The Jharkhand High Court quashed criminal proceedings against the petitioner after he failed to deposit the TDS amount and held that penalty should serve as a deterrent and in the given case, the petitioner had already deposited the TDS amount along with the interest and there was no occasion to proceed against the petitioner under section 276(B) of the Income Tax Act.
Brief Facts:
The petitioner filed the present petition seeking quashing of the criminal proceedings initiated against him under Sections 276B and 278B of the Income Tax Act, 1961 after his firm failed to deposit the TDS amount with the Income Tax Department as per the provisions of the Income Tax Act.
Contentions of the Applicant:
The learned counsel appearing on behalf of the petitioner contended that the petitioner’s firm did not have any knowledge about the TDS for the last quarter of the said financial year and the petitioner immediately consulted his chartered accountant as soon as he came to know about the provision of the TDS. It was further argued that the petitioner was not heard when the sanction order was passed and when the TDS amount along with the interest had already been deposited, there was no need to launch a prosecution case against the petitioner.
Contentions of the Respondent:
The learned counsel appearing on behalf of the respondent argued that once the statutory provision is not fulfilled the case has been rightly lodged by the Income Tax Department and depositing of the said TDS amount along with the interest has nothing to do with the prosecution case. It was further contended that once a failure is there, the proceedings can go on as per the interpretation of provisions in the Income Tax Act.
Observations of the Court:
The court observed that the present case was not one where the TDS amount was deposited after the case was filed the prosecution was launched after much delay in depositing the amount and the assessee had succeeded in proving that there were full and sufficient reasons for his failure under the act. The court further stated that in the present case, the amount has been deposited along with the interest and there was no occasion to proceed against the petitioner under section 276(B) of the Income Tax Act.
It was further stated that the penalty should serve as a deterrent and in the given case, the petitioner had already deposited the TDS amount along with the interest. The court further referred to the judgment in K.C. Builders and Another v. Assistant Commissioner of Income Tax wherein the criminal case was held to be not survived in view of the fact that the penalty is struck down to state that in the present case, the penalty proceeding has not even been initiated against the petitioner and continuation of the proceedings against the petitioner would amount to abuse of process of law.
The decision of the Court:
The court allowed the petition and quashed the entire criminal proceedings and the order taking cognizance.
Case Title: M/s A.M. Enterprises and anr. vs. State of Jharkhand and anr.
Coram: Hon’ble Mr. Chief Justice Sanjaya Kumar Dwivedi
Case No.: W.P.(Cr.) No. 577 of 2022
Advocate for the Applicant: Mr. Parth Jalan and Ms. Shivani Jaluka
Advocate for the Respondent: Mr. R.N Sahay and Mr. Gaurav Raj
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