Bangalore District Court
The Income Tax Department vs M/S. Corporate Leisure And Property on 28 February, 2023
BEFORE THE SPECIAL COURT FOR ECONOMIC
OFFENCES: AT BENGALURU
Dated this the 28th day of February 2023
:Present:
Sri. ANAND S. KARIYAMMANAVAR, B.A., LL.B., (Hon')
Presiding Officer, Special Court
For Economic Offences, Bengaluru.
C.C.No.12/2020
Complainant: The Income Tax Department
By its Assistant Commissioner of Income Tax,
TDS, Circle-1(1),
Bengaluru.
(Reptd. By Spl. Pubic Prosecutor)
Vs.
Accused : 1. M/s. Corporate Leisure and Property
Development Pvt. Ltd.,
Ground Floor, No.108,
Oxford Towers, No.139,
Old Airport Road, Kodihalli,
Bengaluru - 560 008.
Rep by its Managing Director
2. Sri. Govindachary
Director, (Discharged)
M/s. Corporate Leisure and Property
Development Pvt. Ltd.,
Ground Floor, No.108,
Oxford Towers, No.139,
Old Airport Road, Kodihalli,
Bengaluru - 560 008.
(Reptd. By Sri. SA., Advocate)
2 C.C.No.12/2020
: JU DG M E NT :
This is a complaint made by the complainant against
the accused for the offences punishable under section 276B
r/w Section 278B of the Income Tax Act, 1961 (hereinafter
referred as IT Act).
2. The brief facts of the case of the complainant that:
The accused No.1 is a company registered under
Companies Act and engaged in the business of property
builders and developers. The accused No.2 is Director of
accused No.1, who is responsible for day to day conduct of
business of accused No.1 company and on 29.01.2013 notice
U/s.2(35) of IT Act was issued and treated the accused No.2
as Principal Officer of accused No.1 company. Further, it is
the case of the complainant that the accused have deducted
the TDS for the financial year 2009-10 on various heads
U/s.192, 194C, 194H, 194I and 194J of IT Act to an extent of
Rs.15,84,710/-, however they have failed to remit the same to
the Central Government account within time as prescribed
under rule 30 of the IT Rules r/w Section 200 of IT Act.
Further, it is the case of the complainant that since the
accused failed to deposit the said TDS in time. Thereafter a
show cause notice was issued on 25.02.2013 about informing
the offence committed by them and in response to the said
notice, on 08.03.2013 the accused replied stating that due to
search operations U/s.132 of IT Act conducted during August
2009, the delay was made in respect of the payment of TDS,
thereby he expressed his willingness to avail option of
3 C.C.No.12/2020
compounding the offences. However, the accused has not
came forward to compound the offence till today. Hence, the
present complaint came to be filed.
3. Upon receiving the complaint, the sworn statement is
dispensed with as the complainant is a public servant and
this court took cognizance for the offence punishable
U/s.276B r/w Section 278B of Income Tax Act, 1961.
Thereafter, the summons was issued to the accused and he
appeared and enlarged on bail. Subsequently, learned
counsel for the accused No.2 filed application for discharge of
accused No.2. Hence, application was allowed and accused
No.2 was discharged from this case on 18.09.2021. The
charge was framed and read over to accused No.2 as he was
represented by accused No.1 and explained to him in the
language known to him. He pleaded not guilty and claimed to
be tried. As such, the complainant was called upon to lead
evidence.
4. In order to bring home the guilt of the accused, the
complainant has examined its Assistant Commissioner of
Income Tax Officer, TDS, Circle-1(1) as PW-1 and Income Tax
Officer, TDS, Ward-16(1) as PW-2 and got marked six
documents as Ex.P-1 to Ex.P-6 and Ex.P-6(a).
5. After the completion of evidence on behalf of
complainant, the incriminating evidence available against
accused No.1 was read over as per the provisions of Section
313 of Cr.P.C. However, accused No.2 on behalf of accused
No.1 denied the same and accused No.2 being representative
4 C.C.No.12/2020
of accused No.1 has been examined as DW-1 and got marked
Ex.D-1 to Ex.D-12.
6. Heard the arguments advanced by both the counsels for
the complainant and accused. Upon hearing their arguments
and on going through the materials on record, the following
points arise for determination of this court:
1) Whether the complainant proves beyond all
reasonable doubt that the accused No.1 being
the company defaulted in remittance of TDS of
Rs.15,84,710/- for the financial year 2009-10
to the Central Government thereby committed
the offence punishable U/s.276B of IT Act,
1961?
2) What order?
