Delhi District Court
Ito vs M/S. Capital Infrastructure Pvt. Ltd. & ... on 26 July, 2018
IN THE COURT OF SH. PAWAN SINGH RAJAWAT
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts):CENTRAL
TIS HAZARI COURTS, DELHI
CC No.540667/2016
ITO vs M/s. Capital Infrastructure Pvt. Ltd. & Anr.
JUDGMENT
(a) Name of complainant : Income Tax Office through Sh. C.R. Meena, ITO.
(b) Name, parentage, residence : 1) M/s. Capital Power
of accused Infrastructure Ltd.
A-156, Lower Ground Floor,
New Friends Colony,
New Delhi-110 025.
2) Sh. Pawan Kumar Bansal
C/o M/s Capital Power
Infrastructure Ltd.
A-156, Lower Ground Floor,
New Friends Colony,
New Delhi-110 025.
(c) Offence complained of/ proved : U/s 276B r/w Sec. 278-B of
Income Tax Act,1961.
(d) Plea of accused : Pleaded not guilty
(e) Final order : Convicted.
(g) Date of such order : 26.07.18
Date of Institution of complaint : 06.10.2016
Arguments heard/order reserved : 26.07.2018
Date of Judgment : 26.07.2018
ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 1 of 11
Brief statement of the reasons for the decision:-
1. The complainant through Sh. C.R. Meena, Income Tax Officer, filed the present complaint in discharge of official duties against accused no. 1 company and accused no. 2 Sh. Pawan Kumar Bansal being its Director for the offence punishable u/s 276-B r/w 278B of the Income Tax Act (for short the 'Act'), 1961 pertaining to Financial Year (for short FY) 2012-13.
2. Succinctly, the facts of the case are that accused no.1, a private limited company, had deducted certain TDS amounts for the relevant Assessment Year in accordance with the provisions of the Act but not deposited the same with the Government account within prescribed time. Hence, present complaint.
3. The pre summoning evidence was dispensed with as complainant was a government servant and filed complaint in discharge of official duties in terms of section 200 Cr.P.C.
4. The accused were summoned, accused no. 2 Pawan Kumar Bansal Director of accused no.1 company appeared before the court and copy of complaint and of documents were supplied to the accused and the matter was fixed for pre-charge evidence.
5. Sh. C.R. Meena, ITO examined as CW1 in pre-charge evidence and deposed on the lines of facts as alleged in the complaint. He has proved his complaint as Ex.CW1/1, sanction order as Ex.CW1/2, list of witnesses as Ex. CW-1/3, details of late deposit of TDS is Ex. CW-1/4. He stated that on verification it transpired that accused company through accused no. 2 had deducted amount of ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 2 of 11 Rs. 50,61,876/- but had not deposited the same to the government account within the stipulated period. He further proved show cause notice under Section 2(35) of the Act dated 17.12.2015 sent to accused no.2 as Ex.CW1/5. Replies dated 28.12.2015 of accused as Ex. CW-1/6 to the said notice, order U/s 2(35) of the Act dated 09.03.2016 was passed which is Ex. CW-1/7. He further deposed that proposal for launching of prosecution dated 11.03.2016 was sent by Sh. Subhash Kumar to the CIT which is Ex. CW-1/8. He further proved showcause notices u/s 279(1) of the I.T. Act dated 21/29.03.2016 as Ex. CW-1/9, its replies as Ex. CW-1/10 . He further deposed that after considering the replies to the show cause notices U/s 279(1) and after perusing the records, CIT has granted sanction Ex. CW-1/2 for launching of prosecution against the company.
During cross examination he stated that reply dt. 18.04.2016 filed by the accused to the showcause notice, was duly considered by the CIT before the issue of sanction order.
6. After hearing arguments, charge for offence 276-B r/w 278- B of the I.T. Act was framed against accused no. 1/company as well accused no.2 on 11.12.2017.
7. In post charge evidence, CW-1 i.e. complainant was recalled and cross examined by Ld. Defence counsel. After closing of post charge evidence the matter was adjourned for statement of accused.
8. Statements of accused no.1 company (through accused no.
2) as well as of accused no. 2 were recorded u/s 313 Cr.P.C. read with section 281 Cr.P.C separately. In the statement, accused denied the allegations and submitted that accused have been falsely implicated ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 3 of 11 in this case. In his statement accused no. 2 stated that the delay in deposit occurred due to late receipt of payment from customers i.e. government department.
9. In support of claim and contentions, accused examined Sh.
Anil Kumar as DW-1. He stated that he was the statutory auditor of accused no.1 and have signed the balance sheet for FY 2012-13. He further stated that the objective of Statutory Audit Report is to express an opinion on the financial statements based on their audit He stated that the balance sheet reflects true and fair view of books of accounts of the company. He failed to comment on the financial soundness of the company audited. He further proved annual report of accused no.1 for the FY 2012-13 as Ex. DW-1/1. During cross examination , he stated that the profit & loss account statement of Ex. DW-1/1 was prepared by the company and he had verified its contents. He admitted that during the FY 2012-13, the company earned profit of Rs. 2,79,14,316/- and the TDS deposited is not mentioned in Ex. DW-1/1.
