Jharkhand High Court | Liability cannot be fastened upon the company for delay in TDS when it had taken steps within time but the same was not credited in the account of the Central Government

Jharkhand High Court

   

Jharkhand High Court: Sanjay Kumar Dwivedi, J. allowed a criminal miscellaneous petition quashing the entire criminal proceeding including the order dated 08-12-2017, passed by the Special Judge, Economic Offences, Dhanbad, whereby cognizance had been taken against the petitioners for the offences under Sections 276(B) and 278(B) of the Income Tax Act, 1961 pending in the Court of Special Judge, Economic Offences, Dhanbad.

Facts of the case:

The complainant, Assistant Commissioner, Income Tax Department stated that accused 1 (petitioner1) is a joint venture company represented through its principal officer i.e., accused 2 (petitioner 2) and is carrying business of power generator in the name “Maithon Power Limited”.

It is a private limited company registered under the Companies Act and derived Income from business of generating power and is an assessee within the meaning of Income Tax Act. Being a principal officer as per Section 2(35) of the I. T. Act of accused 1, the accused 2 was liable and responsible to the company for the conduct of the business of the company.

The accused 2 for and on behalf of accused 1, being a principal officer of accused 1, deducted TDS amount, amounting to Rs. 8,22,23,551/- for F.Y.-2012-13 but failed to credit the same to the account of Central Government of India, TDS Ward Dhanbad. The complainant contended that the accused 2 deliberately, intentionally, knowingly, willingly and having mens rea in his mind failed, neglected and avoided to deposit the same in time to the credit of Central Government account without reasonable cause rather converted the aforesaid amount into their own use for their wrongful gain and for wrongful loss to the Central Government. A show cause notice was issued and served upon the accused in response to which he filed a letter which had no leg to stand.

Finally sanction to launch a prosecution U/s 276-B r/w Section 278-B of the I. T. Act against the accused persons was sent to Commissioner of Income Tax, TDS Ward, Patna. Considering all the facts and circumstances with due care and caution he applied his judicial mind and opined that a prima facie case is made out under section 276-B r/w Section 278-B of the I. T. Act.

Contentions:

Counsel appearing for the petitioners submitted that the TDS amount in question was received by the company in the month of February, 2013 and in terms of Rule-30 of the Income Tax Rules, 1962, it is required to be deposited in terms of Rule-30(2)(B), as such, the amount was required to be deposited on or before 07-03-2013, however, the same was credited in the account of Income Tax Department on 08-03-2013. He further submitted that for the delay of one day in payment of TDS amount, the interest has also been paid to the department, which is also an admitted fact. By way of referring Section 95 of the Penal Code 1860, he submitted that in view of that Section, if the harm is so slight, no person of ordinary sense and temper would complain of such harm. He further submitted that in light of Section 202 Criminal Procedure Code, 1973, the summon was not required to be issued so far as petitioner 2 is concerned, who was stationed at Mumbai. Relying on case laws he submitted that the complainant has not disclosed in the complaint as to how the petitioner 2 was overall in-charge. He finally submitted that the entire criminal proceedings including the order of taking cognizance were fit to be quashed.

Counsel appearing for the Income Tax Department submitted that whatever has been argued by the counsel appearing for the petitioners can be looked into only in the trial. She further submitted that the there is no delay of one day rather there was delay of two months in crediting the T.D.S. stating that period of delay is counted from the date of deduction of the TDS and not from the date of deposit of the TDS, as per the CBDT guidelines. She further submitted that paying the interest is civil liability, whereas the TDS amount, which has not been deposited by the petitioner is a criminal liability, for which, he has been called to face the prosecution under the relevant Sections of the Income Tax Act.

Findings:

The Court went through the materials available on record and it was noted that the charts enclosed by the General Manager, CSD, State Bank of India disclosed the time of transaction. On perusal of the said chart, it transpired that the TDS credit transaction was initiated between 10.00 P.M. to 11. 00 P.M. and the first initiation was also done in the evening and for the transaction between 10.00 P.M. to 11. 00 P.M on 07-03-2013, the status description discloses ‘completed successful.' Meaning thereby that the petitioners had taken steps within time, however, the same was credited in the account of the Central Government on 08-03-2013. It was further noted that interest of one day had also been paid.

The Court was of the opinion that looking at Rule-30(2)(B) of the Income Tax Rules and the Bank document, it transpires that the liability cannot be fastened upon the petitioners on the ground that the initiation of payment of TDS shall not be taken at the right time. The Court relied on Ravi Thapar v. Madan Lal Kapoor, (2013) 3 SCC 330 and came to a conclusion that the documents of the State Bank of India can be looked into by this Court, sitting under Section 482 Cr.P.C. The court further stated that the Magistrate was required to follow the mandatory provision of Section 202 Cr.P.C., which has been amended in the year 2005 making it mandatory to postpone the issue of process, where the accused is not residing within the territorial jurisdiction of the magistrate concerned.

The Court further relying on Girdhari Lal Gupta v. D.H. Mehta, (1971) 3 SCC 189 and Dayle De'souza v. Government of India, 2021 SCC Online SC 1012 held that the petition does not disclose as to how petitioner 2 is overall in-charge of the business reproducing Section 278(B) of the Income Tax Act.

The Court consequently quashed the entire criminal proceeding including the order Special Economic Offices against the petitioners and allowed the criminal miscellaneous petition.

[Maithon Power Limited v. State of Jharkhand, Cr.M.P. No. 2193 of 2018, decided on 14-02-2022]


Advocates who appeared in this case :

Pandey Neeraj Rai, Rohit Ranjan Sinha, Akchansh Kishore, Pradymna Poddar, Advocates, for the Petitioners;

Bhola Nath Ojha, Advocate, for the State;

Amrita Sinha, Advocate, for the Income Tax Department.


*Suchita Shukla, Editorial Assistant has reported this brief.

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