7. My findings on the above said points are as under:
Point No.1: In the Negative
Point No.2: As per final order
for the following:
REASONS
8. Point No.1 : The complainant in order to prove its case
examined complainant i.e., Assistant Commissioner of Income
Tax Officer, TDS, Circle 1(1) as PW-1 and Income Tax Officer,
TDS, Ward 16(1) as PW-2 and got marked six documents as
Ex.P-1 to Ex.P-6 and Ex.P-6(a).
9. PW-1 in her chief-examination, deposed that she was
authorized to file complaint against the accused No.1 & 2 for
the offences punishable U/s.276B r/w Section 278B of IT Act
and she had obtained sanction on 25.03.2019. Further she
5 C.C.No.12/2020
deposed that before according sanction, show cause notice
was issued to accused No.1 & 2, for the same, they have
replied on 08.07.2013 and undertook for the delayed
payments thereby documents got marked Ex.P-1 to Ex.P-5.
10. Further, the complainant examined CW-2 as PW-2, he
being the Income Tax Officer deposed that on 29.01.2013 he
had issued notice to accused No.2 treating him as Principal
Officer of accused No.1 company as there was a delay in
remittance of TDS for the financial year 2009-10. Further he
identified show cause notice which is marked as Ex.P-6 and
his signature as Ex.P-6(a).
11. By relying on all these documents, learned Spl. PP
vehemently argued that though the accused have deducted
TDS for the financial year 2009-10, but they have not
remitted the same to the Central Government well within
time. Further, learned Spl. PP relied on rule 30 of IT rules
which read as under:
Rule 30(2) of I.T. Rules provide details of payments
liable for TDS and due dates of remittance of tax
deducted to the Government account.
(2) All sums deducted in accordance with the
provisions of Chapter XVII-B by deductors other
than an office of the Government shall be paid to
the credit of the Central Government--
6 C.C.No.12/2020
(a) on or before 30th day of April where the income
or amount is credited or paid in the month of
March; and
(b) in any other case, on or before seven days from
the end of the month in which--
(i) the deduction is made; or
(ii) income-tax is due under sub-section
(1A) of section 192.
12. On careful perusal of above said provisions of law that
the accused ought to have paid the TDS on or before 7 th day
from the end of the month, in which, the deduction is made.
But in the present case, the accused have not remitted the
TDS well within time and there is a delay in payment of TDS
to the Central Government. Therefore, the Spl. PP
vehemently argued that as admitted by the accused, there is
a delay in remittance of TDS, hence sought to convict the
accused for the above said offences. In the present case as
discussed above since the accused No.2 was already
discharged and in support of accused No.1 company, the
accused No.1 have taken following defences.
1. The accused No.1 has paid entire TDS along
with interest.
2. In the show cause notice the correct limb has
not been indicated, therefore the show cause
notice and sanction order bad in law.
3. No penalty proceedings was initiated against
the accused and there was a reasonable cause
for delay in remittance of TDS.
7 C.C.No.12/2020
4. The complainant is not authorized to file this
complaint as per the sanction order.
13. Defence No.1: The accused No.1 has paid entire TDS
along with interest : In support of his defences, the
representative of accused No.1 has deposed as DW-1 and got
marked Ex.D-1 to Ex.D-12. Further, he deposed that the
delay in remittance has already been explained to the
complainant authority by replying to the show cause notice as
due to search proceedings by Income Tax Authority in the
year 2009 and also for financial problems, he could not remit
the TDS in time. In the present case, strong defence taken by
the accused No.1 is that the TDS along with interest has
already been paid. In support of his defence, he has relied
upon Ex.P-5 which is sanction order, in para No.2, it clearly
reveals as under:
"However, consequent to filing of correction
statement the actual amount of TDS which has
been remitted belatedly into Government is
Rs.15,84,710/-"
14. On perusal of above said contents in Ex.P-5, which is
sanction order clearly reveals that before passing the sanction
order only the accused has made remittance of the said TDS
amount to the Central Government account. Further, DW-1
in his chief-examination, he deposed that he has already paid
TDS along with interest. Further, in support of the same, the
8 C.C.No.12/2020
accused has relied upon Ex.D-12 which is compounding
order which reveals that:
"There is no demand outstanding in TRACES
portal for the assessment year 2010-11"
15. So, this itself shows that the accused had paid entire
TDS with interest for the financial year 2009-10. At the time
of arguments, learned counsel for the accused vehemently
argued that in order to complete the offence U/s.276B of IT
Act, there shall be failure to remit the TDS to the Central
Government account. However, in this case, the accused has
made payment of entire TDS in the above said financial year
along with interest before passing the sanction order.
