TaxTMI 
TaxTMI 
2023 (11) TMI 447
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....sons. The Trial Court by order dated 02.02.2023 has taken cognizance of the offences under sections 276B, section 2(35) and 278B of the IT Act and issued summon to these Petitioners who have been arraigned as accused persons in the said complaint alleging commission of the said offences. The impugned order taking cognizance of the offences alleged to have been committed by these Petitioners (accused persons) passed by the court below is now the subject matter of this present Revision. I. FACT OF THE CASE:- 3. Facts necessary for the purpose are as under:- (A) The Petitioner No.1 (Accused No.1) is a Private Limited Company having its registered office at Bhubaneswar has been accorded with the Tax Deduction and Collection Account Number (TAN) to Deduct Tax at Source (TDS) and the Opposite Party No.2 (Accused No.2) is the Director and Principal Officer of the Opposite Party No.1-Company (Accused No.1) who is accountable/responsible for the day to day affairs of Petitioner No.1-Company (Accused No.1) as per the provision of section 2(35) and section 278B of the IT Act. (B) By the virtue of the same, the Petitioner No.2 (Accused No.2) carries the responsibility to deduct and deposi....
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....lainant) identified the Petitioner No.2 (Accused No.2) as the Principal Officer of the Petitioner No.1 (Accused No.1) as per the provisions of section 2(35) read with section 278B of the IT Act. (D) On perusal of the records, the explanations furnished in the show cause reply by the Petitioners (accused persons) being found by the Authority to be unsatisfactory, two other notices were issued on 07.12.2022 calling upon the Petitioners (accused persons) to submit their reply on or before 21.12.2022, which were so tendered. Thereafter, the Commissioner, Income Tax (TDS), Bhubaneswar by an order under section 279(1) of the IT Act accorded sanction for launching the prosecution against the Petitioners for commission of offence under section 276B of the IT Act, the present complaint against the Petitioners have come to be filed in the court of law in which the Court below by the impugned order has taken the cognizance of the offences as afore-noted. Hence, this present Revision is at the instance of the Petitioners (accused persons) is at the instance of the Petitioners (accused persons). II. PETITIONERS SUBMISSION:- 4. Mr.R.P.Kar, learned Senior Counsel for the Petitioners submitted ....
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.....T. Act. In effect that the penal provision only stands attracted when the assessee fails to show to the satisfaction that there was no reasonable cause for such failure. It was submitted that the Authority had thus decided to file the complaint taking a view that there was no reasonable cause for the failure on the part of the Petitioners in depositing the collected TDS during the period covered under the Financial Year 2020-21. Further citing the position of law laid down by the Hon'ble Apex Court in case of Madhumilan Syntex Ltd. and Others Vrs. Union of India and Another; (2007) 11 SCC 297; learned Senior Counsel submitted that the Hon'ble Apex Court while dealing with the provision under section 276B of the I.T. Act has held therein that whenever Company is required to deduct tax at source and pay it to the account of the Central Government, failure on the part of the Company in deducting or in paying such amount constitute an offence under the Act and is punishable. Therefore, it cannot be said that the prosecution against the Company or its Directors in default of deducting or paying tax is not envisaged by the Act. Distinguishing this present case in hand, he points out ....
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....shing such reason for delay would not be required to prove any such fact as those stand accepted across the globe including highest Court of the Country as well as Government Authorities. Thus according to him, this complaint could not have been accorded the sanction in taking the steps of launching prosecution against these Petitioners for such violation as to non-deposit of the TDS within the prescribed time limit; for the delay was due to reasonable cause which is an established and admitted one and the delay in doing so was neither intentional nor deliberate nor even for the reasons or causes centering round the Petitioners affair or their employees but for the COVID-19 Pandemic situation, a global phenomenon. Moreso, placing reliance on various notifications, he submitted that Central Government and the State Government had made several notifications under the Disaster Management Act, 2005 and when even the Hon'ble Apex Court taking cognizance of such situation has extended the period of limitation by providing several exemptions to the statutory provisions being not made applicable and keeping those in suspension during the period. He submitted that when the Authority had re....
