Section 276B invariably provides for Prosecution for delay in payment of TDS and prosecution in such case is confirmed by court
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.
Exh. –
Income Tax
Through Ajay
G. Kamble
Income Tax Officer(TDS)1(
5) .. Complainant.
V/s.
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
complainant.
Ld. Advocate Mr. Ashok Bhatia for accused.
JUDGMENT
(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(
5),
Mumbai, attached to CIT(TDS), Mumbai. The sanctioning authority in
..2..
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
Rules, 1962.
3. The complainant further submitted that in view of default
committed by the accused show cause notice was issued to the accused,
..3.. C.C.No.95/SW/2014.
Judgment.
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,
present complaint.
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
..4..
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
and Assessment
year 20102011
to the credit of Central
Government within time without any
justifiable reason and thereby committed
an offence punishable u/s. 276B of The
IncomeTax
Act? ..In the affirmative.
2 What order ? As per final order.
..5.. C.C.No.95/SW/2014.
Judgment.
REASONS.
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
Ex.25.
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.
..6..
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
..7.. C.C.No.95/SW/2014.
Judgment.
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
any authority.
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.
..8..
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.
8,56,102/but
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
..9.. C.C.No.95/SW/2014.
Judgment.
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
Act.
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
..10..
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.
..11. C.C.No.95/SW/2014.
Judgment.
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
..12..
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
granted.
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
..13.. C.C.No.95/SW/2014.
Judgment.
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
consequences. Once TDS amount is deducted then the deductor is
legally bound to remit the same to the Government. The accused has no
right to retain the TDS amount and make use of the same for any
..14..
purpose. The financial difficulty is not defence of the default. As far as
not having mens rea is concerned, it is submitted that mens rea is not
prerequisite
ingredients to the offence under section 194C of The
IncomeTax
Act. If accused fails to make deduction of tax at source, he
is liable to be punished for the said offence. This liability is an absolute
liability.
24. Thus mens rea is not a requisite ingredient of the offence
under section 194A, 194C and 276B of The IncomeTax
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 under section 276B r/w sec. 194A
mens rea is not required.
25. Advocate for accused submitted by referring of the
documents on record and answers given by the complainant in crossexamination
that the deducted TDS amount with interest,penalty and
legal fees deposited by accused before initiation of proceeding. Hence,
the present complaint is not maintainable. This contention is not
substantiate under law because the offence punishable under section
276B of The IncomeTax
Act is complete when the tax deducted at
source is not deposited within given time and late deposit will not
absolve the accused.
26. Advocate of accused submitted that since TDS has already
..15.. C.C.No.95/SW/2014.
Judgment.
been deposited to the account of Central Government, there was no
default and no prosecution can be ordered. There is no provision in the
IncomeTax
Act imposing criminal liability for delay in deduction as for
non payment in time. I am unable to agree with Advocate of accused
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 acton can be taken under the Act.
27. Advocate for accused pointed out section 278E of the Act
which shows that if any prosecution for any offence under this act
which requires a culpable mental state on the part of accused, then
Court shall presume the existence of such mental state, but it shall be a
defence for the accused to prove the fact that he has no such mental
state with respect to the Act charged is an offence in that prosecution.
Advocate of accused submitted that the accused have no mental state or
no intention to avoid payment of TDS, but there are some financial
problems under such circumstances, accused default in making payment
of TDS and tax were paid at belated stage. If the defence of the accused
about existence of such mental state, then burden lies upon the accused
to prove that he had no mental state with respect to the Act charged as
an offence in that prosecution. In the present case there is no evidence
that there is no culpable mental state of mind from the part of accused
person if the failure deposit TDS amount beyond time limit. There is no
positive evidence brought on record, therefore it appears that accused
failed to rebut the presumption lies against him under section 278E of
The IncomeTax
Act.
..16..
