The prosecution proceedings launched against the taxpayer for belatedly depositing tax deducted at source (TDS) have been quashed by the Andhra Pradesh High Court.
The bench of Justice Venkata Jyothirmai Pratapa has marked that CIT overlooked the material placed by the taxpayer to show that there was a reasonable cause for their failure to remit the amount within a specified time. Since the taxpayer has paid the tax including late payment interest (although belatedly), no tenable grounds are there to resume the proceedings against the applicants in all three matters, and therefore, the proceedings are liable to be quashed.
The accused in the assessment years 2014-15, 2015-16, and 2016-17, had TDS on contract payments, but they were not credited into the account of the Central Government within time.
The accused deducted amounts of Rs. 32,82,250/-, Rs. 21,31,332/-, and Rs. 10,85,795/-, respectively, u/s 192B, 194A, 194C, and 194J, on different dates, and they were deposited belatedly. U/s 201(1)(a) of the Income Tax Act late payment interest for assessment years, respectively, has also been paid.
It has been argued by the accused that it is an educational institution and the matters have been lodged against the applicants for the breach of section 276B. The same does not matter that the taxes have not been deducted, however the same is the matter in which the applicants deducted the tax at source but did not credit the amount to the credit of the government within the said time.
The same is the matter of the late tax payment, and the applicant in their explanation specified that the cause of the delay was because of the late fee reimbursement from the government of A.P., due to which remittance of the amount to the government is delayed. Against the applicant, no offence has been made u/s 276B, and therefore the proceedings against the accused applicants are obligated to be quashed.
The council argued that the applicant needed to deduct the tax at source and that it is required to get deposited with the government in the said time. But the applicants deducted the tax at source, they were unable to deposit it and the payment was incurred with interest. The SCN was issued via the Commissioner of Income Tax, and in response, the applicant losses show a reasonable cause for the delay.
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Section 276B of the Income Tax Act exhibits it is applicable when there is a failure by a person to pay to the credit of the Central Government the tax deducted at source by such person as mandated under Chapter XVII-B or the tax liable to be paid by such person as needed u/s 115-O(2) or the second proviso to Section 194-B of the Income Tax Act.
The court remarked that the proceedings issued via the Commissioner of Income Tax u/s 279(1) of the Income Tax Act would indicate that, if the applicant were enable to designate a reasonable cause amount deposit failure within the prescribed time, there could not be any criminal prosecution.
It is pertinent to say that Section 278AA starts with a non-obstante clause, which is a powerful device in determining the intent of the Legislature giving effect to the enacting part of the Section in case of conflict over the provisions cited in the non-obstante clause.
Section 276 B is included within the fold of Section 278 AA, which expresses that no person will be accountable for punishment for any failure to adhere to Section 276B of the Income Tax Act if he can prove that he was prevented by a reasonable cause for such failure. Therefore, to prevent prosecution reasonable cause is needed
As per the court, the reason delivered via the applicant for the delay in remitting the amount to the Central Government is sufficient to include “reasonable cause” as per Section 278AA of the Income Tax Act, and therefore criminal prosecution against the applicants is not warranted. No dispute is there that the applicant has paid the tax including with late payment interest.
The Court mentioned that there are no tenable grounds to carry on the proceedings against the applicant, and hence, it is to be quashed.
| Case Title | MM/s Aditya Institute Of Technology Vs. The State Of Andhra Pradesh |
| Criminal Petition | NOs.1207, 1208 and 1212 of 2020 |
| Counsel For Petitioner | Sri Vijay Mathukumilli |
| Counsel For Respondent | Ms.D.Prasanna Lakshmi, Assistant Public Prosecutor for R.1 Sri Vijay Kumar Punna for R.2 |
| Andhra Pradesh High Court | Read Order |