Prosecution u/s 276B set aside as intention of company was to deposit TDS, but due to bad financial condition the same was not deposited in time but later on
ABCAUS Case Law Citation:
ABCAUS 3143 (2019) (09) AC
In the instant case, a criminal appeal had been filed by the appellant company against the impugned judgment and order passed by the Additional Chief Metropolitan Magistrate (ACMM/Trial Court) u/s 276B of the Income Tax Act, 1961 (the Act) for delay in payment of TDS to the credit of the Government read with section 278B of the Act whereby the Learned Trial Court had convicted the appellant for the said offence and sentenced the appellant/convict to fine of Rs. 25,00,000/-.
It was the case of the assessee that the learned Trial Court had erroneously convicted the appellant and imposed a penalty without appreciating reasonable cause of the appellant. It was further stated that the appellant had suo motto deposited all the tax deducted at sources alongwith compensatory interest thereon, as per Section 200 (1A) of the Act, showing reasonable cause for not depositing TDS, within time, and, thus, conviction was unsustainable and unreasonable.
It was further stated that the appellant, accordingly, had deposited interest on the delayed payment of TDS, however, the Trial Court had imposed heavy fine of Rs. 25,00,000/- vide its impugned order, which was totally arbitrary and, hence, the impugned orders were liable to be set aside.
The Appellate Court observed that the Ld. Trial Court, in its judgment had observed that the onus was upon the accused to show that there was reasonable cause for the delay in deposit of TDS. To show the same accused had not examined any defence witness. No witness had been examined by the accused to show the genuine and bonafide difficulty in timely deposit of TDS.
The Trial Court had noted that the accused despite opportunity, had chosen not to bring forth any material to justify the delay. Accordingly the Ld. Trial Court expressed satisfaction that there was delay in deposit of TDS and accused had failed to discharge the burden of showing reasonable cause for the default in deposit of TDS amount. The accused also failed to rebut the presumption U/s 278E of the Act. Undisputedly, the tax deducted at source by the accused no.1 company was not deposited within the prescribed period.
The Ld. Trial Court had further recorded that the offence U/s 276B of the Act is complete when the tax deducted at source is not deposited in time. Company cannot be allowed to take unfair advantage and use the tax amount so deducted for any other purpose.
In view of the above facts and circumstances of the case, the Ld. Trial Court had held that the prosecution had proved its case against accused beyond reasonable doubt. Accordingly, accused company was held guilty for the offence U/s 276B r/w section 278B of the Act for deducting TDS for the relevant financial year and not deposited the same in the Government account within prescribed period.
The Appellate Court noted that the appellant/accused company had deposited all the TDS alongwith compensatory interest thereon, in the present case, with the Income Tax Department. In a written statement recorded before Ld. Trial Court U/s 313 Cr.P.C. the Authorised Representative of the company had stated that, due to bad financial condition, the company was not in a position to pay the TDS amount on due time and TDS was deposited, immediately, after the availability of funds with interest.
Intention of company was to deposit TDS
In view of the statement of AR of the appellant company, the Appellate Court opined that the stand taken by the Authorized Representative of the appellant company was a plausible one. It was fortified by the fact that, TDS for the relevant financial year alongwith compensatory interest thereon, was suo motto deposited by the appellant with the Income Tax Department. Thus, appellant had a reasonable cause for delay, in depositing the TDS, due to bad financial condition of the company. Thus, there was reasonable cause i.e. “due to bad financial condition” TDS could not be deposited by the appellant company, in time.
Due to bad financial condition TDS was not deposited in time but later on
Thus, the Appellate Court opined that due to bad financial position, TDS in the present case, was not deposited by the appellant company in time but, later on, as soon as the funds were available with the appellant company, the same were deposited with interest with the income tax department.
Thus the intention of the appellant was to deposit the TDS, but due to said reason, the same was not deposited in time but, later on, the same was deposited.
Prosecution u/s 276B set aside
Accordingly, the Appellate Court set aside the impugned order passed by Ld. Trial Court convicting the appellant for the offence punishable U/s 276-B r/w section 278- B of Act and sentenced the appellant/convict to fine of Rs.25,00,000/-
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