HC quashes criminal proceedings for delayed TDS deposit under sections 276B and 278B after amount deposited with interest

HC quashed criminal proceedings against petitioners for offences under sections 276B and 278B of Income Tax Act relating to delayed TDS deposit. Court held that since TDS amount with interest had already been deposited with Income Tax Department, continuing proceedings would constitute abuse of process. Decision followed precedent from Dev Multicom case affirmed by SC and subsequent parliamentary amendment in Finance Act 2024. Cognizance orders by Special Judge for Economic Offences were set aside.

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Issues:
1. Quashing of criminal proceedings under Section 276-B and 278-B of the Income Tax Act for belated TDS deposits in various financial years.

Detailed Analysis:
The judgment involved multiple writ petitions seeking to quash criminal proceedings related to belated TDS deposits under Section 276-B and 278-B of the Income Tax Act for different financial years. The petitioners argued that the TDS amounts were deposited belatedly due to financial hardships, and they had already deposited the amounts with interest before the show cause notice. They relied on a previous judgment by the court in Dev Multicom Pvt. Ltd case, which highlighted that prosecution should not proceed if the amount in default has been deposited with interest. The petitioners contended that the continuation of proceedings would amount to an abuse of the court's process.

The petitioners further pointed out that the Hon'ble Supreme Court had dismissed a challenge to the court's previous order, which was also considered by other High Courts leading to an amendment in the Finance Act, 2024. This amendment inserted a proviso under Section 276-B stating that if the TDS amount has already been deposited, prosecution cannot be initiated. The petitioners urged for the quashing of criminal proceedings based on these grounds.

The Income Tax Department, represented by senior standing counsel, argued that the TDS amounts were deposited belatedly, indicating a habitual practice by the petitioners. However, the State counsel concurred that the matters were covered by the previous judgment.

The court, after considering the submissions, noted that the TDS amounts in question had been deposited with interest belatedly, a fact not denied by the Income Tax Department. Given the precedent set in the Dev Multicom Pvt. Ltd case, affirmed by the Hon'ble Supreme Court and the subsequent amendment in the Finance Act, 2024, the court found that allowing the proceedings to continue would constitute an abuse of the legal process. Consequently, the court quashed the criminal proceedings and cognizance orders in all the respective cases related to the belated TDS deposits under Sections 276-B and 278-B of the Income Tax Act.

In conclusion, all the writ petitions were allowed, and the matters were disposed of by quashing the criminal proceedings and cognizance orders against the petitioners in the Economic Offence Cases.

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