Court sets aside prosecution sanction under Income-Tax Act, grants opportunity for defense. The Court allowed the writ petitions challenging the order sanctioning prosecution under Section 276B read with Section 278B of the Income-Tax Act, 1961. ...
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Court sets aside prosecution sanction under Income-Tax Act, grants opportunity for defense.
The Court allowed the writ petitions challenging the order sanctioning prosecution under Section 276B read with Section 278B of the Income-Tax Act, 1961. The Court set aside the impugned orders and directed new orders to be passed after giving the petitioner an opportunity to present evidence and arguments. No costs were awarded, and connected miscellaneous petitions were closed.
Issues involved: Challenge to order sanctioning prosecution under Section 276B read with Section 278B of the Income-Tax Act, 1961 for failure to deposit tax deducted at source.
Details of the judgment:
1. The petitioner, a Company, challenged an order sanctioning prosecution for failure to deposit tax deducted under the Income-Tax Act, 1961. The prosecution was proposed due to alleged non-deposit of tax deducted from rental and other payments made by the petitioner between April 2009 to February 2010.
2. The respondents relied on their system database to establish that tax was deducted but not deposited within the prescribed period. The petitioner argued that in cases where rental and other amounts were outstanding, the question of tax deduction did not arise. This argument was presented in a reply filed before the second respondent on 23.03.2015.
3. The petitioner contended that the delay in remitting taxes was due to outstanding amounts and losses incurred, not wilful misconduct. The officer's conclusion in the impugned order did not consider the specific submission that in some cases, no deduction was made as payments were not actually paid.
4. The legal submission made by the petitioner was supported by Section 276B of the Act, which deals with failure to pay taxes to the credit of the Central Government. The amendment to Section 276B in 1968 distinguished between the failure to deduct and failure to remit taxes.
5. The Court noted that the petitioner had been given sufficient opportunities to explain its case before the authorities. The Standing Counsel for the Revenue acknowledged instances of delay but did not address the legal argument put forth by the petitioner in its reply dated 23.03.2015.
6. In the interest of both parties, the Court permitted the petitioner to appear before the respondent for a hearing on the legal submission. The impugned orders were set aside, and new orders were to be passed within two weeks after considering any evidence filed by the petitioner.
7. The writ petitions were allowed, and no costs were awarded. Connected miscellaneous petitions were closed as a result of the judgment.
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