811 total views
Do the thankless Job and get the prosecution as reward
TDS is just an additional compliance burden on the payer or deductor. This job has to be performed under legal compulsion, without any reward. Non compliance may result in the prosecution.
This is what is being ordered by Mumbai High Court in the case of Mr. Firoz Abdul Gafar Nadiadwala. The court have categorically observed that
- Pleas of financial problem, incompetent staff, accountant’s negligence, unawareness about law etc are not acceptable as a defense
- Section 276B invariably provides for Prosecution for delay in payment of TDS.
- The accused has no right to retain the TDS amount and use it for any other purpose.
- The default is complete if the TDS is not deposited in time.
- Late deposit does not absolve the accused.
- Madhumilan Syntex AIR 2007 SC (148) followed)
Here is the copy of the judgment:
CNR No. MHMM200001812014
Complaint filed on : 26.03.2014.
Complaint registered on:26.03.2014.
Decided on : 25.04.2019
Duration : 05Y. & 29D.
IN THE COURT OF ADDL. CHIEF METROPOLITAN MAGISTRATE,
38th COURT, BALLARD PIER, MUMBAI
(Presided over by R. S. Sarkale)
COURT CASE NO.95/SW/2014.
Income Tax Officer(TDS)1(
5) .. Complainant.
Mr. Firoz Abdul Gafar Nadiadwala
Plot No.20, Barkat, Gulmohor Cross Road,
No.5, Juhu Scheme, Andheri(W), Mumbai. .. Accused.
Charge : Under Section 276B of The Income Tax Act,1961.
Appearance : Special Public Prosecutor Mr. Amit Munde for
Ld. Advocate Mr. Ashok Bhatia for accused.
(Delivered on 25.04.2019)
1. The complainant Ajay Kamble, Income Tax Officer(TDS)1(
5) had filed the complaint u/s. 200 of the Cr.P.C. against the accused
for committing the offence punishable u/s. 276B of Income Tax Act,
1961 pertaining to financial year 20092010
and assessment year 20102011.
2. Brief facts of the complainant’s case are as under The
complainant is the Income Tax Officer (TDS)1(
Mumbai, attached to CIT(TDS), Mumbai. The sanctioning authority in
exercise of powers conferred u/s. 279(1) of Income Tax Act has
accorded sanction to prosecute the accused u/s. 276B of Income Tax
Act. Accused is an assessee in the jurisdiction of the complainant for
the income tax (TDS purpose). The accused is an individual having his
office at plot No.20, Barkat, Gulmohor Cross Road, No.5, Juhu Scheme,
Andheri(W), Mumbai. The accused during various dates from the
period 01/04/2009 to 31/03/2010 and was under obligation u/s.194A
of the Act to deduct the income tax from interest paid/credited under
section 194C of the act to deduct the income tax from the payment of
contractors, u/s.194H of the Act to deduct the income tax from the
payments of commissions and u/s.194J of the Act to deduct the income
tax from the payment of fees for professional or technical services. 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. During the period from 01/04/2009 to 31/03/2010 accused
had deducted tax of Rs. 8,56,102/u/
s. 194A, 194C, 194H and 194J of
the Income Tax Act but failed to pay or to deposit income tax so
deducted to the credit of Central Government. The accused failed to
show reasonable cause or excuse to pay deducted tax within the
prescribed period to the credit of Central Government within the
prescribed period. The said amount was paid after a long period of
delay beyond 12 months. Therefore, the accused has committed default
u/s. 200 and 204 of the Act, 1961 r/w Rule 30 of the Income Tax
3. The complainant further submitted that in view of default
committed by the accused show cause notice was issued to the accused,
the accused required to show cause as to why prosecution should not be
launched against him for offence u/s. 276B of the Income Tax Act for
failure to pay the amount deducted by way of income tax within
stipulated time. The complainant submitted that the explanation given
by the accused for his failure to pay the said tax deducted at source
within prescribed time does not constitute reasonable cause for the said
default. The accused has committed a default u/s. 200 and 204 of the
Income Tax Act 1961 r/w Rule 30 of the Income Tax Rules, 1962 by
failing without reasonable cause or excuse to pay the income tax so
deducted to the credit of Central Government and said default amounts
to an offence punishable u/s. 276B of the Income Tax Act. Therefore,
by granting sanction u/s. 279(1) of the Income Tax Act, prosecution
launched against the accused as accused has failed to comply with the
statutory provisions without reasonable cause. Hence accused has
committed an offence punishable under section 276B of Act. Hence,
4. After filing of the complaint, cognizance was taken and
case was registered against the accused for offence punishable u/s.
