Jharkhand High Court
M/S Swastik Fruits Products Limited vs The State Of Jharkhand on 5 July, 2023
Author: Gautam Kumar Choudhary
Bench: Gautam Kumar Choudhary
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Cr.M.P. No. 4098 of 2022
1.M/s Swastik Fruits Products Limited, Corporate Office,
Upper Bazar, Ranchi.
2.Binay Sarawgi .... .. ... Petitioner(s)
Versus
1.The State of Jharkhand.
2.Sanjeev Chourasiya, the then Income Tax Officer,
Ranchi. .. ... ...Opp. Party(s)
...........
CORAM :HON'BLE MR. JUSTICE GAUTAM KUMAR CHOUDHARY .........
For the Petitioner(s) : Mr. M. S. Mittal, Sr. Advocate
M/s Salona Mittal, Advocate
For the Opp. Party(s) : Mr. R. N. Sahay, Advocate
For the State : Mr. Pankaj Kumar, PP
......
09/ 05.07.2023. The instant criminal misc. petition has been filed for quashing the entire criminal proceeding including the cognizance order dated 13.11.2017 passed in Complaint Case No. C 05 of 2017 whereby and whereunder, cognizance has been taken under Sections 276B and 278B of the Income Tax Act, 1961.
2. The allegation against the petitioners as set out in the complaint is that petitioner no. 1 had deducted TDS amount of Rs.17,99,629/- for the financial year 2014-15 (assessment year 2015-16) but had failed to deposit the same in time to the credit of Central Government as per the provisions of Income Tax Act, 1961. The chart with respect to quarter and the amount so deposited is set out which reads as under:-
Quarte Form Chln Ded PAN PAN ---- Due Date of TDS/TCS Last Interest Date of PERIO r type . No. ucte Date Deposit Deposited Payment on Late Deductio D OF e Principal Pmnt n Delay Ser. Amount (In No. Month) Q1 26Q 1 1 CQAPS6 USMA--- 7-Jul- 14-Oct- 2656.00 2656.00 195.00 30-June- 5 200G June 2014 2014 2014 2014 Q2 26Q 1 1 CQAPS6 USMA --- 10- 14-Oct- 8482.00 8482.00 252.00 30-Sept- 2 200G Sep 2014 Oct- 2014 2014 2014 Q3 26Q 1 1 APCPS916 SAKET --- 7- 13-Jan- 100.00 100.00 3.00 31-Dec- 2 6E Dec 2014 Jan- 2015 2014 2015 Q4 26Q 2 1 AABC11 INTER --- 30- 30-Apr- 101885.00 101885.00 19851.00 31-Mar- 13 73J Mar, 2015 Apr- 2016 2015 2015
3. Initially, petitioner no. 1 in agreement with Parle Agro Private Limited engaged in the business of packing, manufacture and sale of beverage for human consumption. For the purpose of its business, petitioner no. 1 had availed loans from Axis Bank. However, owing to the seasonal nature of business of beverages, petitioner no. 1 could not achieve financial and business stability and eventually it defaulted in its repayment obligation to Axis Bank. Subsequently, the debts of petitioner no. 1 was 2 acquired by International Asset Reconstruction Company Private Limited (IARC) vide sanction letter dated 08.02.2012. One of the conditions of restructuring of the debt was that petitioner no. 1 was to open a trust and retention account (TRA) with a bank acceptable to IARC. All the receipts and payments would be routed through the TRA alone. Pursuant thereto, a TRA agreement dated 08.07.2012 entered into between petitioner no. 1, IARC and HDFC Bank Limited for the purpose of operation and maintenance of TRA.
4. In sum and substance, under the aforesaid facts and circumstances, the petitioners were tied down by the condition imposed by TRA agreement and, therefore, there was some delay in depositing the TDS amount in the Central Government.
5. The second plea is that as per the circular bearing F. number 255/339/79- IT(Inv.) dated 28.05.1980, complaint should be filed within sixty days but this complaint has been filed after two years after the TDS amount with interest was already deposited.
6. Reliance has been placed on 2022 SCC Online Jhar 537. It is submitted that no specific averment has been made regarding the complicity of the Director. Reliance has been placed on 2022 SCC Online Jhar 821. In Cr.M.P. Nos. 3970 of 2018, 3972 of 2018 and 634 of 2021, cognizance has been quashed by this Court. This Court has held that the prosecution under Section 276B of the Act shall not normally be initiated when the amount involved and/ or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit to the Government.
7. Petitioner no. 1-Company had deducted TDS to the tune of Rs.17,99,629/- for the financial year 2013-14 (assessment year 2014-15) but had failed to deposit the same in time to the credit of Central Government as per the provisions of Income Tax Act inviting prosecution under Sections 276B and 278B of the Income Tax Act.
8. The debts of petitioner no. 1 was acquired by International Asset Reconstruction Company Private Limited (IARC) vide sanction letter dated 08.02.2012. One of the conditions of restructuring of debts was that petitioner no. 1 has to open a Trust and Retention Account (TRA) with a bank acceptable to IARC. It was due to this factor which was beyond the control of the petitioner to deposit TDS amount with delay. The said amount was deposited before issuance of any show cause notice dated 16.11.2016 by the Income Tax Department. After 1 ½ years of the deposit of amount, notice was issued.
