealt with a challenge to a summoning order issued under Section 278-B of the Income Tax Act, 1961, due to delayed payment of Tax Deducted at Source (TDS). The applicants argued that despite paying the TDS amount belatedly and with interest, the trial court erred in issuing the summoning order. They relied on a circular issued by the Department of Revenue, Central Board of Direct Taxes, Government of India, stating that prosecution for non-payment of TDS below Rs. 25 Lakhs and delayed by less than 60 days should not proceed under normal circumstances.

The applicants further cited a judgment by the Jharkhand High Court in a similar case, emphasizing that once the TDS amount has been deposited with interest, criminal proceedings should not continue. On the contrary, the respondents relied on the Supreme Court judgment in Madhumilan Syntex Ltd Vs. Union of India, asserting that timely payment of taxes is mandatory, and any delay constitutes a default subject to penal action under the Act. They argued that the circular may not apply to habitual defaulters who repeatedly delay TDS payments.

In response, the Senior Advocate for the applicants requested the court to dispose of the application with liberty to raise their arguments before the trial court. The court agreed, directing the trial court to consider the objections raised by the applicants in accordance with the law. The judgment did not provide a final decision but allowed the applicants to present their case before the trial court for further consideration.