276B of the Income Tax Act. The process was issued u/s. 276B of the
Income Tax Act. Notice was served on the accused, in response to the
notice, accused appeared through his Counsel and enlarged on bail.
5. The complainant complied the formalities u/s. 207 of Cr.
P.C. All the documents were furnished to the accused. Thereafter
evidence of the complainant and sanctioning authority was recorded
before charge and after hearing both the sides my Predecessor hold that
there is sufficient material to frame the charge and accordingly charge
was framed against the accused as per Ex.17 u/s. 276B of the Income
Tax Act. Contents of the charge were read over to the accused in
vernacular. Accused pleaded not guilty and claimed for trial. The plea
of the accused is at Ex.18.
6. In order to prove the charges leveled against the accused,
the complainant has examined two witnesses. These are C.W.1 Vinod
Kumar Pande, sanctioning authority at Ex.10 and C.W.2 Ajay
Ghanshyam Kamble, complainant at Ex.19 and placed number of
documents on record. After closer of evidence of the complainant,
statement of accused u/s. 313 of Cr. P.C. was recorded at Ex.23. The
accused denied incriminating evidence put to him. Defence of accused is
of total denial. The accused submitted that TDS amount is already
deposited with the Government and he is regular payee of the tax and
false case filed against him.
7. From the contents of the complaint and evidence of both
the sides, after hearing Ld. Advocate for complainant and accused at
length, following points arise for my determination and I have recorded
my findings against each point with reasons as follows Sr.
No. Points Findings
1 Does prosecution prove that, accused is
responsible for deduction of Tax at source
but accused failed to pay TDS of the
Financial year 20092010
to the credit of Central
Government within time without any
justifiable reason and thereby committed
an offence punishable u/s. 276B of The
Act? ..In the affirmative.
2 What order ? As per final order.
8. In order to prove the guilt against the accused, complainant
has examined C.W.1 Vinod Kumar Pande, sanctioning authority at
Ex.10 and C.W.2 Ajay Ghanshyam Kamble, complainant at Ex.19.
Except that no other witness was examined by the complainant. While
complainant relied upon documentary evidence i.e. proposal Ex.14,
reply Ex.15, show cause notice Ex.12, 13, 16, details of traces Ex.20,
sanction order Ex.11. Except that no other oral or documentary
evidence led by the complainant. Thereafter complainant has filed
evidence closed pursis at Ex.21. While in defence accused has not led
any oral or documentary evidence and filed evidence close pursis at
As to Point No.1:
9. It is the case of complainant that the accused has deducted
the tax amount but failed to deposit the tax within stipulated period
prescribed in the Income Tax Act to the Central Government, therefore
accused has committed offence u/s. 276B of the Income Tax Act.
In order to prove the guilt against the accused, complainant has
examined two witnesses. C.W.2 Ajay Ghanshyam Kamble, complainant
deposed at Ex.19. He deposed that from 2013 to 2015 he was attached
to TDS office situated at Charni Road, Mumbai. He received sanction
order from CIT(TDS) Shri. V.K. Pandey for launching prosecution
against the accused Firoz Nadiadwala. During assessment of case of
accused he found that accused had deducted tax of Rs. 8,56,102/of
the financial year 20092010
but deducted tax amount not deposited or
paid to the Central Government account within stipulated time. The
period of deduction of tax amount is up to the 7th day of next month.
He collected the information from the system of his department and
found that accused was defaulter for non payment of tax amount within
stipulated time. The traces statement is at Ex.20. The accused
deposited tax and TDS amount after expiry of 12 months.
10. The witness was crossexamined.
In the crossexamination
witness admitted that he did not remember which documents are
annexed with sanction order by CIT(TDS), he also did not remember on
which date he received the sanction order. He has not issued the notice
dtd. 27/09/2012 and the said notice was issued by his Predecessor. He
denied that he was not signatory of any document filed on record. He
admitted that reply given by the accused to show cause notice is seen by
him before filing of complaint. He did not file reply of the accused of
show cause notice as he do not want it is necessary. He admitted that
Ex.20 is unsigned document and there was no mention of name of
Government Website. He admitted that in the complaint nowhere
mentioned about Ex.20 is generated by him personally from official
computer system traces. He did not remember on which date accused
filed income tax returns of financial year 20092010
and year 20102011.
On Ex.20 there are 104 PAN numbers are mentioned. Witness
admitted that the amount of Rs. 8,56,102/was
deposited by the
accused. He also admitted that in his complaint it was mentioned that
accused deposited said amount and delayed by 12 months. He
admitted that his department levied penalty, interest and legal fees in
case of delayed payment. He admitted that accused deposited same
amount in the department. He did not remember about the
correspondence dtd. 09/10/2012 made by the accused with
department. The sanction order is of dtd. 25/03/2014 while he filed
complaint on 26/03/2014 but denied that he has no any authority to
file the complaint. Witness denied that accused has given satisfactory
explanation to the department but department has not considered his
explanation about delayed payment of TDS. He denied that department
has accepted the amount from the accused after giving satisfactory
explanation by the accused, by accepting explanation of the accused.
