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2023 (7) TMI 409 - HC - Income TaxProsecution u/s 276B and 278B - delay in depositing the TDS amount in the Central Government - as relying upon CBDT guideline issued in F No. 285/90/2008/IT(Inv.-I)/05 dated 24.04.2008 assessee submitted that there was no criminality on the part of the petitioner as the amount had been credited in the account of interest before issuance of notice - whether the petitioner has made out its case u/s 278AA? - A specific plea has been taken that as a result of restructuring the debt by IARC, petitioner no. 1 had lost all control over utilization of its fund and payments to be made. HELD THAT - As due restrictions were put in place by TRA agreement, the petitioner no. 1 was not in a position to take instant and prompt decision as all payments have to be rectified by IARC. Department has not taken any stand on this and controverted this part of the averment made in the petition in its counter affidavit. As argued on behalf of the Department that this is a subject where it can be considered at the stage of trial, but the question for consideration will arise only when there is denial of the said plea of reasonable cause. The petitioner claims that the notice to deposit the amount was issued on 14.11.2017 on the basis of the sanction order dated 11.12.2017 and before issuance of the notice, the amount was deposited with interest. The notice for prosecution of sanction was issued after the amount had been deposited by the petitioner with interest. Thus find force in the submission advanced on behalf of the petitioner that there was belated service of notice and there was sufficient cause which prevented the petitioner to deposit the TDS amount within the stipulated time. Accordingly, the cognizance order passed in Complaint Case is set aside. Decided in favour of assessee.
Issues Involved:
1. Quashing of criminal proceeding under Sections 276B and 278B of the Income Tax Act, 1961 based on delay in depositing TDS amount. 2. Application of CBDT guidelines and Section 278-AA of the Act for defense in the prosecution. Summary: The petition was filed to quash the criminal proceeding regarding the delay in depositing TDS amount under Sections 276B and 278B of the Income Tax Act, 1961. The petitioner, a company engaged in the beverage business, faced financial instability leading to delays in TDS deposit due to conditions imposed by a Trust and Retention Account (TRA) agreement. The defense also cited a circular stating prosecutions should not be proposed for insignificant amounts already deposited. The court noted previous judgments and guidelines emphasizing the importance of substantial defaults before initiating prosecution. The department argued that TDS was deducted but not deposited within the statutory period, following the standard operating procedure for prosecution. Notices were issued to the petitioner, but no response was received. The defense highlighted the restructuring of debts by International Asset Reconstruction Company affecting fund control and payments. The court considered the delay in TDS deposit and whether the petitioner had a reasonable cause under Section 278AA of the Act. It was found that the belated notice and valid reasons prevented timely deposit, leading to the quashing of the cognizance order dated 13.11.2017 in Complaint Case No. C 05 of 2017. The court allowed the criminal misc. petition, considering the circumstances and defenses presented by the petitioner, ultimately setting aside the cognizance order for the delay in TDS deposit.
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