Somesh Agarwal v. Commissioner Of Income Tax (Tds), Central Revenuebuilding, Statue Circle, Janpath, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Civil Writ Petition No. 6450/2024 1. Rockwood Hotels And Resorts Limited, A CompanyRegistered Under Companies Act, 1956 Having ItsRegistered Office At Marine Lines, Mumbai And Local/Aggrieved Unit At B-1, Opposite Aravali Hospital,Ambamata, Udaipur Through Its Managing DirectorSomesh Agarwal. 2. Somesh Agarwal S/o Omprakash Agarwal, AgedAbout 45 Years, 39, 3Rd Marine Street, Marine Lines,Mumbai-400002. ----Petitioners Versus 1. Commissioner Of Income Tax (Tds), Central RevenueBuilding, Statue Circle, Janpath, Jaipur. 2. Joint Commissioner Income Tax (Tds), 6 NewFatehpura, Udaipur. 3. Income Tax Officer (Tds), 6, New Fatehpura, Udaipur. ----Respondents For Petitioner(s): For Respondent(s): Mr. K.K. Bissa : Mr. Sharad Kothari HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI HON'BLE MR. JUSTICE MUNNURI LAXMAN Order 14/05/2024 1.The petitioners have preferred this writ petition claimingthe following reliefs:- "It is therefore, most humbly and respectfullyprayed that the Writ Petition may kindly be allowed andby an appropriate order or direction:- a.The impugned order dated 21.02.2024(Annexure-13) may be quashed and set aside; b.It may be declared that the petitioners areentitled to conferred impunity from prosecution underSection 278AA for delayed deposit of TDS to the credit ofCentral Government corresponding to 2020-21. c.To pass any other writ, order or direction, asthe Hon'ble High Court may deem fit in the facts andcircumstances of the case." 2.Learned counsel for the petitioners submits that thehotel activities were suspended due to COVID-19 pandemiclockdown imposed by the Administration from March, 2020 toAugust, 2020. The activities were resumed by theGovernment in October, 2020 with partial restrictions ontraveling and social gatherings. Learned counsel furthersubmits that the second wave of COVID-19 started in midmonths of the year 2021 and a limping start to the activitieswas given in July, 2021. In furtherance, learned counselsubmits that it is a genuine cause and that the petitionershave paid all the necessary dues along with interest and latefee to the Government within three months from default.2.1. Learned counsel submits that Section 278AA of theIncome Tax Act, 1961 (hereinafter referred as ‘Act of 1961’) isbeing invoked against the present petitioners withoutconsidering the reasonable cause offered by the petitionersfor their failure to pay the TDS amount. Section 278AA of Act of 1961 reads as follows:- "278AA. Punishment not to be imposed incertain cases.-Notwithstanding anything contained inthe provisions of section 276A, section 276AB, 4[orsection 276B,] no person shall be punishable for anyfailure referred to in the said provisions if he provesthat there was reasonable cause for such failure."certain cases.-Notwithstanding anything contained inthe provisions of section 276A, section 276AB, 4[orsection 276B,] no person shall be punishable for anyfailure referred to in the said provisions if he provesthat there was reasonable cause for such failure." 2.2. Learned counsel has also drawn attention of this Courttowards Section 276B of the Act of 1961, which reads astowards Section 276B of the Act of 1961, which reads as follows:- “276B. Failure to pay tax to the credit of CentralGovernment under Chapter XII-D or XVII-B.—If aperson fails to pay to the credit of the CentralGovernment,—Government under Chapter XII-D or XVII-B.—If aperson fails to pay to the credit of the CentralGovernment,— (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— (i) sub-section (2) of section 115-O; or (ii) the second proviso to section 194B, 2.2. Learned counsel has also drawn attention of this Courttowards Section 276B of the Act of 1961, which reads astowards Section 276B of the Act of 1961, which reads as follows:- “276B. Failure to pay tax to the credit of CentralGovernment under Chapter XII-D or XVII-B.—If aperson fails to pay to the credit of the CentralGovernment,—Government under Chapter XII-D or XVII-B.—If aperson fails to pay to the credit of the CentralGovernment,— (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— (i) sub-section (2) of section 115-O; or (ii) the second proviso to section 194B, he shall be punishable with rigorous imprisonment fora term which shall not be less than three months butwhich may extend to seven years and with fine." 2.3. Learned counsel for the petitioners submits that theprospect of imprisonment itself is a harsh prospect in thegiven facts and circumstances. He has drawn the attention ofthis Court to the judgment passed by this Hon'ble Court in thematter of S.G. Kale Vs. Union of India (UOI) inS.B. CivilWrit Petition No.232/1995,decidedon19.03.2001, the relevant portion of which reads as under:- “20. The principle was reiterated as late as in MansukhlalVithaldas Chauhan v. State of Gujarat [1997] 7 SCC 622, in whichthe question arose in connection with the sanction requiredfor prosecution of a public servant under Section 197of theCriminal Procedure Code, 1973. The court said (headnote) :Vithaldas Chauhan v. State of Gujarat [1997] 7 SCC 622, in whichthe question arose in connection with the sanction requiredfor prosecution of a public servant under Section 197of theCriminal Procedure Code, 1973. The court said (headnote) : "The validity of the sanction would, therefore dependupon the material placed before the sanctioningauthority and the fact that all the relevant facts,material and evidence have been considered by thesanctioning authority. Consideration impliesapplication of mind. The order of sanction must exfacie disclose that the sanctioning authority hadconsidered the evidence and other material collectedduring investigation and placed before it. This factcan also be established by extrinsic evidence byplacing relevant files before the court to show thatall relevant facts were considered by the sanctioningauthority." upon the material placed before the sanctioningauthority and the fact that all the relevant facts,material and evidence have been considered by thesanctioning authority. Consideration impliesapplication of mind. The order of sanction must exfacie disclose that the sanctioning authority hadconsidered the evidence and other material collectedduring investigation and placed before it. This factcan also be established by extrinsic evidence byplacing relevant files before the court to show thatall relevant facts were considered by the sanctioningauthority." 