He denied that he has filed false complaint against the accused without
11. By perusing the evidence of complainant, it seems that as
per the directions given by Principal Income Tax Commissioner(TDS),
he has filed complaint against the accused as accused deducted the tax
but not deposited the said amount with tax authority within stipulated
time. The witness admitted that the accused have paid the TDS
amount but amount was paid by the accused after expiry of
stipulated time. As per directions given, witness filed present complaint
as per authority given to him.
12. C.W.1 Vinod Kumar Pande, sanctioning authority deposed
at Ex.10. He deposed that he has passed sanction order for prosecution
against the accused on 25/03/2014 as per Ex.11 and authorised
complainant Ajay Kamble to file complaint against the accused. Before
granting sanction he issued show cause notice dtd. 12/11/2012 as per
Ex.12 & 13. The proposal came from Shri. Ramankumar I.T.O. TDS
1(5) as per Ex.14, reply received by the accused as per Ex.15. Assessee
deducted the TDS from various payment made to others but assessee/
accused did not deposit TDS with the Government within stipulated
period. On 01/10/2013 notice was issued to the accused through ITO
head quarter, Mumbai and one more opportunity was given to accused
but accused not complied with the same.
13. The witness was crossexamined
by defence. In the crossexamination
the witness admitted that he has gone through the record
of assessee. In the financial year 20092010
assessee deducted Rs.
deposited said amount after 12 months. He did not
remember whether accused gave a reply to the notice. Witness denied
that if the amount of income exceeded Rs. 20,000/then
TDS would be
applicable. To the notice issued by him, accused gave reply dtd.
17/12/2012 but witness denied that he ignored that reply. When he
found that reply of accused is not satisfactory that is why he has passed
sanction order for launching prosecution against the accused. He
denied that before passing sanction order he had not gone through the
reply of assessee. He denied that in spite of satisfactory explanation
given by the accused, he passed sanction order in the year 2014. He
denied that he passed orders without verifying details of assessee and
not verified whether the said amount comes under the exceptions of
section 192 clause1 A of Income Tax Act.
14. C.W.2 is the sanctioning authority, as per procedure and
authorisation given by the Act to him and by perusing relevant
documents and by applying his mind and after considering all the
relevant factors, he passed sanction order against the accused for
prosecution. Nothing brought on record from the mouth of this witness
to discard his testimony.
15. Spl. Public Prosecutor Shri. Munde argued that on perusal
of the evidence on record the guilt of accused is proved. The accused
deducted TDS but failed to deposit the deducted tax to the Government
within stipulated perod. The accused himself admitted the said fact
during recording 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 Advocate also submitted
that the accused is duty bound to remit the deducted TDS amount
within stipulated period of time as prescribed in Rule 30 Income Tax
rules and the failure to remit the TDS after its deduction within
stipulated period of time attracts penal provision contained in section
276B of The IncomeTax
Act. The deducted TDS amount belongs to the
Government and the payer acts in fiduciary capacity. Thus, it is
bounden duty to remit the TDS to the Government account and no
amount of helplessness and financial difficulty will not come in the
rescue of the payer. The payer is not entrusted to retain the deducted
TDS and used the same for any other purpose. Thus, the accused has
failed to comply with the statutory provisions without reasonable cause,
hence committed an offence punishable under section 276 B of IncomeTax
16. Advocate for accused submitted that before any initiating the
prosecution, the accused has deposited all the TDS amount to the
department, therefore present complaint is not maintainable. It is also
submitted by Advocate that during the stipulated period, the
economical condition of the accused is not well and the business of the
complainant was not in a good condition. After March 2008, there were
no active film production. His income comprised of only sale receipt of
old movie. No new movie released during three years therefore accused
could not paid TDS amount within stipulated period. The accused
submitted reply to the show cause notice and this is the first time
accused defaulted for payment of money. It is further submitted that in
view of the instructions issued by Government Of India, Ministry Of
Finance, CBDT dt. 28.05.1980, 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.
Advocate for accused also submitted that in view of provisions under
section 278AA when there is reasonable cause, in such cases, no penalty
should be imposed. On that basis Advocate for accused submitted that
accused is entitled for acquittal.
