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TMI Blog2003 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... at source during the criminal trial to avail of the benefit of section 278AA - appeal and the connected application are accordingly dismissed. - - - - - Dated:- 29-7-2003 - Judge(s) : ALTAMAS KABIR., ALOK KUMAR BASU. JUDGMENT ALTAMAS KABIR J.-As the appeal involves a question of law, on consent of the parties the appeal itself was taken up for consideration along with the application for stay of operation of the judgment and order dated June 11, 2003, passed by the learned single judge on the writ petition filed by the appellant herein, being W.P. No. 992 of 2003 (Shaw Wallace and Co. Ltd. v. CIT (TDS) (No. 1) [2003] 264 ITR 241). In the writ petition the appellant-company challenged the decision of the respondents to initiate pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in instalments without imposition of penalty and that the company had honoured the commitment and had paid off the entire outstanding dues. Mr. Sarkar submitted that the conduct of the appellant-company did not warrant prosecution for the default in question. Mr. Sarkar contended that the prosecution for default in paying tax deducted at source to the credit of the Central Government did not automatically follow such default and the provision had, therefore, been made under section 279 of the Income-tax Act for sanction to be granted for such prosecution by the Chief Commissioner. Mr. Sarkar urged that it had repeatedly been held by the courts that whenever the decision was left to the subjective satisfaction of a statutory authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48, wherein also sanction for grant of prosecution under section 276B of the Income-tax Act was under challenge. Referring to the provisions of section 278AA of the said Act, the learned judge observed that in the case of Basdeo Agarwalla v. Emperor, AIR 1945 FC 16, it had been observed that the sanction under the Act was not intended to be an automatic formality and it was essential that the provisions in regard to the sanction should be observed with complete strictness. The learned judge observed further that since the validity of the sanction depends on the application of mind by the sanctioning authority to the facts of the case, as also the material evidence collected during the investigation, it must follow that the sanctioning autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry basis for the prosecution had not been validly granted. Mr. Sarkar submitted that the decision to initiate prosecution for the default in paying tax deducted at source to the Central Government for the financial years in question had not been communicated to the appellant company despite the company having been asked to show cause. Mr. Sarkar added that while the sanctioning authority was not required to give a hearing before granting sanction, since it had chosen to do so, it was incumbent, in keeping with the principles of natural justice, to communicate its decision to the appellant-company. Mr. Sarkar urged that the decision to initiate prosecution against the appellant-company was liable to be quashed and the writ court had ampl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Lal Agarwal [1999] 238 ITR 461, where the same view has been expressed. Mr. Kapur submitted that in order to prevent frivolous prosecutions, certain safeguards had been engrafted in sections 278AA and 279 of the aforesaid Act and the concerned authority was required to satisfy himself fully on the materials placed before him that sanction for prosecution was required to be granted. It was urged that in the instant case, however, not only had it been admitted that default in terms of section 200 of the Act had been committed by the appellant-company, but the authority granting sanction for prosecution had considered the matter in extenso before granting such sanction. Mr. Kapur urged that once it had been admitted that default had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant to its benefit if it is able to prove that it had sufficient and good reasons for committing the default contemplated in section 200 of the said Act. Except for pleading financial hardship, there is no other reason provided by the appellant for such default. On the question of grant of sanction for prosecution, on which great stress has been laid by Mr. Sarkar, we are of the view that it would not be proper for us to make any observations in respect thereof in these writ proceedings, although we have had occasion to examine the sanction granted. We, therefore, refrain from doing so, since, in our view, the appellant will get ample opportunity to question the validity of the sanction at the time of trial. We see no reason to di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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