28. Before proceeding further it shall be useful to see the
relevant instructions, the same reads as “the prosecution under
section 276B should not normally be proposed when the amount
involved and for 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, section 278AA of the Act reads as “
punishment not to be proposed in certain casesNotwithstanding
anything contained in the provisions of section 276A, 276AB or 276B,
no person shall be punishable for any failure referred to in the said
provision if he proves that there was reasonable cause for such
failure. This section provides a window for accused to escape from the
penal consequence by proving that he had reasonable cause for the
nondepositing
of deducted TDS amount within time limit.
29. Advocate for accused contended that accused had given
reason for failure to pay tax in time due to to financial problem,
competent staff, accountant’s negligence, accused not aware about
depositing tax, but accused during trial not proved the same. The
accused taken defence that due to financial problem resulted in not
depositing of TDS amount, but except putting suggestions and say filed
on record, no material is produced to substantiate the fact. Mere taking
of the contentions is not amount to offering a reasonable cause for
failure to remit the deducted TDS. The accused not proved that during
trial by leading evidence that there was reasonable cause for not
depositing the aforesaid tax amount within specified time limit.
30. Section 276B of The IncomeTax
Act reads as
“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
..17.. C.C.No.95/SW/2014.
Judgment.
Government (
a) the tax deducted at source by him as required by or under the
provisions of Chapter MVIIB;
or
(b) the tax payable by him, as required by or under (
i) subsection(
2) of section 115O;
or
(ii) the second proviso to section 194B
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.
Income Tax Act makes separate provisions for levy of
interest, penalty and criminal prosecution. The charging of interest has
altogether a different purpose and i.e. for compensating the revenue
for depriving it of the user of the money during the period the payment
was withheld. The provisions with regard to criminal prosecution in
cases of economic offences or violations of income tax law are of recent
growth and their desirability and for necessity was felt because of
rampant attitude of the defiance displayed by some affluent sections of
the society. The pernicious effect on the economy of the country that
evasions and violations were playing naturally called for sterner
measures. These prosecutions has thus been made permissible in spite
of the already existing provisions with regard to levy of penalties by
income tax authorities. The legislature’s wisdom, therefore, to open up
prosecutions and dire consequences has a sound basis and can not be
doubted. There is no question of Double Jeopardy in such cases. The
main objectives of prosecution provisions contained in Chapter XXII of
the Act 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
..18..
those, who may even contemplate evading payment of legitimate taxes.
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.
An accessee can be levied penalty
as well as punished by the prosecution. It is defence of the accused that
they has paid all the amount with interest and penalty. No doubt the
accused has paid all the tax amount. It was not paid within stipulated
period, but it was paid after delay and said fact was not disputed by the
accused.
31. It is the defence of accused that delay in depositing TDS
and interest on such delay was due to reasons beyond its control.
However, this plea of accused does not hold much water. The accused
has not explained as to what has prevented or under which
circumstances TDS could not be deposited in time. Except bald
statement accused has not produced any document on record or lead
any defence evidence to show its bonafide for not depositing TDS
within time. Said defence was taken by the accused before IncomeTax
authorities, but IncomeTax
Department not to considered the defence
of accused. Reasonable excuses shown by the accused before granting
sanction for prosecution. But accused failed to brought on record said
defence taken before income tax officer during proceeding before the
concern department and to show these documents before the concern
department. It is contention of accused that accused paid all deducted
TDS amount with interest and penalty. In spite of that, sanction was
granted by Commissioner of Income Tax u/s. 279(1) of IncomeTax.
But, here in the present case, accused not applied for compounding of
offence. Under the IncomeTax
Act, all the powers are vested with
department about compounding. But here accused not availed the said
..19.. C.C.No.95/SW/2014.
Judgment.
remedy. Therefore it can be conclude that the accused have number of
defences but accused has not brought on record that there was
reasonable cause and accused not followed proper procedure and not
availed opportunity given to them. Therefore defence taken by accused
was not proper.
