Prosecution launched for offenses punishable under sections 276B and 278B of the Income Tax Act for delay in depositing TDS quashed as the TDS had already been deposited with interest as provided under section 201(1A). As per CBDT Circulars dated 28th May, 1980 and 24th April, 2008 prosecution ought not be launched where the tax has been deposited.

(i) No notice has been issued by the “Assessing Officer” to any of the petitioners under Section 2 (35) (b) of the I.T Act to treat any of them as “Principal Officer” of the Company.

(ii) No order as contemplated under Section 201 (1) r/w Section 201 (3) of the I.T Act has been passed treating any of the petitioners as ‘Principal Officer” of the company and by which such Principal Officer is whereby “deemed to be assessee in default”.

(iii) In respect of assessment year 2017-2018, a positive order has been passed holding the Company not to be “Assessee in Default”.

(iv) No order imposing penalty (either initially or further penalty) as “deemed to be an assessee in default” under Section 221 has been passed against the company or any of the petitioners.

(v) The petitioners are “Directors” of the Company, however, no averment has been made in the complaints regarding “Consent”, “Connivance” or “negligence” as required under Section 278B (2) of the I.T Act.

(vi) It is incumbent upon the department to prove that the offence has been committed with the consent or connivance of or is attributable to any neglect on the part of any director, manager, secretary, or other officer of the company.

(vii) A combined reading of Circulars dated 28th May, 1980 and 24th April, 2008 contemplate that prosecution ought not be launched where the tax has been deposited. Madhumilan Syntex Ltd and others Vs Union of India (2007) 11 Supreme Court Cases 297, would not be made applicable in view of the Circular dated 24th April, 2008 and, therefore, it cannot be treated as a precedent for the period after 24th April, 2008. It is also expedient to note that Circular dated 24th April, 2008 prescribes that the prosecution is to be launched within sixty days of deduction of the default.

[K.C. Builders Vs. Assistant Commissioner of Income-Tax [2004] 135 TAXMAN 461 (SC), G.L. Didwania and another Vs. Income Tax Officer 1995 Supp (2) Supreme Court Cases 724, Sree Metaliks Ltd. Vs. Union of India [2024] 162 Taxmann.com 161 (Orissa) Sonali Autos (P) Ltd vs The State Of Bihar [2017] 396 ITR 636 (Patna) M/s. Dev Prabha Construction Private Limited Vs. The State of Jharkhand Cr. M.P. NO.2941 of 2018 followed]