39. The main plea for quashing of prosecution is that on the basis of CBDT guideline issued in F No. 285/90/2008/IT(Inv.-I)/05 dated 24.04.2008. Para (g) reads as under:
"Prosecutions under Section 276B should not normally be proposed when the amount involved, and or the period of default, is not substantial and the amount in default has also been deposited in the meantime to the Credit of the Government. No such consideration will, of course, apply to levy of interest under Section 201(1A)."
10. Relying on this circular, it is submitted that there was no criminality on the part of the petitioner as the amount had been credited in the account of interest before issuance of notice. Lastly, it is submitted that Section 278-AA of the Act specifically provides that 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.
11. The circular/instructions of Central Board of Direct Taxes (CBDT) as contained in F. number 255/339/79-IT(Inv.) dated 28.05.1980 has been relied upon while quashing the criminal prosecution in Cr. M. P. No.3970 of 2018 by the Co-ordinate Bench of this Court wherein the Court has noted that the Circular and guidelines of CBDT have been followed by different High Courts.
12. It is submitted by learned counsel Sri R. N. Sahay on behalf of the Department that indisputably there has been deduction of TDS by the petitioner- Company which was not deposited within the statutory period. In case of default in depositing the amount, the standard operating procedure laid down at Paras 5.1 and 5.2 of Manual on Prosecution and Compounding 2020 is followed which reads as follows :-
5.1 The time period for the entire process from identification to passing of order under Section 279(1)/ 2792(2) is summarised as under :-
Manual on Prosecution and Compounding 2020 Vol. II S. Section Time limit for submitting Time Limit for Time Limit NO. proposal for sanction u/s according sanction u/s for filing 279(1) 279(1) prosecution complaint
1. 276B Preferably within 90 days Preferably within 90 Preferably from issue of SCN by AO days of receipt of within 30 TDS [CIT (TDS)] may proposal from the AO days of extend the timeline for (TDS) through Range receiving submission of prosecution Head (excluding the approval u/s proposal considering the additional time taken 279(1) (Refer facts and circumstances of to dispose off Para 4.19) each case] (Refer Para 4.13) compounding application filed, if any) [Refer Para 4.15
(g)
2. 276BB -do- -do- -do-
5.2 The time lines given above should be followed as far as possible. However, any deviation from the time lines shall not render prosecution proceedings barred by limitation. The Pr. CCIT/ CCIT (TDS) should monitor progress of the cases identified for processing for prosecution particularly cases in which the timelines have not been followed.'' 4 In consonance with the guidelines, the notice for prosecution after default was served upon the petitioner-Company for default for the years 2014-15 on 30.11.2016.
13. It is further submitted that before initiating prosecution for not depositing the TDS amount, notice(s) were issued to the petitioner by the Assessing Officer on 30.11.2016, 21.12.2016 and then on 20.06.2017. However, none of these show cause/reminders were responded by the petitioner(s). In addition, the Commissioner of Income Tax (TDS), Patna also issued a show cause dated 14.11.2017 before giving sanction under Section 279(1) of the I.T. Act. With regard to the plea of reasonable cause for depositing the TDS as pleaded by the petitioner under Section 278 AA of the I.T. Act, it is submitted that there is no material to show that any effort was made to deposit the TDS amount in which the restructuring of debt by IARC came in way.
14. Reliance is placed in the case of Madhumilan Syntex Ltd. vs. Union of India in (2007) 160 Taxman 71 (SC) wherein it has been held by the Hon'ble Supreme Court that the plea under Section 278A of the I.T. Act, can be decided on the basis of evidence which would be adduced by the parties before the competent Court. With this observation for quashing of prosecution filed was rejected by the Hon'ble Supreme Court.
15. Having considered the rival submissions advanced on behalf of the parties and perusing the materials available on record, it is apparent that there has been delay in depositing the TDS amount.
16. The short question falls for consideration in the instant petition is that whether the petitioner has made out its case under Section 278AA of the Act that he was prevented by sufficient cause for depositing such amount to the credit of the Central Government?
18. A specific plea has been taken in Para-15 of the petition that as a result of restructuring the debt by IARC, petitioner no.1 had lost all control over utilization of its fund and payments to be made.
19. Further due restrictions were put in place by TRA agreement, the petitioner no.1 was not in a position to take instant and prompt decision as all payments have to be rectified by IARC. The department has not taken any stand on this and controverted this part of the averment made in the petition in its counter affidavit. It has been argued on behalf of the Department that this is a subject where it can be considered at the stage of trial. But the question for consideration will arise only when there is denial of the said plea of reasonable cause. The petitioner claims that the notice to deposit the amount was issued on 14.11.2017 on the basis of the sanction order dated 5 11.12.2017 and before issuance of the notice, the amount was deposited with interest. The notice for prosecution of sanction was issued after the amount had been deposited by the petitioner with interest.
As such, I find force in the submission advanced on behalf of the petitioner that there was belated service of notice and there was sufficient cause which prevented the petitioner to deposit the TDS amount within the stipulated time. Accordingly, the cognizance order dated 13.11.2017 passed in Complaint Case No. C 05 of 2017 is set aside.
The instant Cr. M. P. is allowed.
(Gautam Kumar Choudhary, J.) Sandeep/