32. Section 200 of I.T. Act obligates a person, deducting any
sum in accordance with the various provisions under the chapter to pay
within the prescribed time period in the treasury of the Central
Government, the sum so deducted to the credit of the Central
Government or as the board directs. In this case, breach of provisions of
section 200 of I.T. Act has been alleged against the accused for which
sanction for prosecution has been granted u/s.279 of the Act.
33. However, for breach, one of consequence is to levy penalty
as provided u/s.201 which reads as under Sec.
201Consequences
for failure to deduct or pay (
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 subsection
(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 persons shall, without prejudice to any other consequences
which he may incur, be deemed to be an assessee in default in respect
of such tax:
34. From the aforesaid provisions, it is apparent that
..20..
notwithstanding treating a company which has not deposited the tax to
the credit of Central Government within prescribed time as an assessee
in default to be liable to penalty. It further makes it clear that such
penalty is not to be imposed on any person, whether in his own
capacity, as a company or as Principal Officer of the company unless
Accessing Officer is further satisfied that such person or Principal
Officer of the company, as the case may be, has failed to deduct and to
pay tax without any good and sufficient cause. Therefore, a bonafide
default with good and sufficient reasons in payment of tax required to
be deducted at source to the treasury within prescribed time mitigates
the gravity of the offence to an extent that even penalty for such breach
can not be imposed.
35. It is argued on behalf of the accused that in reply to show
cause notice at Ex.15 dt. 17.12.2012 the accused gave reasons for non
payment of the tax, but the Principal Commissioner of IncomeTax
has
not gone through it and not considered the same as reasonable cause
for non paying TDS to the Government, but during granting sanction
the Principle Commissioner Of IncomeTax
specifically held in
paragraph of Ex.11 that “ The facts and materials placed before me
which I have gone through fully and have carefuly examined and I am
further satisfied that adequate grounds of exist to prosecute the said
person”. Thus, contention of defence about concerned authority is not
considered and to grant prosecution is not tenable and proper. It is also
defence of accused that sanctioning authority not applied proper rules
during granting the sanction, but on perusal of section order the
sanctioning authority clearly gave finding about applying the mind and
thereafter granted sanction, therefore there is no question of non
applying of mind would arise. Therefore, it clear that accused gave
..21.. C.C.No.95/SW/2014.
Judgment.
opportunity for explaining for non payment of tax, but accused not
availed the same. Therefore accused not given reasonable cause for
delaying payment of tax.
36. It is the defence of accused that reply was filed by the
Chartered Account of accused and accused is not aware about the same,
but the said defence of accused is not acceptable because the reply filed
on record and it was not possible for C.A. without giving any authority
and without instructions by accused, he cannot filed reply to the
concerned authority. Moreover, accused has not examined his C.A. as a
defence witness. In spite of stating during recording of statement of
accused under section 313 of Criminal Procedure about to examine C.A.
but not examined him and brought on record, the said fact, best reason
known to the accused. Moreover, as per the contentions of accused his
Chartered Accountant without his instruction, Chartered Accountant
filed reply in the proceeding. Thereafter, accused have liberty to take
necessary steps against the CA for filing reply in the proceeding without
authority and without any information, but in the present case no any
evidence brought on record to show that C.A. of accused filed reply
without consent of accused, hence defence is not accepted.
37. Advocate for accused argued that whole prosecution case is
on annexure B i.e. Ex.20 which is TDS default statement on Traces. As
per the contentions of accused, the document is not proved by
complainant and it can not be read in evidence and this document have
no evidentiary value and not proved as per law as no any signature on
document, the documents does not reflect in any manner that he has
..22..
been generated to the office system and bears the name of the
Government of India or any dominion made to the IncomeTax
Act also
no where mentioined that Ex.20 has been generated by the witness
personally from office computer traces, also witness not known how the
entries Ex.20 are generated, not examined any witness who feed data,
who obtain print out, as well as no certificate annexed under section
65B of The Evidence Act. On the basis of which date is accessed and
document is not verified with IncomeTax
Department. Hence, Advocate
for accused submitted that document is not admissible.