Further, Ex.D-12 at Annexure-A reveals that:
"Accordingly interest U/s.201(1)(a) of IT Act, 1961
of Rs.1,57,746/- and other sum of Rs.1,55,288/-
was levied and the same has been paid by the
applicant"
16. Therefore Ex.D-12 itself shows that the accused has
made remittance of the above said TDS amount and accused
has not failed to remit the same. Further, at the time of
arguments, learned counsel for the accused has relied upon
the decision of Hon'ble High Court of Karnataka in Dr. Viloo
Patell V/s. Income Tax Department reported in (2019)112
taxmann.com 220 (Kar) in which, Hon'ble High Court of
Karnataka observed that:
9 C.C.No.12/2020
"5. Coming to the next contention that the
sanction order issued for prosecution of
petitioners, does not reflect application of mind is
concerned, I have gone through the said sanction
order wherein the Commissioner of Income
Tax/Sanctioning authority has narrated the facts
of the case, referred to provisions of law applicable
to the facts and has observed that an opportunity
was given to the assessee in default to make the
payment Para 6 of the sanction order dated
15.10.2015 reads as follows:-
"6. Opportunity: This office has sent show cause
notice dated 02.05.2014, 24.06.2014, 12.08.2014
under section 276B read with section 278B of the
Income Tax Act, 1961, requiring the deductor to
show cause why prosecution proceedings should
not be initiated for the said default of non-
remittance of TDS to Central Government
account"
"Under the said circumstances, if any amount was
paid pursuant to the said show cause notice, the
proof thereof could have been produced by
petitioners so as to avoid criminal proceedings"
"There is nothing on record to show that the
remittance made by the petitioners have been
brought to the notice to the Central Government"
17. On careful perusal of the above said observation made
by the Hon'ble High Court of Karnataka it clearly makes that
if the accused had paid the TDS after issuing the show cause
notice and if the same is communicated to the department,
then criminal prosecution could be avoided. Accordingly, on
perusal of the records, it clearly makes that the accused has
paid the TDS along with interest much prior to the issuance
of the show cause notice and before the complainant
10 C.C.No.12/2020
initiating the proceedings against the accused No.1 and same
is communicated to the complainant on 30.10.2012 and the
said document is marked as Ex.D-7. Therefore, accused
proved that he has made remittance of entire TDS with
interest for the financial year 2009-10 well before sanction.
18. Defence No.2: In the show cause notice the correct
limb has not been indicated, therefore the show cause
notice and sanction order bad in law : In the present case
the accused has specifically contended that the show cause
notice issued by the complainant does not indicate under
which limb of the section the prosecution is proposed to be
initiated. Therefore, the show cause notice issued by the
complainant in this case is bad in law. In support of his
defence, the counsel for the accused has relied upon the the
decision of Hon'ble High Court of Karnataka 2012 SCC Online
Kar 8862 reported in Commissioner of Income Tax and
another V/s. Manjunatha Cotton and Ginning Factory and
others in which, Hon'ble High Court of Karnataka held that:
"Any notice which does not specify under which
limb of section accused committed offence, the
said notice is bad under law"
19. Further, he relied upon the decision of Hon'ble Supreme
Court in Amrit Foods V/s. Commissioner of Central Excise
(U.P.) in which, it has held that:
"The assessee necessarily to be put on notice has
to the exact nature of the contravention for which
11 C.C.No.12/2020
the assessee was liable under the provisions of rule
173Q"
20. Further, he relied upon the decision of Hon'ble Supreme
Court in CIT V/s. SSA's Emerald Meadows reported in
(2016)73 taxmann.com 248 (SC) in which it has held that:
"Section 274, read with section 271(1)(c), of the
Income Tax Act, 1961 - Penalty - Procedure for
imposition of (Conditions precedent) - Assessment
year 2009-10 - Tribunal, relying on decision of
Division Bench of Karnataka High Court rendered
in case of CIT V/s. Manjunatha Cotton & Ginning
Factory (2013) 359 ITR 565/218 Taxman 423/35
taxmann.com 260, allowed appeal of assessee
holding that notice issued by Assessing Officer
under section 274 read with section 271(1)(c) was
bad in law, as it did not specify under which limb
of section 271(1)(c) penalty proceedings had been
initiated, i.e., whether for concealment of
particulars of income or furnishing of inaccurate
particulars of income - High Court held that
matter was covered by aforesaid decision of
Division Bench and, therefore, there was no
substantial question of law arising for
determination - Whether since there was no merit
in SLP filed by revenue, same was liable to be
dismissed - Held, yes (para 2) (In favour of
assessee)"
21. By relying on the above judgments of Hon'ble Supreme
Court and Hon'ble High Courts, the counsel for the accused
argued that the show cause notice and sanction order does
not disclose under which limb of Section 276B of IT Act the
accused has committed offence. However, on perusal of show
cause notice and sanction order, no doubt, the specific limb
of Section 276B in which, the accused contravened is not
mentioned specifically, but when we read the show cause
12 C.C.No.12/2020
notice and sanction order on entirety, then it can determined
that the accused has contravened the provisions of Chapter
XVII-B of IT Act. Hence, the present defence does not holds
goods.