21. Since the validity of the sanction depends on theapplication of mind by the sanctioning authority to the factsapplication of mind by the sanctioning authority to the facts of the case as also the material evidence collected duringthe investigation, it must follow that the sanctioningauthority has to apply its own mind for generation ofgenuine satisfaction whether the prosecution has to besanctioned or not. Thus, the principle being well settled,the reason which prevailed with the sanctioning authorityhaving been documented in annexure 3, if the case on thepresent facts is analysed, it leaves but one impression inthe mind that the sanction has been accorded without dueapplication of mind to the relevant facts which wereexisting and had vital bearing on the question of accordingor not according of sanction for prosecution after almost adecade of the alleged default.” of the case as also the material evidence collected duringthe investigation, it must follow that the sanctioningauthority has to apply its own mind for generation ofgenuine satisfaction whether the prosecution has to besanctioned or not. Thus, the principle being well settled,the reason which prevailed with the sanctioning authorityhaving been documented in annexure 3, if the case on thepresent facts is analysed, it leaves but one impression inthe mind that the sanction has been accorded without dueapplication of mind to the relevant facts which wereexisting and had vital bearing on the question of accordingor not according of sanction for prosecution after almost adecade of the alleged default.” 2.4. Learned counsel submits that the sanctioning authority,while passing the order of sanction has dealt with the issue ofCOVID-19 pandemic, but has not considered it as areasonable cause due to mechanical application of mind. 3.On the other hand, Mr. K.K. Bissa, learned counsel forthe respondents opposes the above submissions made onbehalf of the petitioners. Learned counsel that the petitionershave a remedy of getting the default compounded. Learnedcounsel also submits that proper application of mind is therein the impugned order, wherein the COVID-19 pandemicsituation has been assessed and the order has been passed,while considering the dates of defaults. Learned counselfurther submits that the collection was made at the instant ofthe petitioners and thus, it should have been lawfully passedon to the respondents without any default. Learned counselsubmits that any sympathy towards the defaulter would resultinto serious issues of recovery of such tax and future prospects of the action against the defaults, which have to beviewed in a strict purview, will stand diminished. 4.Heard learned counsel for the parties.5.This Court observes that in para-8 of the impugnedorder, the authority while granting the sanction, hasconsidered the defense of COVID-19 pandemic, but the samedoes not deal with the critical waves, which were in existencein the mid of the year 2020-21.The restrictions on the hotelindustry, traveling as well as social gatherings and otherswere reasonable causes, which could have been deliberatedmore specifically by the respondents and while looking to theextraordinary situation of pandemic, a proper considerationought to have been made before considering the harshconsequences of Section 276B of the Act of 1961, whichwarrants punishment of rigorous imprisonment from threemonths up to seven years with fine. 5.1This Court is convinced that in the peculiar factualmatrix, when the petitioners have made complete payment ofTDS amount to the credit of the Central Government withinthree months of the prescribed time frame along with theinterest and late fee and suffered intense wave of Covid-19pandemic in the year 2020-21, then in such circumstancesexposing them to the prosecution sanction whilecontemplating punishment up to seven years rigorousimprisonment, looks ill considered in the perspective of thedefault commensurating with the consequences of Covid-19pandemic. 5.2Moreover, the precedent law cited above also makes itclear that the validity of the sanction has to depend upon thematerial placed before the sanctioning authority, whichincludes relevant facts, material and the evidence to beconsidered to reflect application of mind of the sanctioningauthority. It is not that the sanctioning authority hasabsolutely not deliberated upon the issue, but what seemslacking is that the sanctioning authority failed to apply itsmind for generation of genuine satisfaction, whether theprosecution sanction has to be sanctioned or not. The analysisin question in the impugned order leaves us with animpression that the sanction was accorded in a mechanicalmanner without considering the evil consequences of thetragedy as humongous as COVID-19 pandemic. 6.In light of the aforesaid observations, the present writpetition is partly allowed and the impugned order dated21.02.2024 (Annex.13) alongwith consequential proceedingsis quashed and set-aside. The matter is remanded back to thesanctioning authority, which shall apply its mind and considerthe reasonable cause all over again, after giving opportunityof hearing to the petitioners. Thereafter, the sanctioningauthority shall be completely free to move ahead underSection 278AA of the Act of 1961, if the situation so warrants. (MUNNURI LAXMAN),J 3-Nirmala/Devraj- (DR.PUSHPENDRA SINGH BHATI),J