Belated Deposit Of TDS: Andhra Pradesh High Court Quashes Prosecution Against Assessee

Belated Deposit Of TDS: Andhra Pradesh High Court Quashes Prosecution Against Assessee

The accused had TDS on contract payments, but they were not credited into the Central Government's account within time.

The Andhra Pradesh High Court has quashed the prosecution proceedings launched against the assessee for belatedly depositing tax deducted at source (TDS).

The bench of Justice Venkata Jyothirmai Pratapa noted that the Commissioner of Income Tax (CIT) ignored the assessee’s documents to establish a cause for his failure to remit the amount within a stipulated time.

Since the assessee paid the tax, along with late payment interest (although belatedly), there was no tenable ground to continue the proceedings against the petitioners in all three cases. Hence, the proceedings were liable to be quashed.

During the assessment years 2014–2015, 2015–2016, and 2016–2017, the accused had TDS on contract payments, but they were not credited in time into the Central government's account.

The accused deducted amounts of Rs.32,82,250, Rs.21,31,332 and Rs.10,85,795, under Sections 192B, 194A, 194C, and 194J, respectively, on different dates, and these were deposited belatedly. The late payment interest for assessment years was also paid under Section 201(1)(a) of the Income Tax Act, 1961.

The accused, an educational institution, contended that cases were lodged against the petitioners for violation of Section 276B. It was not that the taxes were not deducted, it was just that these were not credited in time. Therefore, it was a matter of belated payment.

The petitioners added having mentioned that the delay was due to the fee reimbursement from the government of Andhra Pradesh, because of which the delay happened. No offense was made against the petitioners under Section 276B; hence, the proceedings were liable to be quashed.

The revenue department contended that the petitioners must deduct the TDS and it must be deposited with the government within the timeframe. However, the petitioners delayed in doing so. The CIT issued the show-cause notices, but the petitioners failed to respond satisfactorily.

Section 276B of the IT Act indicated it was applicable on failure by a person to credit it to the Central government as required under Chapter XVII-B or the tax payable by the person under Section 115-O(2) or the second proviso to Section 194-B.

The judge observed that the proceedings issued by the CIT under Section 279(1) meant that if the petitioners were able to establish a reasonable cause for failure to deposit the amount within the stipulated time, no criminal prosecution could happen.

It was relevant to note that Section 278AA begins with a non-obstante clause in identifying the intention of the legislature giving effect to the enacting part of the Section in case of conflict over the provisions mentioned in the non-obstante clause.

The bench added that Section 276-B included within the fold of Section 278 AA, which states that no person shall be liable for punishment for any failure to comply with Section 276B of the Income Tax Act if he is able to prove that he was prevented by a reasonable cause for such failure. Thus, reasonable cause is required to avoid prosecution.

The court held that the reason provided by the petitioner for the delay in remitting the amount to the Central Government is sufficient to constitute “reasonable cause” in view of Section 278AA of the Income Tax Act, and hence criminal prosecution against the petitioners is not warranted. There is no dispute that the petitioners have paid the tax along with late payment interest.

The Court held that there are no tenable grounds to continue the proceedings against the petitioners, and hence, the same are liable to be quashed.