22. Defence No.3: No penalty proceedings was initiated
against the accused and there was a reasonable cause
for delay in remittance of TDS : In the present case the
counsel for the accused vehemently argued that the
complainant authority have not initiated penalty proceedings
against the accused since there was a reasonable cause for
remitting the TDS in time. At the time of arguments, learned
counsel for the accused relied upon 2 nd proviso to the Section
201(1A) of IT Act which reads as under:
201(1) Where any person, including the principal
officer of a company,--
(a) who is required to deduct any sum in
accordance with the provisions of this Act;
or
(b) referred to in sub-section (1A) of section
192, being an employer,
does not deduct, or does not pay, or after so
deducting fails to pay, the whole or any part of the
tax, as required by or under this Act, then, such
person, shall, without prejudice to any other
consequences which he may incur, be deemed to
be an assessee in default in respect of such
tax........
Provided further......that no penalty shall be
charged under section 221 from such person,
unless the Assessing Officer is satisfied that such
13 C.C.No.12/2020
person, without good and sufficient reasons , has
failed to deduct and pay such tax......
23. On careful perusal of the above said provisions of law
and the proviso to the said section it clearly reveals that if
there is no penalty is levied for default in non-payment of tax
in time, then there will be good and sufficient reason for delay
in payment of tax. Similarly as per Section 278AA of IT Act,
which reads as under:
"278AA. Punishment not to be imposed In certain
cases Notwithstanding anything contained in the
provisions of section 276A, section 276AB [or
section 276B,] no person shall be punishable for
any failure referred to in the said provisions if he
proves that there was reasonable cause for such
failure"
24. On careful perusal of the above said provisions of law it
clearly reveals that no person shall be punishable U/s.276B
of the Act if he proves that there was a reasonable cause for
such failure. If we read the Section 278AA and proviso to
Section 201(1) together, it says that if there is reasonable
cause for non-initiation of the proceedings U/s.221 of the Act
is sufficient to held that the 'reasonable cause' mentioned in
Section 278AA is satisfied. Therefore, where there are no
penalty proceedings is initiated, then it can be said that there
was reasonable cause for non-payment of tax. At this stage,
learned counsel for the accused relied upon the decision of
Hon'ble High Court of Rajasthan in S.G. Kale V/s. Union of
India reported in (2001)118 Taxman 349 (Raj) , wherein it is
held that:
14 C.C.No.12/2020
"The existence of sufficient and reasonable cause
for non-payment of tax deductible at source within
the prescribed time is also an essential ingredient
of levy of penalty under section 201 read with
section 221. The conclusion is, therefore not far
to reach that where the proceedings for penalty
have been initiated and the same has not been
found imposable because of existence of sufficient
and reasonable cause for failure to comply with
the provisions of section 200, that the finding
coming from the competent officer becomes
relevant and weighty material to be considered
before sanction for prosecution could accorded
because in view of such finding ordinarily it is not
possible to sustain the prosecution, particularly if
the finding in the proceedings under section 201
has become final"
Further the counsel for the accused relied on the
decision of the Hon'ble High Court of Delhi in the
case of Sequoia Constructions Co. V/s. P.P. Suri
ITO (1985) 21 Taxman 13 (Delhi) , the Hon'ble
Court observed that the penalties had been
quashed on merits after acceptance of the case of
the assessee that thee was a good and sufficient
reason for non depositing the tax with the revenue
within time. It had, therefore, to be taken that the
milder proof of reasonable cause was established
and in the circumstances, it was as sheer exercise
in futility and harassment of the accused to allow
criminal prosecution. The prosecution had,
therefore, to be quashed"
The Hon'ble Apex Court in the case of K.C.
Builders 265 ITR 562 (SC) held that if the penalty
fails the prosecution is requires to be quashed.