38. While Advocate for complainant submitted that the
document is not a CD or DVD. The document is auto generated by
putting PAN or TAN number in which cases certificate under section
65B of Evidence Act is notnecessary. The certificate is required for
service provider, but concerning with contention of Advocate of
complainant is not acceptable.
37. As per authority in case of Anwar P.V. V/s P.L. Bashir
(2014)10 SCC, 473, the Hon’ble Apex Court held that “An electronic
record by way of secondary evidence shall not be admitted in evidence
unless the requirement under section 65B are specified. Thus, in case of
CD, DVD chips etc, the same shall be accompanied by certificate in
terms of section 65B obtained at the time of taking document, without
which the secondary evidence pertaining to that electronic record is
inadmissible. In the present case complainant has not complied the
provisions of section 65B of Evidence Act and the document is not
proved as per law and it is not admissible in evidence. here, in the
present case, the case of prosecution is not entirely on the said
document where in the present case accused admitted that he paid
..23.. C.C.No.95/SW/2014.
Judgment.
TDS amount to the Government Treasury after statutory period which is
admitted by filing reply as well as during recording statement of
accused under section 313 of Cr.P.C. Admission is best evidence to
prove the allegations. The fact of deposit of tax amount within time has
been proved by the complainant by leading evidence. Thus, there is no
further evidence required to prove the case of complainant.
39. From the above discussion it is clear that it is admitted by
the accused that accused not paid deducted TDS amount within
stipulated time. No doubt, in the present case, accused paid the tax
with interest and penalty, but tax was paid after stipulated period. The
accused not preferred the application for compounding the offence
before concern authority where as per act the powers of compounding
was only given to Commissioner of IncomeTax,
but accused not availed
the same. Also sanction granted by sanctioning authority after
considering the documents and applying mind. After considering all the
material facts before the court and the defence of the accused about
reasonable cause is not proper. The accused has defaulted to pay the
tax within stipulated time to the Central Government from the TDS
amount for the financial year 20092010
and assessment year 20102011
and accused is the only person to pay the said amount. No doubt
in the present case the accused has deposited the TDS in the amount of
Central Government but depositing amount at belated stage.
40. The advocate for the complainant relied on the authority
reported in Madhumilan Syntex Ltd; and Ors. v/s Union of
India(UOI) and Ors. AIR 2007 SC (148). The Hon’ble Apex Court in
para. 37, 40 and 41 held that 37
“
Once a statute requires to pay tax and stipulates period within
..24..
which such payment is to be made, the payment must be made within
that period. If the payment is not made within that period, there is
default and an appropriate action can be taken under the Act.”
40 “
It is true that the Act provides for imposition of penalty for non
payment of tax. That, however, does not take away the power to
prosecute accused persons if an offence has been committed by them.”
41 “
Finally, the contention that a civil suit is filed by the complainant
and is pending has also not impressed us. If a civil suit is pending, an
appropriate order will be passed by the competent Court. That,
however, does not mean that if the accused have committed any
offence, jurisdiction of criminal court would be ousted. Both the
proceedings are separate, independent and one can not abate or defeat
the other.”
41. Considering the above referred authority and the present
case, it appears that if the payment is made at belated stage then it will
be treated as default and appropriate action can be taken under this
Act. It also clear that deposit of TDS with delay does not absolve
criminal liability. If it is considered that accused paid the amount after
period of 12 months, in such circumstance, complaint is maintainable
and it does not absolve criminal liability of the accused persons.
42. Considering all the discussion and record, it clear that the
accused deducted TDS amount for the relevant financial year 20092010
but failed to deposit the TDS amount with Government account
within stipulated time. The accused is responsible person to pay the
amount within time. The factum of nondeposit
of tax amount within
time has been proved and admitted by the accused during statement
recorded u/s. 313 of Cr.P.C. Thus, no further evidence is required to
..25.. C.C.No.95/SW/2014.
Judgment.
prove the case of the complainant. Admission is the best evidence to
prove the allegations. Thus, in view of aforesaid case laws and
admission by the accused, the case of complainant stands proved. All
the facts clearly indicates that accused deducted the TDS for the
relevant period and did not deposit the same with Government account
within stipulated period and withheld the same for her own use.
