Whether prosecution is justified when TDS is deposited with interest & no penalty imposed?
Respected Members
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Short note of today's case law for quick reference:
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[2025] 482 ITR 1 (Bombay)
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Hemant Mahipatray Shah And Another
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1.? Anant Upadhay And Another
2. Sahil Arora And Another
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Prithviraj K. Chavan J.
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12.08.2024?????
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1. The Commissioner (TDS) accorded sanction u/s 279(1) to prosecute the assessee and its directors u/s 276B r.w.s. 278B and complaints were filed before the Additional Chief Metropolitan Magistrate.
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2. The Additional Sessions Court rejected the criminal revision applications and confirmed the orders of the issuance of process passed by the Additional Chief Metropolitan Magistrate.
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3. On criminal writ petitions u/s 482 of the Code of Criminal Procedure, 1973 read with Article 227 of the Constitution of India it was held that:
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4. Admittedly, tax deducted at source by the assessee had already been deposited with interest as provided u/s 201(1A).
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5. No notice had been issued by the A.O. to any of the petitioners u/s 2(35)(b) to treat any of them as Principal Officer of the assessee.
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6. No order as contemplated u/s 201(1) read with section 201(3) had been passed treating any of the petitioners as Principal Officer of the assessee and by which such Principal Officer was deemed to be assessee in default.
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7. No order imposing penalty either initially or further penalty as deemed to be assessee in default u/s 221 has been passed against the assessee or any of the petitioners for A.Y. 2017-18.
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8. Though the petitioner were directors of the assessee, no contention had been made in the complaints regarding consent, connivance as required u/s 278B(2).
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9. That a combined reading of circulars dated 28.05.1980 & 24.04.2008 contemplate that prosecution ought not to be launched where the tax been deposited.
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10. That circular dated 24.04.2008 prescribe that the prosecution is to be launched within 60 days of detection of default.
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11. That section 2(35)(b) postulates the A.O. to issue notice of his intention to treat a person connected with the management and administration of an assessee as its “Principal Officer” that mere issuance of notice would not ipso facto become a final determination of classification and identification of a person as Principal Officer.
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12. Treating a person as such would not only have the civil but also penal consequences.
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13. As such, an order making such determination is necessary.
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14. Such adjudication was contemplated u/s 201 when such person other than the assessee was held to be Principal Officer and was also thereafter deemed to be assessee in default.
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15. Any person aggrieved by such order would have remedies available u/s 246(1)(i).
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16. The term Principal Officer has been used singular and not in plural and the word officer is further premised by the word principal which signifies the main officer and not all the officers who may in some way be connected with the management or administration of the company.
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17. Determination could therefore be done only while passing an order u/s 201(1).
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18. Hence, prosecution quashed.