COVID-related delay in TDS and TCS deposit accepted as reasonable cause, leading to quashing of prosecution

Delay in depositing TDS and TCS was treated as sufficiently explained where the remittance was made late because of COVID-19 disruption and its economic impact on the business. The HC relied on earlier decisions recognising the pandemic as a reasonable cause in delayed tax deposit cases, especially where the tax had ultimately been paid with interest and no revenue loss remained. Although the offences were compoundable and an alternate remedy would ordinarily be expected, the Court found exceptional circumstances justifying interference under Section 482 CrPC and quashed the prosecution and cognizance order.

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Issues: Whether the prosecution and cognizance for delay in deposit of TDS and TCS under Sections 276B and 276BB of the Income-tax Act, 1961 should be quashed in exercise of inherent jurisdiction on the ground that the delay was sufficiently explained by the COVID-19 pandemic and related business disruption.

Analysis: The Court found that the petitioners had deposited the deducted and collected tax belatedly, but the delay was shown to be caused by the prevailing COVID-19 situation and its economic impact on the business. The Court relied on its earlier decisions holding that the pandemic could constitute a sufficient explanation and reasonable cause in delayed remittance cases, particularly where the tax amount had ultimately been deposited with interest and no revenue loss remained. The Court also noted that, although the offences were compoundable and the alternate remedy ordinarily ought to be pursued, the facts disclosed exceptional circumstances warranting interference under Section 482 of the Code of Criminal Procedure, 1973.

Conclusion: The prosecution and the cognizance order were quashed, and the petitioners succeeded.

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