Delayed TDS payment without contumacious conduct cannot justify prosecution sanction under the Income-tax Act.

Delayed deposit of tax deducted at source, followed by voluntary payment of the tax with interest before issuance of the show-cause notice, was treated as insufficient to justify prosecution sanction under the Income-tax Act. The explanation for the delay was neither doubted nor rejected, and the matter did not involve a complete failure to deduct or deposit tax. In the absence of malicious or contumacious conduct, mere delayed compliance was held not enough to sustain penal prosecution, and the impugned sanction order was set aside.

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Issues: Whether sanction for prosecution under the Income-tax Act was justified for delayed deposit of tax deducted at source despite subsequent voluntary payment of the tax with interest.

Analysis: The petitioners had deducted and deposited the tax with interest before the show-cause notice was issued. Their explanation for the delay was neither doubted nor rejected. The case did not involve a complete failure to deduct or deposit tax, and penal prosecution was held not to be warranted merely because it was legally permissible. In the absence of malicious or contumacious conduct, delayed compliance by itself was held insufficient to sustain prosecution sanction.

Conclusion: The sanction for prosecution was not justified and the impugned order was set aside in favour of the petitioners.

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