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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
MR. JUSTICE AVNEESH JHINGAN, MR. JUSTICE MANEESH SHARMA, JJ
Ms Fortune Infovision Pvt Ltd And Ors - Appellant
Versus
Dy Commissioner Of Income Tax And Anr - Respondent
D.B. Civil Writ Petition No. 11431/2018
Decided On : 18-03-2025
(A) Income Tax Act, 1961 - Section 279(1) - Writ petition challenging sanction for prosecution for failure to deduct and deposit Tax Deduction at Source (T.D.S.) - Delay in deposit of T.D.S. was rectified with interest - Court held that mere delay does not warrant prosecution if compliance is ultimately made - Reliance on Supreme Court decisions regarding initiation of penal proceedings. (Paras 2, 3, 4, 5)
(B) Prosecution Sanction - The court emphasized that prosecution cannot be initiated solely because it is lawful unless the conduct is malicious or contumacious. (Paras 3, 4)
Facts of the case:
The petitioner was liable to deduct T.D.S. for the assessment year 2014-15 but delayed the deposit, which was rectified with interest. The Commissioner sanctioned prosecution based on a Supreme Court ruling.
Findings of Court:
The court found that the petitioner had complied with the T.D.S. requirements before the show cause notice was issued, and thus, no case for prosecution was established.
Issues: The main issue was whether the delay in T.D.S. deposit warranted prosecution.
Ratio Decidendi: The court ruled that delayed compliance alone does not justify prosecution, especially when the obligation is ultimately fulfilled.
Result: Writ petition allowed, and the impugned order set aside.
Order :
AVNEESH JHINGAN, J.
1. This writ petition is filed challenging order for sanctioning of prosecution proceedings for liability of Rs.79,893/-.
2. The brief facts of the case are that the petitioner No.1 for the assessment year 2014-15 was liable to deduct for Tax Deduction at Source (T.D.S.) from the payments made to the other companies and to deposit it. There was a delay in deposit of the T.D.S., but was deposited alongwith 18% interest after a delay upto ten months. The notice dated 23.02.2018 issued under Section 279(1) of the Income Tax Act, 1961 (for short ‘the Act of 1961’), was responded to the petitioner-company. It was stated that the business activity of the petitioner No.1 relates to e-commerce transactions and due to delay on the part of the companies like Amazon, Naaptol & Ebay etc. in submitting the bills by which T.D.S. to be deducted could be quantified.
2.1 The Commissioner, Income Tax (T.D.S.), Jaipur passed impugned order was granting sanction to prosecute petitioner No.1 and directors of company. Reliance was place upon the decision of the Supreme Court in the case of Madhumilan Syntex Ltd. & Ors. versus Union of India & Ors. reported in (2007) 11 SCC 297, to hold that in case of failure to comply with the procedures stipulated in the statute, appropriate action can be taken under the Act.
3. There cannot be a quarrel with the proposition that penal proceedings cannot be initiated merely because it is lawful to do so, unless the conduct of the assessee is malicious or contumacious. Reference be made to the decision of the Supreme Court in the case of Hindustan Steel Ltd. versus State of Orissa reported in (1969) 2 SCC 627.
4. This petition is pending since year 2018 and the interim protection was granted in favour of the petitioners and there is no prosecution launched till date. Even otherwise, the explanation given by the petitioners was neither doubted nor rejected. The case in hand is not of TDS not being deducted and deposited. It is undisputed that before issuance of show cause notice, the T.D.S. was deposited voluntarily by the petitioner-company along with the interest. The delayed compliance of provision of deducting and depositing TDS stand alone shall not suffice for grant of prosecution sanction.
5. In the facts & circumstances, no case is made out for prosecution against the petitioner. Accordingly, the impugned order is set aside. The present writ petition is allowed.
Prosecution for delayed T.D.S. compliance is not warranted if the obligation is ultimately fulfilled, emphasizing that mere delay does not equate to malicious conduct.
The prosecution for delays in depositing TDS cannot proceed when the amounts were eventually paid with interest, and valid explanations for the delays were provided.
Prosecution for delayed TDS deposits under Income Tax Act may be quashed when reasonable causes are established; the recent CBDT circular allows for compounding such offences.
The main legal point established in the judgment is the importance of balancing the interests of both parties and considering legal submissions in prosecution proceedings under the Income Tax Act.
Prosecution for delayed TDS deposits during COVID-19 was deemed unwarranted as the pandemic constituted a 'reasonable cause' for non-compliance.
The main legal point established in the judgment is that the timing of TDS payment, the liability of the petitioners under Sections 276(B) and 278(B) of the Income Tax Act, and the interpretation of ....
The court affirmed that amendments to the Income Tax Act permit TDS deposit extensions up to the return filing date, emphasizing adherence to legislative intent in tax compliance cases.
The court affirmed the applicability of the Supreme Court's extension of limitation during the pandemic to compounding applications, asserting that discretion in such matters must be exercised judici....
The court affirmed that failure to comply with payment obligations and delays in challenging judicial orders can result in penalties, emphasizing enforcement of compliance without frivolous excuses.
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