2003 (7) TMI 55

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.... In the writ petition the appellant-company challenged the decision of the respondents to initiate prosecution against the appellant under section 276B of the Income-tax Act, 1961, for the years 1995-96, 1997-98, 1998-99 and 1999-2000 for the appellant's failure to deposit and/or pay to the credit of the Central Government the tax deducted by the appellant at source, hereinafter referred to as tax deducted at source. By his judgment and order dated June 11, 2003, the learned single judge dismissed the writ petition upon holding, inter alia, that there was no scope for pre-empting the criminal proceedings unless it could have been established that even if the allegations made by the respondents were all true, they did not constitute any off....

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....by the courts that whenever the decision was left to the subjective satisfaction of a statutory authority, it necessarily implied that such authority was required to apply its mind to all relevant factors before arriving at a decision. Mr. Sarkar submitted that grant of sanction for launching prosecution was a very serious business having serious consequences which entailed proper exercise of discretion upon consideration of all relevant materials, including mitigating circumstances in favour of the defaulter. According to Mr. Sarkar, if the Legislature had intended otherwise it would not have provided the safeguard against prosecution in section 279 of the above Act. In support of his aforesaid contention, Mr. Sarkar firstly referred....

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....as also the material evidence collected during the investigation, it must follow that the sanctioning authority has to apply its own mind for generation of genuine satisfaction whether the prosecution has to be sanctioned or not. The next decision referred to by Mr. Sarkar was the decision of the Supreme Court in Mansukhlal Vithaldas Chauhan v. State of Gujarat [1997] 7 SCC 622, which was a case under the Prevention of Corruption Act which required sanction for prosecution under section 197 of the Code of Criminal Procedure. Following the decision in Basdeo Agarwalla's case, AIR 1945 FC 16, the Supreme Court observed that the sanction lifts the bar for prosecution. The grant of sanction is not an idle formality or an acrimonious exercise....

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....sion to initiate prosecution against the appellant-company was liable to be quashed and the writ court had ample power to do so. Mr. Sarkar's submissions were strongly opposed by the learned Additional Solicitor General. It was contended by Mr. Kapur that the scheme and the relevant provisions of the Income-tax Act did not support Mr. Sarkar's contentions. Mr. Kapur submitted that section 279 of the said Act did not provide for or contemplate that a notice to show cause or a hearing was required to be given to the assessee by the authority empowered to sanction prosecution. According to Mr. Kapur, the opportunity given to the appellant was wholly redundant and did not entitle the appellant to receive a copy of the order passed on the cau....

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....tter in extenso before granting such sanction. Mr. Kapur urged that once it had been admitted that default had been committed in terms of section 200 of the Act, the provisions of section 276B were immediately attracted. Mr. Kapur, submitted that the fact that penalty had not been imposed for delayed payment of the tax deducted at source deducted by the appellant-company was not a factor which could bring the appellant's case within the ambit of section 278AA of the above Act. The learned Additional Solicitor General submitted that in similar circumstances in the case of Jagmohan Singh v. ITO [1992] 196 ITR 473, the Punjab and Haryana High Court had held that the fact that the income-tax authorities had charged interest on late deposi....