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....ion under section- 276B of the I.T. Act shall not normally be proposed when the amount involved and/or the period of default is not substantial and the amount in default has been deposited in the meantime to the credit of Government. It was submitted that in the present case, admittedly there has been no loss of the revenue and it is not in dispute that the Petitioners while depositing the collected TDS have also deposited the interest being computed in terms of the provisions contained in the statute. Therefore, it was contended that the prosecution initiated by the order of cognizance is an abuse of process and the Court below by going through the discussion of the facts contained in the sanction order ought not to have taken cognizance of said offences and thus according to him, the impugned order has caused failure of justice. 6. Per contra, Mr. S.S. Mohapatra, learned Senior Standing Counsel for the Income Tax, while not disputing the distinguishing factual settings of the case of Madhumilan Syntex Ltd. and Others (supra) to the extent that the Petitioners therein had not projected the situation like Pandemic COVID-19 to be the reasonable cause for the failure to deposit the....
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....ision is maintainable? (B) Whether the impugned order suffers from the vice of non-application of mind as the learned Magistrate without going through the sanction order and without taking a prima facie view that the failure on the part of the Petitioners to deposit the collected TDS was not because of some reasonable cause which are apparent and thus being improper and illegal has caused failure of justice and amount to abuse of process? 9. Addressing the objection as to the maintainability of the Revision in challenging the order impugned hereafter as at 8(A); it is noticed that when the text of sub-section-1 of Section-397 of the Cr.P.C. is too wide in conferring the powers upon the Court in exercising the Revisional jurisdiction, it has been drastically curtailed by the very next sub-section i.e. sub-section (2) of said section. This provision introduces a complete prohibition on the Revisional Court in respect of interlocutory orders. Therefore, the nature of order whose legality and propriety is called in question before a Revisional Court liable for interference in exercise of revisional jurisdiction is the focal point for ruling touching on the entertainability of the Re....
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.... not only to the individuals involved but also to society; and (iii) the procedure should not be complicated and should, to the utmost extent possible, ensure fair deal to the poorer sections of the community." As regards Section 397(2) of the Cr.P.C. paragraph 5(d) of the Statement of Objects and Reasons mentioned that:-" "(5) Some of the more important changes proposed to be made with a view to speeding up the disposal of criminal cases are - (d) the powers of revision against interlocutory orders are being taken away, as it has been found to be one of the main contributing factors in the delay or disposal of criminal cases." In reply to the debate on the subject, it was stated by Shri Ram Niwas Mirdha the concerned Minister that:- "It was stated before the Select Committee that a large number of appeals against interlocutory orders are filed with the result that the appeals got delayed considerably. Some of the more notorious cases concern big business persons. So, this new provision was also welcomed by most of the witnesses as well as the Select Committee. . . . This was a well-thought out measure so we do not want to delete it." 20. As noted in Amar Nath (supra) th....
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....by the appellants were upheld by the Court the entire prosecution proceedings would have been terminated. Hence, as per the said standard, the order was revisable." 23. We may note that in different cases, different expressions are used for the same category of orders - sometimes it is called an intermediate order, sometimes a quasi-final order and sometimes it is called an order that is a matter of moment. Our preference is for the expression 'intermediate order' since that brings out the nature of the order more explicitly." 12. In proceeding to further deliberate upon the subject, the Hon'ble Apex Court has held as follows:- "3. While we fully agree with the view taken by the learned Judge that where a revision to the High Court against the order of the Subordinate Judge is expressly barred under sub-section (2) of Section 397 of the 1973 Code the inherent powers contained in Section 482 would not be available to defeat the bar contained in Section 397(2). Section 482 of the 1973 Code contains the inherent powers of the Court and does not confer any new powers but preserves the powers which the High Court already possessed. A harmonious construction of Sections 397 and 482 ....
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....m its own order. Therefore, we are of opinion that the appellants cannot draw any support for their submissions from A.R. Antulay (supra)." 27. Our conclusion on this subject is that while the appellants might have an entitlement (not a right) to file a revision petition in the High Court but that entitlement can be taken away and in any event, the High Court is under no obligation to entertain a revision petition - such a petition can be rejected at the threshold. If the High Court is inclined to accept the revision petition it can do so only against a final order or an intermediate order, namely, an order which if set aside would result in the culmination of the proceedings. As we see it, there appear to be only two such eventualities of a revisable order and in any case only one such eventuality is before us. Consequently the result of paragraph 10 of the order passed by this Court is that the entitlement of the appellants to file a revision petition in the High Court is taken away and thereby the High Court is deprived of exercising its extraordinary discretionary power available under Section 397 of the Cr.P.C. 28. However, this does not mean that the appellants have no re....