Accused can not be allowed to use the tax amount, so deducted for any
other purpose. The TDS deducted on behalf of the Government and
should be deposited in Government account. Deductor is not supposed
to finance their business through Government money. Therefore,
considering the evidence available on record, I come to conclusion that
the accused is the person to pay tax within time and accused failed to
deposit TDS within time. Therefore, the complainant has proved the
case against the accused beyond reasonable doubt and proved the guilt
of the accused u/s. 276B of I.T. Act. Therefore, I answer point no.1 in
affirmative. I heard the accused on the point of sentence.
Date:25.04.2019. ( R.S. Sarkale )
Addl. Chief Metropolitan Magistrate,
38th Court, Ballard Pier, Mumbai.
43. Heard accused, advocate of accused and Special P.P.
Accused submitted that this is his first offence and he has already paid
tax amount with interest to the Government Treasury and submitted
to show leniency. While advocate for accused submitted that this is
his first offence already all TDS amount with interest, penalty and
legal charges are paid to Government Treasury and prayed for
leniency.
..26..
44. On the other hand, Ld. Spl.P.P. Munde submitted
that accused is the educated person and he had sufficient amount to
pay TDS amount, but he failed to do so. The accused failed to credit
the amount in Government account and used said amount for any
other purpose, therefore this aspect cannot be viewed lightly and
prayed for maximum punishment for accused.
45. Considering the submission of either side, it is well
established that accused committed alleged offence. Before authority,
he also remain absent. No any application for compounding the
offence is filed. It appears that there is culpable mental state of the
accused for non depositing of TDS amount within time therefore, he
is liable for punishment. The offence U/sec. 276B of IncomeTax
Act
1961 is punishable with rigorous imprisonment which shall not be
less than three months and which may extend to 7 years and with
fine. The matter is on record not substantiate the contention of
accused that due to financial crunches fund problems, accountants
negligence, accused not aware about payment of depositing tax
constrains resulted in not depositing TDS amount. However, there is
no allegation that accused is irregular in paying the tax other than the
case in hand. Thus, the Court is of the considered view that accused is
liable for possible sentence of 3 months rigorous imprisonment and
fine. It is the minimum punishment. The Court is not having
discretion in reducing the sentence. Therefore, accused shall undergo
rigorous imprisonment for a period of 3 months and fine of
Rs.5,000/(
Rs. Five Thousand only) for having committed offence
U/sec. 276B of IncomeTax
Act. From the above said reasons and
discussions, my findings recorded as to point No.1 in the affirmative
and proceed to pass the following order.
..27.. C.C.No.95/SW/2014.
Judgment.
ORDER.
i. By exercising the power conferred U/sec. 248(2) of The
Code of Criminal Procedure the accused Firoz Abdul Gafar Nadiadwala
is convicted for the offence punishable U/sec.276B of The IncomeTax
Act, 1961.
ii. The accused shall undergo rigorous imprisonment for a
period of three months and to pay the fine of Rs.5,000/(
Rs. Five
Thousand only) in default of payment of fine, the accused shall undergo
simple imprisonment for a period of 30 days for the offence punishable
U/sec. 276B of The IncomeTax
Act, 1961.
iii. Bail bonds of accused shall stands surrendered.
iv. Copy of Judgment be provided to the accused on free of
costs.
v. Dictated and pronounced in open Court, before parties and
their counsels.
sd x.x.x.
Date:25.04.2019. ( R.S. Sarkale )
Addl. Chief Metropolitan Magistrate,
38th Court, Ballard Pier, Mumbai.
Dictated on 22.04.2019
Transcribed on 23.04.2019
Signed on 25.04.2019
sd x.x.x.
Date:25.04.2019. ( R.S. Sarkale )
Addl. Chief Metropolitan Magistrate,
38th Court, Ballard Pier, Mumbai.
