JUDGMENT

C.K. THAKKER, J.

The present appeal is filed by the appellants against an order passed by the High Court of Madhya Pradesh (Indore Bench) on March 12, 1999 rejecting in limine Miscellaneous Criminal Petition No. 4730 of 1998.

The facts giving rise to the present appeal are that appellant No.1 Madhumilan Syntex Ltd. is a Public Limited Company registered under the Companies Act, 1956. Appellant Nos. 2 to 4 are its Directors. Appellant-Company deals in the production and business of yarn at Madhumilan Cinema Building, Ahata. The tax assessment of the Company is done by the Deputy Commissioner of Income Tax (Tax Assessment), Special Range No.1, Indore. It was the case of the respondents that for the Assessment Year 1989-90, Returns were submitted by the Company on December 29, 1989. On verification of the Returns, it was found that though an amount of Rs.1,29,348/- was deducted by the Company as Tax Deducted at Source (TDS for short), it was not credited by the Company in the account of the Central Government as required by Sections 194C and 200 of the Income Tax Act, 1961 (hereinafter referred to as the Act) read with Rule 30 of the Income Tax Rules, 1962 (hereinafter referred to as "the Rules"). It is, however, not in dispute that the amount of TDS was credited by the Company with interest later on. But there was delay on the part of the Company in depositing such amount. Income Tax Officer (TDS), Bhopal, therefore, issued a notice to the appellants on March 11, 1999 alleging therein that there was failure to credit TDS to the Central Government as required by Section 276B of the Act by them. The appellants had thus committed an offence punishable under Section 278B of the Act. A show-cause notice was, therefore, issued against the appellant-Company as also against appellant Nos. 2 to 4 (and one Smt. Chandraprabha Modi) being principal officers of the appellant-Company. The Income Tax Officer, TDS, Bhopal asked the appellants to show-cause as to why proceedings should not be initiated against them. The appellants were asked to submit their reply on or before March 18, 1991 failing which it would be presumed that they had nothing to say in the matter and action would be taken accordingly. It was also stated in the notice that the appellant Nos. 2 to 4 (and Smt. Chandraprabha Modi) were to be considered as principal officer within the meaning of Section 2(35) of the Act.

The appellants filed a reply to the show-cause notice raising various objections. It was, inter alia, contended that they had not committed any offence nor violated provisions of the Act. It was stated that it was not a case of no payment of TDS. The amount of tax along with interest had been paid and statutory provisions had been complied with. There was some delay in receiving loan from Industrial Development Bank of India (IDBI) due to which TDS could not be paid in time. Moreover, because of construction of one unit by the Company, there was shortage of liquid funds and hence the payment could not be made. There was thus a reasonable cause for non-payment of amount within the prescribed period but the payment had been made with interest and there was no loss to Revenue. It was, therefore, submitted that no case had been made out for taking action against the appellants and notice was required to be revoked. The Commissioner of Income Tax, Bhopal-respondent No. 2 herein, vide his order dated February 4, 1992 granted sanction to prosecute appellants under Section 279 of the Act observing therein that the assessee had committed default under Section 194C of the Act in paying TDS to the credit of the Central Government. It was also observed that the reason put forward by the Company was not correct. He, therefore, granted sanction to prosecute the appellant-Company as well as the Directors of the Company. In view of sanction to prosecute, accorded by the Commissioner, a complaint was filed against the appellants on February 26, 1992 in the Court of the A