TMI Blog1992 (7) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... Act read with rule 30(1)(b)(i) of the Income-tax Rules, 1962. As per the said rules, the tax so deducted should be deposited within two months from the date of the deduction. The details of the cases and the amount of tax deducted at source and the delay in depositing the amount to the account of the Central Government are given in the following chart : ---------------------------------------------------------------------------------------------------------------------------------------------- SI. No. Court Case Amount of Date of Date of Late No. TDS deduction deposit ---------------------------------------------------------------------------------------------------------------------------------------------- Rs. 1. 4 of 1989 34,741 28-2-1987 23-6-1987 4 months 2. 5 of 1989 5,000 -do- -do- -do- 3. 6 of 1989 5,359 -do- -do- -do- 4. 7 of 1989 71,113 -do- -do- -do- 5. 8 of 1989 3,170 -do- -do- -do- 6. 9 of 1989 4,669 -do- -do- -do- 7. 10 of 1989 5,348 -do- -do- -do- 8. 11 of 1989 4,410 -do- -do- -do- ----------------- Total 1,33,810 --------------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied that charging interest under section 201(1A) of the Act was sufficient in the present case and, as such, he did not think it proper to initiate penalty proceedings under section 221 of the Act. According to learned counsel, in a case where charging penalty was not thought proper, launching of criminal prosecution which is a harsh remedy, is an abuse of the process of the court ; (ii) that the order of the Commissioner of Income-tax under section 279(1) of the Act directing prosecution of the petitioners is invalid as it was done without application of mind and on taking into consideration certain facts which did not exist on the record ; (iii) that before launching prosecution against the petitioners, notice should have been given to explain their position in a case like the present one where the delay in depositing the tax amount in the Central Government treasury was not abnormal. On the other hand, learned counsel for the Department argued that itwas not necessary to issue any show-cause notice to the petitioners before filing a complaint as there is no such statutory requirement either under the Act or the Rules. According to learned counsel, the offence under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson deducting tax. Any person deducting any sum in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H, section 195, section 196A and section 196B, shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs. " Then, section 201 provides the consequence of failure to deduct or pay the tax at source. For the sake of convenience, the relevant parts of the section are reproduced as under : " 201. (1) If any such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax : Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not satisfied about the existence of conditions specified in clause (a), (b) or (c) before the proceedings are concluded. The proceeding to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction. " In D. M. Manasvi v. CIT [1972] 86 ITR 557, the Supreme Court, while considering the incidence of penalty as provided under section 271(1) of the Act, observed as under (at page 561) "The fact that notices were issued subsequent to the making of the assessment orders would not, in our opinion, show that there was no satisfaction of the Income-tax Officer during the assessment proceedings that the assessee had concealed the particulars of his income or had furnished incorrect particulars of such income. What is contemplated by clause (1) of Section 271 is that the Income-tax Officer or the Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether any such action has been initiated before the date of completion of the assessment." On the basis of the above decisions, learned counsel for the petitioners tried to convince that the very fact of not initiating penalty proceedings by the assessing authority showed that the authority was satisfied that there were good and sufficient reasons for the default in depositing the TDS amount in time. I am unable to accept such a broad proposition of law canvassed before me. In my view, no such presumption can be raised simply on non-initiation of penalty proceedings. The above decisions do not lay down such a broad principle of law. Hence, I have no hesitation to reject the submission. Learned counsel then relied upon a Bench decision of the Delhi High Court in CIT v. Raunaq and Co. (P.) Ltd. [1983] 140 ITR 407, in which it was held that section 221 of the Act enables the Income-tax Officer to impose a penalty where an assessee is in default in making the payment of tax, yet, the imposition of the penalty cannot be automatic as a consequence of the default. It was held that it is a question of fact to be decided on the facts and circumstances of the each case if good and suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e formulated by the judge (at page 398) : " Whether, in a penalty proceeding, where an authority under the Act who has expert knowledge of the subject has recorded a finding that the assessee had furnished good and sufficient reasons for failure to deduct and/or pay the tax within time, and dropped the penalty proceedings