TDS default can trigger independent prosecution; later payment and pending Section 201 action do not bar criminal proceedings.

Failure to deduct or pay tax deducted at source within the prescribed time can attract prosecution under Section 276B independently of Section 201, interest, or penalty proceedings. The statutory scheme treats the deductor as an assessee in default without excluding criminal liability, and prosecution is not barred merely because the tax is later deposited or adjudication on default has not been completed. Section 278AA offers relief only where reasonable cause is proved. The claimed protection under departmental circulars also failed on the facts because no reliable material showed compliance within the extended time, so quashing was refused and prosecution was held maintainable.

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Issues: Whether prosecution under Section 276B of the Income-tax Act, 1961 could be sustained for failure to remit tax deducted at source without first determining liability under Section 201 of the Act and whether the departmental circulars protected the petitioners from criminal proceedings.

Analysis: Failure to deduct or, after deduction, to pay tax within the prescribed time attracts consequences under the Act and is not controlled by the machinery of Section 201 or by the levy of interest or penalty alone. The statutory scheme treats the defaulting deductor as an assessee in default without prejudice to other consequences, and Section 276B independently provides for prosecution. Section 278AA carves out an exception only where the accused proves reasonable cause. The Court relied on the statutory text and the principle that prosecution is not excluded merely because the tax may later be deposited or because adjudication on penalty has not been completed. The claimed benefit of the circulars also failed on facts, as no reliable material showed compliance within the extended time.

Conclusion: Prosecution was maintainable and the petitioners were not entitled to quashing on the grounds urged.

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