Therefore, the accused No.1 submits that in view
of above decisions when the penalty proceedings
are dropped the complainant is precluded from
initiating the prosecution proceedings. In the
instant case no penalty notice were issued and no
15 C.C.No.12/2020
penalty proceedings initiated and consequently the
prosecution proceedings are bad in law"
25. By relying on these decisions, the counsel for the
accused vehemently argued that since there are no penalty
proceedings against the accused and accused have paid TDS
along with interest well within time. Therefore, the defence
taken by the accused on this point is very much acceptable.
26. However, in the present case the complainant
authorities have not at all initiated penalty proceedings
against the accused as there was reasonable cause for delay
in remittance.
27. Defence No.4: The complainant is not authorized to file
this complaint as per the sanction order: On perusal of
materials available on record and also the sanction order
dated 25.03.2019, the Commissioner of Income Tax, TDS,
Bengaluru has authorized and accorded sanction to Deputy
Commissioner of Income Tax, TDS, Circle-1(1) to file the
complaint against the accused persons. However, the present
complaint is filed by Assistant Commissioner of Income Tax,
TDS, Circle-1(1). At this stage, it is just and proper to know
hierarchy of Income Tax authority which provides U/s.116 of
Income Tax Act, which reads as under:
116. There shall be the following classes of income-
tax authorities for the purposes of this Act,
namely:--
16 C.C.No.12/2020
(a) the Central Board of Direct Taxes
constituted under the Central Boards
of Revenue Act, 1963 (54 of 1963),
(b) General of Income-tax or Chief
Commissioners of Income-tax,
(c) of Income-tax or Commissioners of
Income-tax or Commissioners of
Income-tax (Appeals),
(d) Deputy Directors of Income-tax or
Deputy Commissioners of Income-tax
or Deputy Commissioners of Income-
tax (Appeals),
(e) Directors of Income-tax or Assistant
Commissioners of Income-tax,
(f) tax Officers,
(g) Recovery Officers,
(h) of Income-tax.
28. On perusal of the above said provisions of law, the ACIT
and DCIT are not the same rank officers and DCIT is the
higher rank officer of the ACIT. The complainant before filing
this complaint ought to have sought for correction or issuing
the corrigendum to the Commissioner of Income Tax, TDS to
correct the sanction order thereby the complainant ought to
have filed this complaint. Therefore, even on this point also
the present complaint is defective. Further, on perusal of
materials available on record, the remittance of TDS for the
above said financial year well before issuance of the sanction
is not disputed by the complainant and on the other hand,
there is no penalty proceedings initiated against the accused
as discussed above. Therefore there was a reasonable cause
17 C.C.No.12/2020
for delay in remittance of TDS. Hence, the complainant has
failed to prove the guilt of the accused beyond all reasonable
doubt. Hence, I answer Point No.1 in the Negative.
29. Point No.2: In view of my findings on Point No.1, I
proceed to pass the following:
ORDER
By exercising the power conferred under section 248(1) of Cr.P.C., the accused No.1 is acquitted for the offence punishable under section 276B of the Income Tax Act, 1961.
The bail bond of accused No.1 shall stand cancelled.
(Dictated to the Stenographer, same has been typed, corrected and then pronounced by me, in open court on this the 28th day of February 2023) (ANAND S. KARIYAMMANAVAR) Presiding Officer, Spl. Court for Economic Offences, Bengaluru.
ANNEXURE:
List of the witnesses examined on behalf of the Complainant:
PW-1 : Cathy Tresa Mathew PW-2 : Shaji Varghese List of the Documents exhibited on behalf of the Complainant:
Ex.P-1 : Show cause notice
Ex.P-2 : Show cause notice
Ex.P-3 : Reply
Ex.P-4 : Letter of undertaking
18 C.C.No.12/2020
Ex.P-5 : Sanction order
Ex.P-6 : Show cause notice to A-2
Ex.P-6(a) : Signature of PW-2
List of witnesses examined on behalf of the Accused:
DW-1 : Govindachary List of Documents examined on behalf of the Accused:
Ex.D-1 to 6: TDS statement pertaining to
Financial Year 2009-10
Ex.D-7 : Written Representation
Ex.D-8 : Reply
Ex.D-9 : Reply
Ex.D-10 & 11: Two Request Letters
Ex.D-12 : Compounding Order
Presiding Officer,
Spl. Court for Economic Offences, Bengaluru.19 C.C.No.12/2020
28.02.2023 Complt.: IT Accd: SA & BK., For Judgment Judgment pronounced in the open court (vide separate order) ORDER By exercising the power conferred under section 248(1) of Cr.P.C., the accused No.1 is acquitted for the offence punishable under section 276B of the Income Tax Act, 1961.
The bail bond of accused No.1 shall stand cancelled.
PRESIDING OFFICER.