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....ere being no other provision in the Code for the redress of the grievance of the aggrieved party. But then, if the order assailed is purely of an interlocutory character which could be corrected in exercise of the revisional power of the High Court under the 1898 Code, the High Court will refuse to exercise its inherent power. But in case the impugned order clearly brings about a situation which is an abuse of the process of the Court or for the purpose of securing the ends of justice interference by the High Court is absolutely necessary, then nothing contained in Section 397(2) can limit or affect the exercise of the inherent power by the High Court. But such cases would be few and far between. The High Court must exercise the inherent power very sparingly." 31. The expanse of Section 482 of the Cr.P.C. was also discussed in great detail in State of Haryana v. Bhajan Lal; 1992 Supp (1) 335 in the context of quashing a first information report or a complaint. After giving several illustrations, this Court cautioned that the power available under Section 482 of the Cr.P.C. should be exercised in the "rarest of rare" cases. It was said: "103. We also give a note of caution to th....
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....nitiating the proceeding against the Petitioners that aspect has been totally over looked besides the fact that the sanction for prosecution passed mechanically has also been given a go by. 15. In case of Madhumilan Syntex Ltd. and Others (supra), the Hon'ble Apex Court delving with a factual matrix wherein prosecution had been launched against the Company and its officials who were the Petitioners therein for commission of the offences punishable under section-278B of the I.T. Act for the failure of the Petitioners-Company and others in crediting the TDS to the Central government as required by section-276B of the I.T. Act. The Petitioner-Company and others therein contended that they had not committed any offence for violation of the provision of I.T. Act. It was stated that it was not a case of non-payment of TDS. The amount of tax along with interest had been paid and all the statutory provisions had been complied with. They further contended that there was some delay in receiving the loan from their Banker due to which the TDS could not be paid in time and furthermore, because of construction of one unit by the Company, there being shortage of liquid fund, the payment was del....
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....itted by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purposes of this section,- (a) "company" means a body corporate, and includes- (i) a firm; and (ii) an association of persons or a body of individuals whether incorporated or not; and (b) "director", in relation to- (i) a firm, means a partner in the firm; (ii) any association of persons or a body of individuals, means any member controlling the affairs thereof". 26. Clause (20) of Section 2, inter alia, defines 'Director' in relation to a Company having the meaning assigned to it in the Companies Act, 1956. Section 2(13) of the Companies Act, 1956 defines 'Director'. The definition is inclusive and includes "any person occupying the position of Director by whatever name called". Clause (31) of Section 2 defines 'person' which include....
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....be taken to be the failure falling within the ambit of reasonable cause which cannot be gone into at this stage but to be delved upon only in the trial; more so when that aspect can be judged without even the Petitioners tendering any evidence in support of the same. Therefore, now it stands to be examined as to whether prevalence of the Pandemic COVID-19 situation in the given factual settings of the case at hand was the reasonable cause which had stood on the way of the Petitioners to comply with the provisions contained in the I.T. Acts and Rules in relation to the deposit of the TDS. 19. The word 'reasonable'; we find from the Black's Law Dictionary, 10th Edition as fair, proper or moderate under the circumstance. What is reasonable cause cannot be laid down with precision which would depend on the factual background. The reasonable cause as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. Expression reasonable is not susceptible be of a clear and precise definition; for a an attempt to give a specific meaning to the word reasonable would be trying to count what is not number and measure what is not space. It has t....
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....ed which qualifies the penal provision laid under section 276B of the Act. Both the provisions accordingly are to be read together to ascertain the attractability of the penal provision. 21. It is well settled law that in a criminal proceeding by merely showing a reasonable cause, an accused can be exonerated and for showing that reasonable cause, the standard of proof of such fact in support of the same is lighter than the proof of such fact in support of good and sufficient reason. A reasonable cause may not necessarily be a good and sufficient reason. It may not be out of place to note here that in case the ITO Vrs. Roshni Cold Storage; 2000 245 (ITR) 322 (Madras), the terrible financial stringency, heavy losses, colossal losses and carry forward losses, have been recognized as reasonable cause in further holding that paucity of funds and financial stringency would fall as reasonable cause within the scope and ambit of the meaning of reasonable cause. 22. Coming to the case before us, the prosecution has been launched against the Petitioners for delay in deposit of the collected TDS for the Financial Year, 2020-21 (Accounting Year, 2021-22). The collected TDS was admittedly no....
