Quashing of TDS and TCS prosecution where delay was explained and tax later paid with interest under binding precedent

Criminal prosecution for delayed remittance of TDS/TCS under the Income-tax Act may be quashed where the delay is satisfactorily explained, the tax is later deposited with interest, and the matter falls within binding precedent and the relevant departmental circular. The Orissa HC treated COVID-19 restrictions as a sufficient explanation on the facts noted and relied on its earlier decision in Sree Metaliks Limited, which had applied the departmental policy for cases where tax and interest stood paid. The cognizance order and consequential proceedings were quashed against the petitioner.

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Issues: Whether the order taking cognizance of offences under Sections 276B and 276BB of the Income-tax Act, 1961 and the consequent criminal proceedings were liable to be quashed in view of the explanation offered for the delay in deposit of TDS/TCS and the earlier decision of the Court.

Analysis: The delay in depositing the deducted and collected tax was explained as arising from the COVID-19 restrictions and the amounts had later been deposited with interest. The Court also noted that the controversy was covered by its earlier decision in Sree Metaliks Limited, which had relied upon the departmental circular dealing with prosecution in cases where the tax along with interest stood paid and the delay was satisfactorily explained.

Conclusion: The petition was allowed and the order taking cognizance, along with the consequential proceedings, was quashed qua the petitioner.

Ratio Decidendi: Where the delay in remittance of TDS/TCS is satisfactorily explained and the tax is subsequently deposited with interest, criminal prosecution under Sections 276B and 276BB of the Income-tax Act, 1961 may be quashed when the case is covered by binding precedent and the applicable departmental circular.

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