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.

S.S. Mishra, J.

1. In the present petition, the petitioners are seeking quashing of the complaint case registered as 2(c) CC Case No.09 of 2023 pending in the Court of the learned Additional Chief Judicial Magistrate (Spl.)-cumAsst. Sessions Judge, Cuttack. The petitioners are also aggrieved by the order dated 22.02.2023 passed by the learned Additional Chief Judicial Magistrate (Spl.)-cum-Asst. Sessions Judge, Cuttack in 2(c) CC Case No.09 of 2023 whereby the learned Court below has taken cognizance of the offences under Sections-276B/278B of the Income Tax Act, 1961 (In short “The Act”). The petitioners have also assailed the order dated 05.01.2023 passed by the Commissioner of Income Tax according sanction under Section 279 (1) of the Income Tax Act for prosecuting the present petitioners for the offences as mentioned above.

2. The case against the opposite parties put forth in the statutory complaint filed by the opposite party no.1 is that the petitioners have violated the provisions of Sections-276B and 278B of the Act by not depositing the TDS amount for the Financial Year 2019-20 within the statutory period prescribed under law and delay caused by them remained unexplained.

3. It is contended by the opposite parties that although the TDS amount was deposited belatedly by paying interest for the belated period by the petitioners, still the statutory offence under Section-276B r/w Section-278B of the Act has been admittedly committed by the petitioners. Admittedly, the petitioners have delayed in depositing the amount collected on behalf of the govt. ranging from 15 days to 394 days. Since the delays are beyond one year, the competent authority has rightly accorded sanction under Section-279(1) of the Act for prosecuting the petitioners for having committed the offences U/Ss 276B r/w Section-278B of the Act.

4. Mr. Sidhartha Ray, learned Senior Counsel appearing for the petitioners, inter alia, contended that due to general sluggishness in the market price of iron ore etc , the petitioners-company suffered huge loss. Apart from that at the instance of one of the financial creditor, a proceeding under Section-7 of the Insolvency & Bankruptcy Code, 2016 was initiated against the petitioner company. The I.B. proceeding was admitted on 30.01.2017 and resolution plan of the resolution applicant was approved on 07.11.2017. After approval of the resolution plan, the company gradually started paying the debts and statutory dues on the basis of the case flows of the company. Therefore, the delay has been caused in making payment of the TDS amount to the revenue. The petitioners have also contended that due to the outbreak of COVID-19 pandemic in the month of March, 2020, they could not deposit the TDS amount for the Financial Year 2019-20.Therefore, there is no mense rea involved in the unavoidable act of the petitioner in depositing the TDS amount with the Revenue belatedly. Despite general explanation afforded by the petitioners, the opposite parties have mechanically dealt with those explanations and proceeded to file the statutory complaint against the petitioners. Hence, the petitioners seek, indulgence of this Court.

5. My Ray, learned Senior Counsel to begin with has relied upon a Circular No F No 285/90/2008-IT(Inv-I)/05 dated 24.04.2008 and contended that the benefit of the said Circular ought to have been extended to the petitioners. The relevant part of the Circular reads as under:-

“Subject:- Streamlining of procedure for identification and processing of case for prosecution under Direct Tax Laws- matter reg.-

xxx xxx xxx xxx

2. xxx xxx xxx xxx

3. Identification and processing of potential prosecution cases:

3.1 The following categories of offences sha