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....ic steps have been taken for ramping up the entire health care infrastructure, preparedness, relief, restoration, mitigation and reconstruction, in a very short time to include:- a) testing, tracing, treatment and quarantine facilities; b) augmenting hospital facilities, oxygenated, beds, ventilators, ICU facilities etc; c) augmentation of health work force and their insurance; d) augmentation, allocation, supply and transportation of oxygen and other essential drugs; e) research, development, enhanced production and administration of vaccinations to rapidly cover one of the world's largest eligible population of beneficiaries; f) ensuring food security to the vulnerable groups; g) minimizing the adverse impact of large-scale economic disruptions by multipronged approach; and h) rehabilitation, protection and education of children orphaned due to COVID-19. The situation required day to day expenditure, day to day monitoring, day to day change in priorities and day to day change in the methods and modalities to deal with the same. 24. It goes without saying that COVID-19 Pandemic has caused serious economic disruption. However, the Government both at Central and Sta....
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....non obstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271C, no penalty shall be imposable on the person or the assessed, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. A clause beginning with "notwithstanding anything" is sometimes appended to a section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect over the provision or Act mentioned in the non obstante clause. (See Orient Paper & Industries Ltd. v. State of Orissa AIR 1991 SC 672). A non obstante clause may be used as a legislative device, to modify the ambit of the provision or law mentioned in the non obstante clause, or to override it in specified circumstances (See T.R. Thandar v. Union of India; AIR 1996 SC 1643). The true effect of the non obstante clause is that in spite of the provision or Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstante clause will not be an impediment for the operation of th....
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....beyond the control o the assessee which primarily were severe effect of COVID-19, non-availability of staff, non-availability of consultants or their staff, frequent lockdowns, cash flow crisis there was a slight delay in deposit of the amount as against the prescribed dates. It is submitted that the Chartered Accountant who was handling the TDS matters of assessee died due to COVID which made really difficult for the assessee to deposit the amount in time. The Department has issued a show cause for launch of prosecution proceedings for such default of the assessee. The provisions related to launching of prosecution in case of failure of assessee to pay TDS have been prescribed in section 276B of the Act. The said section states that where the assessee has failed to pay to the credit of the Central Government tax deducted at source as required by or under the provisions of chapter-XVII-B, the person shall be punishable with imprisonment In this case, we submit that the assessee has paid the amount of Tax Deducted at Source to the account of Government and has neither used the money for personal purposes of the directors nor has mis-utilized the money nor has earned any interest o....
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....tuation in the country in suo moto Writ Petition (C) No.03 of 2020 from time to time, has taken cognizance of the said situation and has even extended the period of limitation for all proceedings before the Courts/ Tribunals w.e.f. 15.03.2020 first of all, till 14.03.2021. But then due to second surge in COVID-19 cases, the move being made by the Supreme Court Advocates On Record Association (SCORA) that period was further extended from 15.03.2020 till 28.02.2022 by stating that the same period would stand excluded. 28. In the given case, it is simply stated in the complaint that the Commissioner of Income Tax (TDS), Bhubaneswar after thorough analysis and due application of mind on the basis of perusal of each of the documents and after scrutinizing the same, he held that there was no justification for late deposit of TDS amount by the accused person. The point for consideration by the Authority was not cull out the justification for delay in depositing the TDS since no justification is permissible to be accepted in law for delaying the deposit and that is the reason automatically, the interest starts running notwithstanding any justification and as such no justification whatsoev....
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....attributed do not constitute a reasonable cause as prescribed in section 278AA of the Act. It is further contended that TDS has already been remitted to the Govt. Account along with late payment interest and therefore, sanction for launching prosecution may not be warranted. In this regard, it is apt to quote the Hon'ble Apex Court judgment in Madhumilan Syntex Vrs. Union of India (290 ITR 199) wherein disapproving Hon'ble Calcutta High Court Judgment, it is held as below- "Once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period. If the payment is not made within that period, there is default and an appropriate action can be taken under the Act." 9. The assessee deductor deducted TDS but failed to deposit the deducted tax to the Government within stipulated period. The assessee itself admitted the said fact. The deductor Assessee is duty bound to remit the deducted TDS amount within stipulated period of time as prescribed in Rule 30 of the Income Tax Rules 1962 and the failure to remit the TDS after its deduction within stipulated period of time attracts penal provisions contained in section 276B....