TMI Blog2018 (3) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... ts/parties to the writ petition. The Sanctioning Authority is the first respondent and Directorate of Income Tax, Ministry of Finance is the second respondent. The second respondent is not an authority and does not have any legal existence. As per details ascertained by the counsel for the Revenue refunds for the AY 2005-06 stands paid. There is, however, short of credit on TDS amounting to ₹ 8,85,418/- which is under verification on account of old records and non-availability of TDS challans. Petitioners claim that they are entitled to refund of ₹ 49 Lakhs for the AY 2005-06. This fact is disputed. With regard to the AY 2009-10, refund of ₹ 37,75,750/- was issued on 1st February, 2014. For the balance amount of ₹ 14,56,140/-, the matter is under verification and thereafter refund would be issued. Petitioner accepts that refund of ₹ 3.05 Crores for the Assessment Year 2010-11 was issued on 27th November, 2012. As per the chart produced by the petitioners, during the period 30th June, 2012 till 31st March, 2013, ₹ 85.11 Lakhs was deposited towards TDS, leaving an outstanding balance of more than ₹ 2.68 Crores payable as TDS. Entire ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing of e-statements in respect of salary or non-salary TDS deductions and the date of actual filing of the statement. Sanction order also refers to the show cause notice dated 5th April, 2016 (sic. 6th April, 2016) issued to the petitioners, as to why they should not be prosecuted under Section 276B and Section 278B of the Act. In response to the notices, authorised representative of the petitioners had appeared and submitted that the petitioner company and his principal officer would opt for compounding. Accordingly, the prosecution proceedings were kept in abeyance subject to the petitioners filing compounding petition. However, when no compounding application was filed, another show cause notice dated 25th January, 2017 was issued to resume the proceedings. Several adjournments were taken whereafter reply dated 3rd March, 2017 was filed accepting that there were defaults in the deposit of TDS on account of financial crunch due to sluggish business activity. Financial position of the petitioner company was adversely affected by sudden drop in business orders. It was alleged that undisputed income tax refunds constituting 4-5 times the amount of shortfall in TDS had also remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal Officers/Directors to comply with such legal requirement, which he had failed to do. The various Courts have held that the assessee cannot be granted immunity from prosecution merely on the ground that ultimately TDS was deposited in Govt. account albeit lately. In the case of M/s Rishikesh Balkishandas Vs I.D. Manchanda, ITO [1987] 167 ITR 49 , the Hon'ble Delhi High Court held that merely because tax has been deposited to the credit of the Central Government before filing of the complaint, it will not absolve the assessee of the offence under section 276B of the Act. Regarding the culpability of the Principal Officers/Directors u/s 278B of the Act, reliance is also placed on the judgment of the Supreme Court in the case of M/s Madhumilan Syntex Limited vs. UOI [2007] 160 Taxman 71/290 ITR 199 (SC), wherein it is held that it would be sufficient compliance if in the SCN issued to the concern, it is mentioned that the assessing Officer intends to treat the Directors as Principal Officers of the company under the Act. `Further, reliance is placed on the judgment of Hon'ble Punjab and Haryana High Court in the case of Dy. CIT Vs M/s Modern Motor Works [1996] 87 Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er fair nor judicious as they do not take into account the provisions of Section 278AA. 8. Petitioners, do not dispute default and delay in deposit of TDS of more than ₹ 3.53 crore relating to the four quarters between 30th June, 2012 to 31st March, 2013. TDS was belatedly deposited between 30th June, 2013 to 16th September, 2013.The issues raised by the petitioners are ex-facie factual and could constitute defense of the petitioners, as constituting reasonable cause. Onus to prove reasonable cause under Section 278AA of the Act is on the person being prosecuted. 9. Similarly, with regard to the Standard Operating Procedure, the contention that default had continued for less than twelve months and effect thereof are aspects which would be considered and decided in the course of criminal proceedings. Late deposit of TDS in gigantic proportions after the end of the financial year, as per the respondents, has huge ramifications and consequences not limited to non-payment of tax, but adverse consequences and sufferance of hundreds of deductee who did not get credit of the tax deducted and had to pay tax and interest. Subsequently, they would have filed revised returns for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 SCC (Cri) 130] it has been opined that: (SCC p. 277, para 9) 9. an order of sanction should not be construed in a pedantic manner. But, it is also well settled that the purpose for which an order of sanction is required to be passed should always be borne in mind. Ordinarily, the sanctioning authority is the best person to judge as to whether the public servant concerned should receive the protection under the Act by refusing to accord sanction for his prosecution or not. 13. In Kootha Perumal v. State [(2011) 1 SCC 491 : (2011) 1 SCC (Cri) 418 : (2011) 2 SCC (L S) 657] it has been opined that the sanctioning authority when grants sanction on an examination of the statements of the witnesses as also the material on record, it can safely be concluded that the sanctioning authority has duly recorded its satisfaction and, therefore, the sanction order is valid. 14. From the aforesaid authorities the following principles can be culled out: 14.1. It is incumbent on the prosecution to prove that the valid sanction has been granted by the sanctioning authority after being satisfied that a case for sanction has been made out. 14.2. The sanction order may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Code. 14. Some controversy was raised regarding non-payment of refunds. There is difficulty in examining this allegation. Petitioners have not impleaded the jurisdictional Assessing Officer and Commissioner as respondents/parties to the writ petition. The Sanctioning Authority is the first respondent and Directorate of Income Tax, Ministry of Finance is the second respondent. The second respondent is not an authority and does not have any legal existence. 15. As per details ascertained by the counsel for the Revenue refunds for the AY 2005-06 stands paid. There is, however, short of credit on TDS amounting to ₹ 8,85,418/- which is under verification on account of old records and non-availability of TDS challans. Petitioners claim that they are entitled to refund of ₹ 49 Lakhs for the AY 2005-06. This fact is disputed. 16. With regard to the AY 2009-10, refund of ₹ 37,75,750/- was issued on 1st February, 2014. For the balance amount of ₹ 14,56,140/-, the matter is under verification and thereafter refund would be issued. Petitioner accepts that refund of ₹ 3.05 Crores for the Assessment Year 2010-11 was issued on 27th November, 2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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