TaxTMI 
TaxTMI 
2023 (11) TMI 447
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.... director arraigning them as the accused persons. 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....
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.... (accused persons) on 30.05.2022. The Opposite Party (Complainant) 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. M....
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.... must be read with the provision contained in section 276AA of the I.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 envisag....
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.... of the evidence during trial in as much as when the Petitioners for establishing 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 thos....
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....s, vide F.No.255/339/79-IT (Inv.) dated 28.05.1980 which reads that the prosecution 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 situat....
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....he issues falling for consideration to be dealt are as follows:- (A) Whether the present Revision 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 i....
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....rdance with the accepted principles of natural justice; (ii) every effort should be made to avoid delay in investigation and trial which is harmful 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....
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....result in culminating the proceedings, if so any order passed on such objections would not be merely interlocutory in nature as envisaged in Section 397(2) of the Code. In the present case, if the objection raised 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....
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.... the law with reference to the Criminal Procedure Code of 1973. Moreover and quite obviously, since this Court had directed in A.R. Antulay (supra) that the trial would have to be conducted not by the Special Judge but by the High Court, no revision would lie to the High Court from 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 ....
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....-section (2) of Section 397 operates only in exercise of the revisional power of the High Court, meaning thereby that the High Court will have no power of revision in relation to any interlocutory order. Then in accordance with one of the other principles enunciated above, the inherent power will come into play, there 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. ....
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....n this Revision suffers from the vice of illegality and impropriety as at 8(B). The ground being that the said failure of the Petitioners in depositing the collected TDS within the time stipulated, premised on the admitted facts was for all the reasonable causes in support. In that view of the matter, while passing said order in question initiating 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 wit....
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....accordingly: Provided that nothing contained in this sub- section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed 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 me....
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....e. 18. The above being the crucial distinguishable factual aspect in the cited case of Madhumilan Syntex Ltd. and Others (supra) to that of the case at hand which is being now dealt with, this Court is of the considered view that the prevalence of COVID-19 Pandemic situation in the country, when stands admitted, it would not be impermissible to say that the said factual settings being projected by the Petitioners as the reasonable cause occasioning their failure thus cannot 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 th....
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.... the "object, good sense and fairness" thereby eschew the others which render the provision oppressive and unjust, as otherwise, the very intent of the legislature would be frustrated. It is in all plausibility therefore to be inferred that to cater such exigencies, the legislature has enacted section 278AA of the I.T. Act. It is also crucial to note that the legislative intent is well discernable so far the usage of the word 'reasonable cause' under section 278AA of the I.T. Act is concerned 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....
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....e, multipronged, multi sectoral, whole of society and whole of Government, while at the same time dynamic approach has been adopted, from time to time with the evolving nature of COVID- 19 virus during first, second and third surges. Various steps have been taken by the Union of India, to strategies nations response to COVID- 19, a once in a lifetime Pandemic inflicted on the entire world, wherein not just the funds of NDRF and SDRF, but even from the Consolidated Fund of India had been utilized. Specific 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)....
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....ard Governor India Pvt. Ltd. Vrs. Commissioner of Income Tax and others; (2001) SCC Online Del 1429. In that case in dealing with the provision of levying of penalty as envisaged under section-271C of the IT Act, the question was of the existence of reasonable cause or otherwise was linked with the main question as to whether there was short deduction of tax at source. It was held that the stand of the Petitioner was on terra firma. On going through the pivotal provisions of the I.T. Act, the Division Bench has been held as under:- "6. Section 273B starts with a 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 & Ind....
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....ecution appear to have placed all those factual settings stated therein for consideration in their proper perspectives which can be seen on a plain reading of the same which forms a part of the record. It appears from the record that the Petitioners in their show-cause while describing all those difficulties which they had faced during the prevalence of the COVID-19 situation had also stated as under:- "1. The assessee has duly deducted the TDS and deposited the same along with interest in the account of Central Government-No prosecution be launched. Due to the certain conditions 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....
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....see as has been explained herein above by the assessee. Your attention is drawn to the CBDT Instructions F.No.255/339/79-IT (Inv.), dated 28.05.1980 where it has been stated that "The prosecution under section 276B should not normally be proposed when the amount involved and/ or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit of the Government." In the present, the TDS liability has arose on day to day transactions of the assessee. The CBDT intention vide this circular that where the amount has been by the assessee, the prosecution proceedings need not be launched. Moreover, if each entry is seen majority of entries of deduction of TDS are meager and very small in amount, as law as Rs.50/-. Therefore, launching of prosecution may be undue hardship on the assessee. 27. It would not be out of place to state that the Hon'ble Apex Court during that period prevalence of Pandemic COVID-19 situation 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/ Tr....
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....he Act. Due diligence needs to be exercised by the assessee deductor for remittance of the amount which duly belongs to the Government once the amount has been deducted. From the compliance pattern of the assessee deductor it is observed that substantial delays are noticed in respect of remittance of TDS amount for the Financial Year 2019-20 and 2021-22 as well. Delay in remittance deprives the Government of the funds which genuinely belong to the Government and also results in undue delay in granting credit to the person from whose behalf tax has been deducted/ collected. The bonafides of the reasons explained for delay on various occasions have not been clearly established in this case. After considering various fettering and manacling circumstances as being ameliorating causes put forth by the assessee deductor, the factual evidence of delayed remittance in respect of the quantum of tax belatedly remitted and the periods of delay, it can be safely concluded that the causes as 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 an....
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....emitted the TDS amount after the statutory period. The assessee thus deducted TDS but not deposited during the statutory time limit but after substantial period of delay ranging from 31 to 214 delays. The deductor has not denied these facts. Since the assessee deductor is responsible to remit/ deposit the deducted TDS amount within the stipulated time as per sanction 200 and 204 of the Act, the assessee deductor has committed the default which comes under the offence as provided in section 276B of the Act. 12. Section 3(38) of General Clauses Act defines an "offence" to mean "any act or omission made punishable by any law for the time being in force". Payment of the TDS is an obligation and duty covered bystatute and the default of such payment, which has been made an offence continuous from day to day till the payment, is made. The evidence regarding the delay in remittance is not only admitted but also unassailable ex-facie. The evidence is not un- worthy of credit or absurd as such to make it a prima-facie fit case for launch of prosecution. In view thereof, the case prima-facie is a fit one in which prosecution needs to be launched." 29. The above part of the order ....