or deleted the same, as the case may be, it can be said that he is still liable to be prosecuted under section 276B of the Act ? Can a criminal court, in spite of a finding by the statutory authority under the Act that the assessee furnished good and sufficient reasons for not deducting and paying the tax within time, take a different view and hold that the failure on the part of the assessee was without reasonable cause or excuse ?" The hon'ble judge gave the answer in the negative and held that the process of a criminal court should not be allowed to be abused in cases where an assessee has succeeded in proving good and sufficient reasons for his failure before an authority under the Act in a penalty proceedings In the judgment, the effect of section 278A of the Act was also considered as under (at page 409): "Now, it has to be seen as to what is the eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Income-tax Officer imposed a penalty, but in appeal, the order of penalty was quashed, holding that there was sufficient and good cause for the default in the payment of tax. While deciding so, it was also held that the scope and purport of penalty proceedings and prosecutions axe separate and independent. The existence of the one or the other was no bar to any of them. An assessee could be levied penalty as well as punished by prosecution. On the basis of the above decisions, an argument has been raised by learned counsel for the petitioners that, in the absence of the penalty proceedings against the petitioners, the criminal element disappears and it cannot be said that the default was without reasonable cause. Learned counsel, therefore, argued that the criminal proceedings should be quashed. This argument can be rejected for the simple reason that, in the Income-tax Act, there are separate provisions for levy of interest, penalty and criminal prosecution. The charging of interest has a different purpose: to compensate the Department for depriving it of the user of the money during the period the payment was withheld. Criminal proceedings have nothing to do either with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree with the view expressed by the High Court of Calcutta in Jyoti Prakash Mitter v. Haramohan Chowdhury [1978] 112 ITR 384. In that case on a complaint made against the assessee for an offence punishable under section 277 of the Act, the Chief Metropolitan Magistrate issued process. Thereupon the assessee questioned the validity of the initiation of the criminal proceedings before the High Court of Calcutta on the ground that until the penalty proceedings initiated in respect of the same period under section 271(1)(c) of the Act were finally disposed of, no complaint could be filed. The contention of the assessee was that the prosecution was opposed to the principles of natural justice as he would be deprived of the benefit of a finding which was likely to be recorded in his favour in the penalty proceedings. It was urged on behalf of the Department that the penalty proceedings under section 271(1)(c) had no direct bearing on the maintainability of a prosecution launched under Chapter XXII of the Act. The High Court took the view, which according to us is an erroneous one, that the provisions of section 279(1A) of the Act established the necessity for the completion of the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under : (i) The scope and purport of interest/penalty proceedings and prosecution under the Income-tax Act are separate and independent. The existence or the absence of the one or the other is no bar to any one of them ; (ii) simply charging of interest by the Department under section 201(1A) of the Act, for the delay in the payment of the amount to the Central Government, does not obliterate the prosecution ; (iii) the non-initiation of penalty proceedings does not lead to presumption that the default in payment was for good and sufficient reasons or that the assessee was deprived to establish that there were good and sufficient reasons for the default in payment; (iv) non-initiation of penalty proceedings in a case cannot be equated with a case where the penalty proceedings were initiated and finding is recorded by the competent authority that there we re good and sufficient reasons for the delay in payment ; (v) there is no statutory requirement either under section 279 or under any other provision of the Act to give a show-cause notice to the assessee before criminal proceedings are initiated against him. In other words, a notice or a right of being heard before laun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fides and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge." . Admittedly, the present case does not fall in any of the categories mentioned above. I may also point out that the offence under section 276B read with section 278B of the Act is compoundable as provided under sub-section (2) of section 279 of the Act by the Chief Commissioner or the Director General even after the institution of the criminal proceedings. Therefore, the petitioners shall be free to approach the concerned authority if they so desire for compounding the offence. If it is so done, it is expected from the said authority to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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