Reasonable cause for delayed TDS remittance can defeat prosecution when tax is later paid with interest.

Where tax deducted at source is deposited belatedly, prosecution under Section 276B of the Income-tax Act, 1961 will not survive if the accused proves reasonable cause under Section 278AA. The High Court noted that the deductors had later remitted the tax with interest and supported the delay with material showing delayed reimbursement by the State Government. On that factual basis, the explanation was accepted as sufficient reasonable cause, and criminal proceedings were held unwarranted and liable to be quashed under Section 482 of the Code of Criminal Procedure, 1973.

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Issues: Whether criminal proceedings for failure to deposit tax deducted at source within time were liable to be quashed where the deductor had subsequently deposited the tax with interest and claimed reasonable cause for the delay.

Analysis: The inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 is attracted to prevent abuse of process and secure the ends of justice. Section 276B of the Income-tax Act, 1961 penalises failure to pay tax deducted at source to the credit of the Central Government, but Section 278AA of the Income-tax Act, 1961 creates an exception where the person proves reasonable cause for the failure. The record showed that the petitioners had deducted tax, later remitted it with interest under Section 201(1)(a) of the Income-tax Act, 1961, and had placed material to explain the delay on account of delayed fee reimbursement from the State Government. The explanation was accepted as sufficient to constitute reasonable cause, and the prosecution was held unwarranted.

Conclusion: The petitioners were entitled to quashment of the criminal proceedings as the delay in remittance was covered by reasonable cause under Section 278AA of the Income-tax Act, 1961.

Ratio Decidendi: Where the accused proves reasonable cause for delayed deposit of tax deducted at source, prosecution under Section 276B of the Income-tax Act, 1961 cannot be sustained.

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