Cwp/26441/2014 Of M/S Kudos Chemie Ltd v. Assistant Commisioner Of Income Tax (Tds) Chandigarh

Civil Writ Petition No. 26441 of 2014 (O&M)Date of Decision: 12.05.2015. M/s Kudos Chemie Ltd._ Petitioner VeTSUS Assistant Commissioner of Income Tax (TDS), Chandigarh. ..Respondent. CORAM: HON'BLE MR. JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE.HON'BLE MR. JUSTICE G.S.SANDHAWALIA. Present:Mr. Akshay Bhan, Sr. Advocate withMr. Alok Mittal, Advocate, for the petitioner.Mr. Yogesh Putney, Advocate, tor the respondent. FS 2S S.J.VAZIFDAR A.C.J.(Oral) The petitioner has sought a writ of certiorari to quash ashow-cause notice dated 28/29.10.2014 issued by the respondent. oOThe notice dated 28/29.10.2014 alleged that the tax deducted bythe petitioner of an amount of=1.04 crores had been deposited by it into the|Central Government Account after the due date prescribed under the IncomeTax Act, 1961 (for short ‘the Act’). The petitioner was called upon to showcause why prosecution proceedings under section 276B of the Act be notlaunched against it. © 3 |We see no reason to interfere at this stage. The petitioner oughtto reply to the notice. There are several issues which would requireconsideration while adjudicating the notice. The respondent would have toconsider various factual aspects such as the dates on which the tax wasdeducted at source and the dates on which the same was paid into theCentral Government account. If there is a delay as there probably is, theauthorities would have to consider whether it was of such a nature 32s to apprehension that the authorities will, irrespective of the facts andcircumstances of the case, launch prosecution proceedings, is not wellfounded. It is not in every case of default in complying with the provisionsrelating to the requirement of deduction of tax at source that a prosecution isliable to be launched. A view to the contrary is unsustainable. 4A sections 276B and 279(1)(2) of the Income Tax Act, 1961 read 4s under:- | “|276-B. Failure to pay tax to the credit of Central|Government under Chapter XII-D or XVII-B.—If a personfails to pay to the credit of the Central Government,— (a) the tax deducted at source by him as required by or'under the provisions of Chapter XVII-B; or (b) the tax payable by him, as required by or under,—(1) sub-section (2) of Section 115-Q; or (ul) the second proviso to Section 194-B, he shall be punishable with rigorous imprisonment for|qa term which shall not be less than three months but whichmay extend to seven years and with fine.|_ 2'79. Prosecution to be at the instance of ChiefCommissioner or Commissioner.—|(1) A person shall not|be proceeded against for an offence under Section 2705A, |Section 275-B], Section 276, Section 276-A, Section 276-B, Section 276-BB, Section 276-C, Section 2/76-CC, Section2/6-D, Section 277 |, Section 277-A| or Section 278 exceptwith the previous sanction of the Commissioner or|Commissioner (Appeals) or the appropriate authority: Providedthat the Chief Commissioner or, as the casemay be, Director-General may issue such instructions ordirections to the aforesaid income tax authorities as he maydeem fit for institution of proceedings under this sub-section. Explanation.—Hor|thepurposesOT|this|section,“appropriate authority’ shall have the same meaning as inclause (a) of Section 269-UVA.] (1-A) ....... \(2) Any offence under this Chapter may, either before or.after the institution of proceedings, be compounded by theChief Commissioner or Director-General.|” 5 _Sub section (1) of Section 279 provides that a person shall notbe proceeded against for an offence under section 276B “except with theprevious sanction of the Commissioner or Commissioner (Appeals) or theappropriate authority”. Thus, if there is no sanction from the Commissioner|or Commissioner (Appeals) or the appropriate authority, a person cannot beproceeded against for an offence under section 276B. This indicates thatlaunching a prosecution is not mandatory. Sub section (1) clearlycontemplates cases where prosecution may not be launched though there is afailure as contemplated by section 276B. — (1-A) ....... \(2) Any offence under this Chapter may, either before or.after the institution of proceedings, be compounded by theChief Commissioner or Director-General.|” 5 _Sub section (1) of Section 279 provides that a person shall notbe proceeded against for an offence under section 276B “except with theprevious sanction of the Commissioner or Commissioner (Appeals) or theappropriate authority”. Thus, if there is no sanction from the Commissioner|or Commissioner (Appeals) or the appropriate authority, a person cannot beproceeded against for an offence under section 276B. This indicates thatlaunching a prosecution is not mandatory. Sub section (1) clearlycontemplates cases where prosecution may not be launched though there is afailure as contemplated by section 276B. — 6.)Under the Proviso to section 279, the Chief Commissioner or,as the case may be, Director General *May> issue such instructions or directions to the said authorities as he may deem fit for institution of theproceedings under this sub-section (1). The Chief Commissioner or theDirector General is not bound to issue such directions. Thus, if theCommissioner or the Commissioner (Appeals) or appropriate authority donot grant the sanction, it is possible that Chief Commissioner or as the casemay be the Director General may also not issue instructions for institution ofthe proceedings under sub section (1). This also establishes that launching aprosecution is not mandatory in every case of failure provided in Section-76B. | J |That it is not mandatory to launch prosecution proceedings isclearer still from sub section (2) of Section 279 of the Act which providesthat any offence under the Chapter, which includes one under section 276B,may be compounded by the Chief Commissioner or a Director GeneralFbeforeor after institution ofproceedings ”’.The authority to compound theoffence before institution of the proceedings makes it abundantly clear that itis left to the discretion of the authorities concerned whether or not to’institute prosecution proceedings in respect of an offence under section2/6B of the Act. If the offence is compounded before institution of theproceedings there would be no question thereafter of instituting proceedingsfor a failure referred to in section 276B of the Act. 8 |Even assuming, therefore, that there was an offence by thepetitioner as alleged in the show cause notice, it is not necessary that theprosecution proceedings would be launched against it. It will be open, forthe petitioner to contend that in the facts and circumstances of the case itought not to be proceeded against for the alleged failure referred to insection 276B of the Act. It would also be open to the petitioner to apply tohave the offence, if any, compounded. If the application is accepted, therewould be no question of instituting prosecution against the petitioner. OQThese are issues, however, which must in the first instance bedecided by the authorities under the Act. Interference with the show causenotice at this stage is not warranted. The apprehension that in the event ofthe respondents deciding to launch the prosecution they may do soimmediately can be allayed by granting the petitioner reasonable time toadopt appropriate proceedings against the decision. 10.The writ petition is accordingly disposed of with a directionthat in the event of the decision being adverse to the petitioner, therespondents shall not implement the same for a period of six weeks after theService of such order upon the petitioner. There shall, however, be no orderas tO COSIS. (S.JI.VAZIFDAR)ACTING CHIEF JUSTICE. (G.SSANDHAWALIA)JUDGE 12.05.2015‘ravinder’Whether tobe referredtothe reporter or not.√ YesNo.