17. It is not disputed that the accused had deducted the TDS
amount of Rs.8,56,102/for
the period from 01/04/2009 to
31/03/2010. It is admitted that accused not deposited said amount
within stipulated period i.e. on or before 7th day of next month. It is also
admitted position that subsequently out of total amount deducted under
section 194A, 194C,194H and 194J of the Act accused paid all the
amount with interest as required under section 201A of the Act. Owing
to the delay in payment of the aforesaid amount. The accused paid TDS
amount after statutory period, therefore there was delay for the
payment of amount. The complainant during the evidence brought on
record that the accused deducted TDS, but not deposited and deposited
after the period of 12 months. It means that the accused not deposited
TDS amount within stipulated time or deposited beyond the period of
statutory limit, the accused not denied the same fact. The accused is
responsible to deposit deducted TDS amount within stipulated time as
per section 200 and 204 of the Act and accused committed default.
18. Advocate for accused submitted that sanction accorded by
sanctioning authority under section 279(1) of Income Tax Act for
launching prosecution against accused under section 276B of IncomeTax
Act is mechanical and contrary to the instructions issued by the
Central board of Direct taxer dt. 28.05.1980. Advocate for accused
further submitted that section 278A of the Act postulates an express bar
on punishment under section 276A, 276AB or 276B of the Act. If access
is proved that there was reasonable cause for such failure. In the
present case accused shows reasonable cause about financial difficulty
and payment of taxes to the Government and shows bonafides the tax
along with interest has been paid, therefore the prosecution is
unwarranted. While Advocate for complainant submitted that by
making payment of TDS amount along with interest will not exonerate
the accused from the liability of section 278B of the Act. Accused
deducted the tax at the source, but did not deposit with Central
Government within specified time limit.
19. Advocate for accused submitted that sanction accorded
without proper offering opportunity and not considered say or reply and
only mechanical sanction is granted. Accused gave a reply to show
cause, but it was not considered by sanctioning authority, but here in
this case the sanction order on record at Ex.12 in paragraph No. 05 of
Ex.12, the sanctioning authority mentions that the facts and materials
placed before me which I have gone through fully and carefully
examined and I am further satisfied that adequate ground exist to
prosecute the said person.
20. Sanction is an administrative function and is only to see that
frivolous or avoidable trials do not take place notwithstanding that it is
an objective exercise by the sanctioning authority to consider the
material on record to satisfy himself whether a case fit for launching
prosecution exists, on such satisfaction, the sanction can be accorded
and thereafter the trial proceedings in which the person sent proceeded
against has ample opportunity to defend himself against the allegations
made against him and to meet the evidence, led to substantiate those
allegations by the prosecution. In the present case notice is given before
issuance of sanction to which reply was filed by accused and after
considering all the relevant facts and material on record sanction was
21. Advocate of accused submitted that no proper sanction to
initiate the criminal proceeding against accused person as sanction
order does not mentioned any details regarding explanation given by
the accused in respect of delay in making the payment. Sanction order
at Ex.11 is on record and that discloses in paragraph No.05 that “ the
facts and material placed before me which I have gone through fully
and have carefully examined and I am further satisfied that adequate
grounds exists to prosecute the said person”, accordingly sanction was
granted to initiate the criminal proceeding. In case of Gopal
Engineering V/s Thanngaraja reported in 1995 211 ITR 303, it is
held that “ there is no necessity that each and every aspect of the case
must be dealt with in the authorisation”. Thus there is no merit in the
contention of the accused that there is no proper sanction to initiate the
criminal proceeding against the accused person.
22. Section 277AA provides a window for the accused to
escape from the penal consequence by proving that he had reasonable
cause for the nondepositing
of deducted TDS amount within time limit.
The accused taken defence that financial constraints and lower down
the business activity during financial year 20092010
as no active film
production and income only comprised old films sale resulted in not
depositing of TDS amount but except putting suggestions and say filed
on record, no material is produced to substantiate the fact. Say of the
accused on record which shows that the taxes are deducted and same
was deposited but it is delayed. But accused during the trial not
produced any material to substantiate the contentions referred above.
Mere taking of the contentions is not amounting to offering a
reasonable cause for the failure to remit the deducted TDS.” It is the
defence of accused that accused gave detailed explanation of non
payment of TDS in time where accused’s business activities during the
financial year 20092010
is not active in film production. His income
comprised only sale receipts of old movies and no movies were
completed and sold or released during three years, also problem of
competent staff, accountants negligence, accused not aware about
deducted and payment of tax voluntary payment of TDS and small
amount of default. There is no intentional default, no mens rea, but
because of above reasons accused could not deposited TDS in time. But
accused not produced any material to substantiate the contention above
referred. Mere taking up the contention is not amounting to offering a
reasonable cause for the failure to remit the defaulted TDS.
23. Advocate of complainant submitted that financial
constrains could not be made as a ground to evade the penal