10. I have heard the arguments on behalf of both the parties and gone through the record of the case. I have also gone through the relevant provisions of Income Tax Act, 1961.
11. Relevant provisions of section 276B & 278B of the Act are reproduced below for reference:-
[276B. Failure to pay tax to the credit of Central Government under Chapter XIID or XVIIB. - If a person fails to pay to the credit of the Central Government, - the tax deducted at source by him as required by or under the provisions of Chapter XVIIB; or the tax payable by him, as required by or under, - sub-section (2) of section 115-O; or the second proviso to section 194B, ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 4 of 11 he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine] [278B. Offences by companies.- (1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
12. It is argued on behalf of the complainant that the case has been proved beyond reasonable doubt against the accused person in view of the testimony of CW1. He submits that the order U/s 2(35), sanction order and the documents pertaining to TDS default were proved by the complainant witnesses. He prays for conviction of the accused.
13. On the other hand, Ld. Counsel for accused argued that the complaint is not maintainable in view of CBDT circular dt. 24.04.08 whereby it was directed that no prosecution will be launched if the default amount of TDS is deposited within 12 months from the date of deduction. He further pointed out that as per the press note dated 06.08.13, the said circular was modified with prospective effect only. He also argued that the complainant is required to prove the case beyond reasonable doubt which they have failed. He also argued that as per Ex. CW-1/4, the last payment was made on 30.07.13 and hence, the period of twelve months is to be considered from that date. He also argued that accused has been able to show reasonable cause of the delay in deposit of TDS amount as provided U/s 278AA of the Act as in Ex. CW-1/10 the accused have explained the reason of the delay and therefore, complaint should be dismissed and accused be acquitted.
ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 5 of 11
14. Whether accused no. 2 is the Principal Officer of accused no. 1: Section 2(35) of the Act deals with expression 'principal officer'. Relevant para of section 2(35) of the Act is reproduced below:
"(35) 'principal officer', used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means-
the secretary, treasurer, manager or agent of the authority, company or association, or body, or any person connected with the management or administration of the local authority, company, association or body upon whom the [Assessing Officer] has served a notice of his intention of treating him as the principal officer thereof'.
Section 200(1): Any person deducting any sum in accordance with (the foregoing porvisions of this Chapter) shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs.
(2) Any person being an employer, referred to in sub-section (1A) of Section 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs.
(3) Any person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in subsection (1A) of Section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, (prepare such statements for such period as may be prescribed) and deliver or cause to be delivered to the prescribed incometax form and verified in such manner and setting forth such particulars and within such time as may be prescribed.
Relevant para of section 204 is reproduced as under:-
"Section 204: Meaning of "persons responsible for paying"
* * *
(iii) In the case of credit, or, as the case may be, payment of any other sum chargeable under the provisions of this Act, the payer himself, or, if the payer is a company, the company itself including the ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 6 of 11 principal officer thereof".
15. The complainant has averred that accused no. 2 is the Director of accused no. 1 and therefore he is liable to be prosecuted for delay in deposit of TDS amount. CW1 categorically stated in his evidence that Sh. Pawan Kumar Bansal is the Principal Officer of accused company and has proved notice under section 2 (35) of Income Tax Act Ex. CW-1/5 issued to Mr. Abhishek Bansal and Mr. Pawan Kumar Bansal and which was duly replied on behalf of accused no. 1 vide reply Ex CW-1/6 dated 28.12.15 wherein it is categorically stated that Abhishek Bansal is not involved in day to day affairs of the company and looks into overall management of the company. Alongwith the reply, in another letter dt. 28.12.15,it was denied that accused Pawan Kumar Bansal is not involved in day to day activities and therefore he should not be treated as officer in default. Another letter dt. 03.03.16 was issued on behalf of accused no. 1 by the Chartered Accountant wherein it is specifically mentioned that Sh. Pawan Kumar Bansal was authorized to look after the matters relating to the accounts and taxation and for payment of taxes and other dues and no other director was involved in such matters. A statement of the Chartered Accountant Rajender Chauhan on behalf of company has also been recorded wherein he stated that Sh. Pawan Kum,ar Bansal was authorized to deposit TDS and TAN matters, no other director should be treated as Principal Officer U/s 2(35) of the Act. The issuance of letter dt. 03.03.16 and statement of the Chartered Accountant on behalf of accused no. 1 have not been denied by the accused. The order under section 2(35) of Income Tax Act, 1961 Ex. CW-1/7 was passed holding that accused Pawan Kumar Bansal as Principal Officer being connected with management or administration of the deductor-assessee for the ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 7 of 11 purpose of initiating proceedings under provisions of 276 B of Income Tax Act. Hence, it is proved that accused no. 2 Sh. PAWan Kumar Bansal is the officer in default who was responsible for timely deposit of TDS amount.
