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.

Judgment :

S.S. Mishra, J.

1. The present Petition is filed by the petitioner under Section 482 Cr.P.C. seeking quashing of the order dated 30.10.2017 passed by the learned Additional Chief Judicial Magistrate (Special Court), Cuttack in 2 (C) C.C. Case No.241 of 2017, whereby the learned Court below has taken cognizance of offence punishable under Section 276(B) of the I.T. Act against the petitioner.

2. The petitioner is one of the Directors of M/s. Braj Mining Corporation Private Limited. The Commissioner of Income-Tax (TDS), Bhubaneswar issued a show-cause notice dated 02.06.2017 to M/s. Braj Mining Corporation Private Limited inter alia calling upon to show cause as to why prosecution under Section 276(B) of the I.T. Act (for short "the Act") shall not be launched against the company and its Directors for having failed/defaulted in depositing the TDS amount of Rs.13,18,732/- within the statutory period. The Revenue has alleged that the petitioner has caused delay in depositing the TDS amount for the financial year 2013-14 ranging from 03 to 12 months. Hence, show cause notice was issued to the petitioner. The Managing Director of the company namely Mr. Deependra Bahadur Singh had died on 14.10.2019. Therefore, the petitioner being the company has been prosecuted. The petitioner company vide its reply to the show cause notice on 04.08.2017 inter alia replied explaining the delay:-

"(2) That, Assessee is doing his business in a remote area of Odisha in the mining sector, which has gone through several hurdles during the period under consideration. Mining at several mines have stopped due to investigation by several Government agencies and Commission for irregularity on account of lifting of ore from mines more than the allowed quota, encroachment of forest area, violation rule 37 of the Mines and Minerals (Development and Regulation) Amendment Act, 2015 and several such factors. Bad roads and local politics have further affected the mining activity in the area. In such a condition survival of a mining contractor becomes difficult for the reason that,

a. Number of mines where activity of mining carried out got reduced as several mines were closed for operation due to several Government restrictions and sanction.

b. Level of operation (quantitatively) got reduced further reducing the source of income for contractors.

c. All the above points reduced the work quantity for the same number of contractors available thereby affecting the business of the contractors.

d. Mine owner used such situation to their advantage by reducing the price of work (cutting the margin of the contractor) and delaying the payment against service provided.

e. There was tremendous pressure from the mine owners to expedite the execution of contracts allotted to the assessee. Assessee succumbed to the pressure of mine owners as there was revenue required to meet the fixed cost. In the process it engaged local transporters and petty contractors to expedite the execution of work. The demand and pressure from them for the payment was also enormous.

3. That, Survival of assessee in the tough situation with huge amount of investment in fixed cost, delay in payment by the contractee and the pressure of payment to the creditors compelled the delay in TDS deposit. Even it became the difficult to collect the outstanding amount from the mine owners. The total sundry debtors as on 31^st March 2014 is at Rs.14,41,79,755 with a turnover of Rs.65,68,41,080 which is around 21% of the gross revenue. For the better appreciation of the facts herewith we are enclosing the copy of the audited financial statements of the assessee.

4. That, the asse