Amended tax-deduction offence law bars prosecution for mere non-deduction where the new scheme provides only penalty.

After the 01.04.1989 amendment to the Income-tax Act, mere failure to deduct tax at source ceased to be prosecutable under section 276B and attracted only a penalty under section 271C, while prosecution under section 276B was confined to failure to pay tax after deduction. In the absence of any saving clause preserving the earlier offence, a criminal complaint filed after the amendment could not proceed on the basis of the superseded penal provision. The complaint was therefore not maintainable and was liable to be quashed.

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Issues: Whether, after the amendment effective from 01.04.1989, failure to deduct tax at source remained prosecutable under section 276B of the Income-tax Act, 1961, or attracted only penalty under section 271C, so as to justify quashing of the criminal complaint.

Analysis: The complaint was lodged after the amendment had come into force. The amended scheme substituted the earlier penal exposure for failure to deduct tax at source with a penalty provision, while prosecution under section 276B was confined to failure to pay tax after deduction. In the absence of any saving clause preserving the old penal provision for pending or future proceedings, the complaint had to be tested under the amended law. On that basis, mere non-deduction of tax at source was no longer prosecutable, and the departmental circular also reflected the same position.

Conclusion: The complaint was not maintainable against the applicant and was liable to be quashed.

Ratio Decidendi: Where a penal provision is amended so that the omission removes prosecution for a particular default and substitutes a penalty provision, and no saving clause preserves the old offence, proceedings initiated after the amendment cannot continue for that abolished offence.

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