16. Whether there was due sanction for the present prosecution: CW-1 has proved the showcause notice Ex. CW-1/9 and reply on behalf of accused Ex. CW-1/10. He also proved the sanction order dt. 28.04.16 which is Ex. CW-1/2. In the sanction order it is clearly mentioned that there was deliberate intention of default of accused no. 1 within the meaning U/s 200 of the Act. It is further mentioned that accused no. 2 Sh. Pawan Kumar Bansal was managing the business activities of accused no. 1 at the relevant time. The sanction order has not been challenged by the accused. No questions was put to CW-1 that the sanction was not proper. Hence, it is proved that there was due sanction for launching of the present prosecution.
17. Whether there was delay in deposit of TDS amount:
As per the Income Tax Act, the TDS amount deducted in a month should have been deposited on or before 7 th of the subsequent month. As per Ex. CW-1/4 running from page no. 12 to 42, the accused no. 1 has committed default in timely deposit of TDS amount of Rs. 50,61,876/-. It is noted that the delay in deposit of TDS is ranging from 2 to 5 months and an interest amount of Rs. 310198.50 was also payable. The accused have not disputed that there was delay in deposit of TDS amount. However, it is claimed that the delay was not deliberate due to acute financial crises, shortage of orders, non release of funds from electricity boards and ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 8 of 11 other government departments and reduction/non availability of bank limits causing liquidity problems to the company. It is also mentioned in letter dt. 03.03.16 that the accused company is entitled for refund of Rs. 1260000/- for excess deposit of TDS which has not been processed in time.
18. Section 278 AA of Income Tax Act provides notwithstanding anything contained in provisions of Section 276A, 276AB or 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.
19. The onus is upon the accused to show that there was reasonable cause for the delay in deposit of TDS. To show the same accused has examined DW-1 who has brought on record the annual report of accused no.1 for the FY 2012-13 which is Ex.DW1/1. I have gone through Ex.DW1/1. None of the reasons mentioned in 03.03.16 find mentioned either in Director's report or in the auditor's report. On the contrary, in the Director's report it is mentioned that net profit of the company has increased by 28.27% from Rs.217.96 lakhs to Rs. 279.14 lakhs. The company is also declared dividend of 1% which comes to Rs. 12 lakhs. No witness have been examined by the accused to show the alleged loses and cash crunch. The plea taken by accused that since Income Tax authorities have delayed the processing of the refund which accused no.1 was entitled,has resulted in TDS default is not maintainable as the law requires the timely deposit of TDS and any counterclaim has no relevance. I am satisfied that there was delay in deposit of TDS and accused has failed to discharge the burden of showing reasonable cause for the default in deposit of TDS amount. The accused also failed to rebut the ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 9 of 11 presumption U/s 278 E of the Act.
20. Whether the CBDT circular dt. 24.04.2008 has any relevance to the present prosecution: The circular dt. 24.04.2008 has been modified by another circular dt. 07.02.2013 wherein it is mentioned that since the provisions of the Income Tax Act do not lay down any specific time limit for the default in deposit of TDS/TCS for launching prosecution, the CBDT has modified the paragraph 3.1 (i) and (ii) whereby it was directed that cases where amount of tax deducted of Rs. 1 lakh or more and the same is not deposited by the due date shall mandatorily be processed for prosecution in addition to recovery steps as may be necessary. However, the press note/release qua circular dt. 07.02.2013 was issued on 06.08.2013. The argument of Ld. Counsel that since the default occurred between 01.04.2012 and 31.03.2013, the circular dt. 24.04.2008 should be applied to the facts of the present case and the modification dt. 07.02.2013 has no application is humbly rejected as the present complaint was filed on 28.09.2016 i.e. after the issuance of circular dt. 07.02.2013. The accused cannot escape prosecution as on the date of filing of complaint, the guidelines as modified by circular dt. 07.02.2013 are in operation and applicable to the present prosecution.
21. Undisputedly, the tax deducted at source by the accused no.1 company was not deposited within prescribed period. The offence u/s 276B of Income Tax Act is complete when the tax deducted at source is not deposited in time. Company can not be allowed to take unfair advantage and use the tax amount so deducted for any other purposes. In view of the aforesaid discussions and facts and circumstances of the case, it is held that ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 10 of 11 the prosecution has proved its case against accused persons beyond reasonable doubt. Accordingly, accused no.1 M/s Capital Power Infrastructure (P) Ltd. and accused no. 2 Pawan Kumar Bansal are held guilty for the offence u/s 276B r/w Sec. 278B of the Act for deducting TDS for the financial year 2012-13 and not depositing the same in the Government account within prescribed period.
22. Copy of the judgment be given free of cost.
Digitally signed by
PAWAN SNGH PAWAN SNGH RAJAWAT
RAJAWAT Date: 2018.07.26
16:06:53 +0530
(PAWAN SINGH RAJAWAT)
ACMM(Special Acts) CENTRAL
TIS HAZARI COURTS DELHI
Announced in Open Court
on 26th of July, 2018.
ITO vs M/s Capital Power Infrastructure Pvt. Ltd.. CC No. 540667/16 11 of 11