TDS prosecution for non-deposit was quashed after tax and interest were paid before sanction and complaint.

Criminal prosecution for failure to deposit TDS was considered unsustainable where the deducted tax with interest had already been paid before sanction for prosecution and before the complaint was filed. The Court treated prior deposit, together with the absence of any penalty proceeding, as material to the issue of wilful default and held that continuation of the prosecution in such circumstances amounted to abuse of process. The reasoning reflects the principle that penal consequences in TDS matters are directed at culpable non-compliance, not a default that has been remedied before criminal action is launched. The criminal proceeding and cognizance order were quashed.

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Issues: Whether criminal prosecution for failure to deposit TDS under the Income-tax Act could be sustained when the deducted tax with interest had already been deposited before the sanction order and before launch of prosecution, and whether continuation of the proceedings would amount to abuse of process.

Analysis: The Court noted that the petitioner's business commenced in January 2016 and that, upon receipt of notice, a reply was filed stating that the TDS amount along with interest had already been deposited on 11.05.2016. The sanction for prosecution was granted only on 14.02.2018 and the complaint was instituted on 13.04.2018. The Court further noticed that no penalty proceeding had been initiated. In these circumstances, the Court held that the subsequent criminal prosecution, after deposit of the tax and interest and in the absence of penalty proceedings, could not be justified. The Court relied on the principle that wilful failure contemplates culpability and that penal consequences in such matters are meant to operate as a deterrent, but not where the default stood remedied before prosecution.

Conclusion: The prosecution was not maintainable on these facts and its continuation was held to be an abuse of process of law.

Final Conclusion: The criminal proceeding and cognizance order were quashed, and the writ petition was allowed.

Ratio Decidendi: Where TDS with interest is deposited before sanction and initiation of prosecution, and no penalty proceeding is pursued, continuation of prosecution for the alleged default may be quashed as an abuse of process.

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