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of <h1>Court quashes criminal proceedings for non-deposit of TDS under Income Tax Act, emphasizing mens rea.</h1> <h3>M/s. A.M. Enterprises and Another Versus The State of Jharkhand and Another</h3> M/s. A.M. Enterprises and Another Versus The State of Jharkhand and Another - TMI Issues Involved:The petition was filed to quash criminal proceedings and order taking cognizance arising from an Economic Offence Complaint Case related to non-deposit of TDS under the Income Tax Act, 1961.Details of the Judgment:1. The complaint alleged that the petitioner's firm failed to deposit TDS as per Income Tax Act provisions. The petitioner, a partner in the firm, was accused of willfully not depositing TDS despite knowledge of the liabilities. The prosecution was launched based on a sanction order by the Commissioner of Income Tax. 2. The petitioner argued that the firm started operations in January 2016 and was unaware of TDS requirements initially. Upon learning, the petitioner promptly consulted a chartered accountant, obtained a TAN number, and deposited the TDS with interest. The petitioner contended that the prosecution was unwarranted as the amount was deposited before the sanction order and no penalty proceedings had commenced.3. The Income Tax Department countered that non-compliance justified the criminal case, citing precedents where courts upheld proceedings for such failures. They argued that the petitioner had been given ample opportunity and expressed readiness to face trial in an anticipatory bail application. 4. The Court noted that the TDS amount with interest was deposited before the prosecution was initiated, and no penalty proceedings were initiated against the petitioner. Citing legal principles, the Court emphasized that penalties should serve as deterrents. Referring to relevant case law, the Court highlighted the need for mens rea in willful failure cases.5. Drawing parallels to a Supreme Court case, the Court held that since penalty proceedings were not initiated and the TDS amount was deposited before prosecution, allowing the case to proceed further would be an abuse of the legal process. Consequently, the Court quashed the criminal proceedings and the order taking cognizance.6. The judgment allowed and disposed of the petition, vacating the interim order in the matter.
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