TDS default prosecution survives recovery, and responsible partners may be prosecuted vicariously for firm-level non-compliance.

Recovery of tax deducted at source, together with penalty and interest, does not replace criminal liability for failure to deposit the tax within the prescribed time, so prosecution under section 276B of the Income-tax Act, 1961 is not barred by double jeopardy under section 300 CrPC. Where the default is committed by a partnership firm, persons in charge of and responsible for its business may be proceeded against vicariously under section 278B, and a discharge on the ground that partners cannot be liable is unsustainable. The prosecution was therefore permitted to proceed to trial.

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Issues: (i) Whether recovery of tax deducted at source, together with penalty and interest, barred prosecution for offence under section 276B of the Income-tax Act, 1961 on the ground of double jeopardy. (ii) Whether the partners of the firm could be prosecuted vicariously under section 278B of the Income-tax Act, 1961 for the default committed by the firm.

Issue (i): Whether recovery of tax deducted at source, together with penalty and interest, barred prosecution for offence under section 276B of the Income-tax Act, 1961 on the ground of double jeopardy.

Analysis: The monetary recovery of the amount due, with interest and penalty, was treated as a consequence of the tax default and not as a substitute for criminal prosecution. The criminal liability for failure to deposit tax deducted at source within the prescribed time was held to arise under a distinct penal provision, and the principle of double jeopardy under section 300 of the Code of Criminal Procedure, 1973 was held inapplicable.

Conclusion: The prosecution under section 276B of the Income-tax Act, 1961 was not barred by prior recovery, penalty, or interest.

Issue (ii): Whether the partners of the firm could be prosecuted vicariously under section 278B of the Income-tax Act, 1961 for the default committed by the firm.

Analysis: Since the accused was a partnership concern, the statutory scheme made the persons in charge of and responsible for the conduct of the business liable for prosecution along with the firm. The discharge on the ground that partners could not be held liable was therefore unsustainable.

Conclusion: The partners were liable to be prosecuted vicariously under section 278B of the Income-tax Act, 1961.

Final Conclusion: The discharge order was set aside and the criminal case was directed to proceed to trial in accordance with law.

Ratio Decidendi: Recovery of tax dues, penalty, and interest for non-deposit of tax deducted at source does not bar prosecution under the penal provisions of the Income-tax Act, 1961, and partners responsible for the affairs of a firm may be proceeded against vicariously where the statute so provides.

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