Rigorous imprisonment awarded u/s 276B for delayed late deposit of TDS. Assessee had culpable mental state as he remained absent before the authorities and also not filed application for compounding
ABCAUS Case Law Citation:
ABCAUS 2984 (2019) (06) AC
Important Case Laws Cited/relied upon by the parties:
Gopal Engineering V/s Thanngaraja 1995 211 ITR 303
Anwar P.V. V/s P.L. Bashir (2014)10 SCC, 473
Madhumilan Syntex Ltd. and Ors. v/s Union of India AIR 2007 SC (148)
In the instant case, the Income Tax Officer (TDS) (the complainant) had filed the complaint u/s 200 of the Cr.P.C. before the Addl Chief Metropolitan Magistrate against the accused assessee for committing the offence punishable u/s 276B of the Income Tax Act, 1961 (the Act).
The accused was an individual who was a film producer and during the relevant assessment year was under obligation u/s 194A, u/s 194H and u/s 194J of the Act to deduct the income tax of approx Rs. eight lacs from the various payments made. The accused was under further obligation u/s 200 and 204 of the Act r/w Rule 30 of the Income Tax Rules, 1962 to pay or to deposit income tax so deducted to the credit of Central Government within the prescribed period.
However, the accused, after deducting the tax failed to pay or to deposit it within the prescribed time to the credit of Central Government, but deposited the said amount after 12 months.
The case of the Department was that the accused failed to show reasonable cause or excuse to pay tax deducted within the prescribed period to the credit of Central Government. It was contended that the accused fact of late deposit of TDS was admitted by the accused himself during recording of the statement under section 313 of the Code of Criminal Procedure as well as in his reply to the show cause notice therefore accused be punished as per law.
The accused submitted that before any initiating the prosecution, he had deposited all the TDS amount to the department, therefore present complaint was not maintainable. It was also submitted that during the stipulated period, the economical condition of the accused was not well and the business of the complainant was not in a good condition.
It was pleaded that the accused submitted reply to the show cause notice and it was the first time accused defaulted for payment of money.
It was further submitted that sanction accorded by sanctioning authority u/s 279(1) of the Act for launching prosecution against accused under section 276B of the Act was mechanical and contrary to the CBDT instructions dt. 28.05.1980 that the prosecution under section 276B are not expected to be proposed when the amount involved and period of default is not substantiated and the amount in default has also been deposited, in the meantime, to the credit of Government along with interest and these instructions are binding on the Government.
It was also submitted that in view of provisions under section 278AA when there is reasonable cause, in such cases, no penalty should be imposed.
The leaned Judge observed that there is no necessity that each and every aspect of the case must be dealt with in the authorisation. Thus he rejected the contention that there was no proper sanction to initiate the criminal proceeding against the accused person simply for the reason that the sanction order did not mentioned any details regarding explanation given by the accused in respect of delay in making the payment.
The learned judge noted that the accused had taken defence of financial constraints and fall in business activity and it was stated that there was no intentional default, no mens rea in not deposit of TDS in time. But accused had not produced any material to substantiate his contention. The leaned Judge opined that mere taking up the contention does not amounting to offering a reasonable cause for the failure to remit the defaulted TDS.
The leaned Judge stated that mens rea is not a requisite ingredient of the offence u/s 194A, 194C and 276B of the Act. If accused failed to make deduction of tax at source, he is liable to be punished for the said offence. Section 276B of the Act does not contain the word “knowingly”. It provides punishment for contravention of the provisions contained in section 194(A). Section 194A requires the person making any payment of interest to deduct the tax at the rate in force. This liability is an absolute liability. Deficit deduction or non deduction was a conscious act therefore in a case u/s 276B r/w sec. 194A mens rea is not required.
With respect to the contention that since TDS had already been deposited to the account of Central Government, there was no default and no prosecution could be ordered, the learned Judge rejected it stating that once statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period, there is default and appropriate action can be taken under the Act.
The learned judge opined that prosecutions under the Act has been made permissible in spite of the already existing provisions with regard to levy of penalties by income tax authorities. The main objectives of prosecution provisions is to punish the offenders found guilty of the tax evasion and other tax related offence and to install fear of ‘law’ in the minds of those, who may even contemplate evading payment of legitimate taxes.
The learned Judge stated that the scope and purport of penalty proceedings and prosecutions are separate and independent. The existence of one or the other is not bar to any of them. They are coexisting. No doubt the accused had paid all the tax amount, but it was paid after delay and said fact was not disputed by the accused.
The learned Judge also rejected the defence of accused that reply was filed by the Chartered Account of accused and accused was not aware about the same.
The learned judge concluded that the accused committed alleged offence. Before authority, he also remained absent. Neither he filed any application for compounding of the offence. Therefore, it appeared that there was a culpable mental state of the accused for non depositing of TDS amount within time therefore, he was liable for punishment.
Accordingly the learned Judge passed the order convicting the accused for the offence punishable u/s 276B of The Income Tax Act, 1961. The accused was ordered to undergo rigorous imprisonment for a period of three months with fine.