Jharkhand High Court

M/S A.M.Enterprises And Another vs The State Of Jharkhand And Another on 22 August, 2023

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             IN THE HIGH COURT OF JHARKHAND, RANCHI
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W.P.(Cr.) No. 577 of 2022

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      M/s A.M.Enterprises and Another                 .... Petitioners
                               --   Versus      --
      The State of Jharkhand and Another              .... Respondents
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CORAM: HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI

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       For the Petitioner        :-     Mr. Parth Jalan, Advocate
                                        Ms. Shivani Jaluka, Advocate
       For Income Tax Deptt.     :-     Mr. R.N. Sahay, Advocate
       For the State             :-     Mr. Gaurav Raj, Advocate
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3/22.08.2023        Heard Mr. Parth Jalan, the learned counsel appearing on

behalf of the petitioners and Mr. R.N. Sahay, the learned counsel

appearing on behalf of the Income Tax Department.

2. This petition has been filed for quashing of the entire

criminal proceeding including the order taking cognizance dated

02.05.2018 arising out of Economic Offence (Complaint) Case No.17 of

2018, pending in the court of learned Presiding Officer, Special Court,

(Economic Offence), Ranchi.

3. The Economic Offence Complaint Case No.17 of 2018 was

lodged alleging therein that complainant was posted as Deputy

Commissioner (TDS) filed the complaint in his official capacity of the

alleged offence committed under section 276B read with section 278B of

Income Tax Act, 1961 and the petitioner's firm had deducted TDS to the

tune of Rs.2,02,117/- for the financial year 2015-16, Assessment year

2016-17 but failed to deposit the same with the department as per the

provision of the Income Tax Act 1961. The petitioner is partner of the

firm and he has also been made accused in the complaint in accordance

with section 248B of the said Act. It has been alleged that the petitioner

has willfully and deliberately not deposited TDS on time to credit of

Central Government account despite knowledge of the fact that there lie

liabilities on its part to deposit the same in time the sanction order under

section 279(1) of the said Act for launching of prosecution under section

276B of the said read with section 278B of the Act against the petitioner

has been accorded to by the Commissioner of Income Tax (TDS) Patna

on 14.2.2018.

4. Mr. Jalan, the learned counsel appearing on behalf of the

petitioner submits that the learned court has been pleased to take

cognizance by order dated 02.05.2018 and issued summons to the

petitioner. He submits that the said case is registered under section

276(B) read with section 278(B) of the Income Tax Act, 1961. He submits

that business operation of the petitioner's firm started in the month of

January, 2016 and the petitioner's firm was not knowing about the TDS

for the last quarter of the financial year 2015-16. He submits that as

soon as the provision of TDS has come in the knowledge of the

petitioner, the petitioner immediately consulted his chartered accountant

who had disclosed the procedure of deducting TDS and depositing with

the Income Tax Department. He submits that thereafter the petitioner

has taken TAN Number for deducting TDS and depositing the same with

the Income Tax Department. He submits that notice was received by the

petitioner and the same was replied by letter dated 22.02.2017 in which

the petitioner has stated the honest mistake and the amount deducted

has already been deposited along with the interest with the Income Tax

Department. He submits that the petitioner was not heard when the

sanction order was passed. In this background, he submits that when the

TDS amount along with interest has already been deposited there is no

occasion to launch prosecution case against the petitioner. He submits

that the amount was deposited on 11.5.2016 whereas the sanction order

was passed on 14.02.2018 and prosecution was launched on 13.04.2018.

He further submits that even no penalty proceeding is started as yet

against the petitioner in view of section 271(C) of the Income Tax Act.

On this ground, he submits that entire criminal proceeding may kindly be

quashed as the entire amount to the tune of Rs.2,02,000/- along with the

has already been deposited.

5. On the other hand, Mr.Sahay, the learned counsel for the

respondent Income Tax Department submits that once the statutory

provision is not fulfilled the case has been rightly lodged by the Income

Tax Department. He submits that depositing of the said TDS amount

along with the interest has nothing to do with the prosecution case. He

submits that the said case was instituted after much deliberation at the

level of learned Deputy Commissioner, TDS Circle, Ranchi. He submits

that this Court as well as the Hon'ble Supreme Court in many cases has

not interfered and the interpretation of the provisions made in the

Income Tax Act, have been made that once the failure is there, the

proceeding can go on. He submits that the petitioner has been provided

full opportunity and in view of that the criminal proceeding cannot be

quashed. He further submits that in the anticipatory bail application it has

come that the petitioner is ready to face the trial and thereafter the

present case has been lodged. On this ground he submits that the case is

fit to be dismissed.

6. In view of the above submission of the learned counsels

appearing on behalf of the parties, the Court finds that there is no denial

that the commencement of the operation of the petitioner company is

with effect from January, 2016 and when the notice was received by the

petitioner, the petitioner has filed reply disclosing that the TDS amount

along with interest has already been deposited on 11.5.2016 itself

whereas sanction order was passed on 14.02.2018 and the prosecution

was launched on 13.04.2018 i.e. after much delay of depositing the said

TDS amount along with the interest. It is not a case that the prosecution

was filed earlier and thereafter the T.D.S amount was deposited.

Further there is no penalty proceeding initiated against the petitioner. In

view of that, the Court finds that the amount of the TDS along with the

interest has already been deposited and after lapse of time the said case

was registered and the Court further finds that the assesse has

succeeded in proving that there is full and sufficient reasons for his

failure before the authority under the Act by way of filing the said reply

wherein he has intimated that this amount in question has already been

deposited along with the interest and no penalty proceeding is initiated

against the petitioner and in the case in hand as the amount has been

deposited along with the interest and as such, there was no occasion to

proceed against the petitioner under section 276(B) of the Income Tax

Act. It is well settled that penalty should serve as a deterrent. In the case

in hand, the petitioner has already been deposited the TDS amount along

with the interest. A reference may be made to the case of Income Tax

Officer v. Autofill and Others, [1990] 184 ITR 47 (AP). Paragraph

no.10 of the said judgment is quoted below:

"Therefore, wilfulness contemplates some element of evil motive and want to justification. In CIT v. Patram Dass Raja Ram Beri [1981] 132 ITR 671, a Full Bench of the Punjab and Haryana High Court, considering the term "wilful failure" occurring in section 276CC of the Income- tax Act, held that "willfulness certainly brings in the element of guilt" and thus the requirement of mens rea. Our Supreme Court in Gujarat Travancore Agency v. CIT, has observed that the creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. It also observed that. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent."

7. In the case of K.C. Builders and Another v. Assistant

Commissioner of Income Tax, [2004] 265 ITR 562 (SC), the

criminal case was held to be not survived in view of the fact that the

penalty is struck down and in the case in hand even the penalty

proceeding has not been initiated against the petitioner. How the amount

is deposited and when sanction and prosecution have been initiated

which has already been discussed hereinabove. The Court finds that in

such a situation to allow the present proceeding to continue further will

amount to abuse of process of law.

8. Accordingly, the entire criminal proceeding including the

order taking cognizance dated 02.05.2018 arising out of Economic

Offence Complaint Case No.17 of 2018, pending in the court of learned