Delhi District Court
Income Tax Office vs Ace Data Devices Pvt Ltd on 18 January, 2025
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IN THE COURT OF MAYANK MITTAL
ADDL. CHIEF JUDICIAL MAGISTRATE (Spl. Acts)
CENTRAL, TIS HAZARI COURTS, DELHI
INCOME TAX OFFICE vs. ACE Data Devices Pvt Ltd
CC No. : 9289/2018
CNR No. : DLCT02-013072-2018
Date of Institution : 19.04.2018
Name of the complainant : Income Tax Office
its registered office through
Shri Saurabh Goyal
Assistant Commissioner of Income
Tax,Circle 73(1), New Delhi
Name of accused : 1. M/s ACE Data Devices Pvt Ltd
her parentage and residence I-132, Kirti Nagar,
New Delhi-110015
2. Sh. Neeraj Mediratta
Director/Principal Officer,
M/s ACE Data Devices Pvt Ltd
3. Sh.Anuj Mediratta
Director / Principal Officer
M/s ACE Data Devices Pvt Ltd
Both at
I-132, Kirti Nagar,
New Delhi-110015
Offence complained of : U/s. 276B read with Section 278 B
and 278E of The Income Act, 1961
Date of Judgment : 18.01.2025
Plea of accused : Pleaded not guilty.
Final Judgment : Convicted.
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Brief facts and reasons for decision of the case:-
1 The present complaint u/s 276B r/w Section 278B of the Income
Tax Act for the F. Y. 2012-2013 has been filed by the complainant
who was Asstt. Commissioner of Income Tax, Circle-73(1) and
incharge of TDS Assessment of M/s ACE Data Devices Pvt Ltd, I-
132, Kirti Nagar, New Delhi-110015 at the relevant point of time,
under the Income Tax Laws, in discharge of official duties as per the
Sanction / Authorization accorded u/s 279(1) of the Income Tax Act
by Dr. Vipin Chandra, Commissioner of Income Tax, TDS-1, New
Delhi directing the present assessing officer Circle-75(1) to file the
present complaint.
2 That on the basis of the report generated from the ITD system, it is
revealed that the accused persons had deducted tax at source under
various sections of TDS amounting to Rs.60,93,000/- during the
relevant financial year to be deposited into the Govt. account within
the stipulated period but the said amount of TDS was not deposited
into the Government Treasury within the Stipulated period. That a
show cause notice for F. Y. 2012-2013 u/s 2(35) of the I.T Act was
issued to Accused No. 2 and 3, dated 15.12.2015 of the intention of
treating them as Principle officer of M/s M/s ACE Data Devices Pvt
Ltd for the relevant financial year. In response to the show cause
notice, the director of the accused filed no reply. On 22.03.2016,
both the accused appeared in person and filed their replies before
the Ld.CIT(TDS), wherein they had submitted that due to recession
and downturn as well as due to some family problem, the business
of the company has been badly effected which has resulted in loss
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of revenues. That after carefully examining the reasons given by the
accused persons, CIT(TDS)-1 found it to be completely vague and
unsatisfactory. Ld. CIT (TDS)-1 after considering all the
submissions of the accused and after affording proper hearing to the
accused persons, had passed the sanction order against the accused.
After the grant of sanction and before the complaint could be filed
before the Court, the accused persons had filed the compounding
application before the Ld.CCIT on 25.04.2016 for compounding of
the offences for the financial year 2013-2013 to 2016-2017 which
shows that the accused persons are repeated offenders and do not
deserve any leniency. The accused persons despite several and
repeated opportunities were not making the payment of the
compounding charges due to which the ACIT,Circle73(1) had
recommended for the rejection of the compounding application. The
accused persons have willfully not deposited the TDS amount
deducted from the payments of the various persons and had used the
said amount for business / personal purposes by diverting the funds
and thus committed the offence punishable u/s 276B r/w 278B of
the Income Tax Act.
3 Vide summoning order dated 19.04.2018 the accused persons were
summoned. Upon appearance, copy of complaint and supporting
documents were supplied to the accused persons.
4 Prior to delving into the contentions advanced on behalf of the
parties, let us briefly discuss the testimonies of witnesses examined
in complainant's evidence:-
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4.1 CW-1 Sh. Saurabh Goyal has deposed that he was holding
charge as ACIT, Circle-73(1) and had jurisdiction over accused
company. That he had filed complaint Ex. CW 1/1 against M/s.
ACE Data Devices Private Limited and its directors Sh. Neeraj
Mendiratta and Sh. Anuj Mendiratta for financial year 2012-13
under Section 276B read with Section 278B of the Income Tax
Act. He stated that the complaint has been filed as per sanction
order dated 22/23.03.2016 accorded by then CIT TDS-1, New
Delhi, Dr. Vipin Chandra Ex.CW1/2 and bearing the signature of
sanctioning authority at point A. He recognized his signature as
he was his superior officer and he has seen him writing and
signing during the course of his official duties. He exhibited the
details of TDS deducted but not deposited within time by the
accused company as ExCW1/3 and certificate u/s 65 B of Indian
Evidence Act Ex. CW-1/4. That on verification it transpired that
the accused company through its directors / principal officer i.e.
accused No.2 and 3 had deducted an amount of Rs.60,93,000/-
tax at source but had not deposited the same to the government
account withing the stipulated time as per the provisions of the
Act read with Rule 30 of the Income Tax Rules. That a show
cause dated 15.12.2015 under Section 2(35) of The Act was sent
to accused Ex.CW1/5 (OSR) under the signature of Sh. Ashish
Chaurasia, the then ACIT and witness identified his signatures as
he had seen his signatures in many official files during official
course of his duties. He exhibited the copy of order, wherein
accused persons admitted themselves to be the Principal Officers
of the company as Ex.CW-1/6. He further deposed that having
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considered the said fact, an order u/s 2(35) of the Act dated
26.02.2016 Ex. CW 1/7 was passed against accused No.2 and 3,
holding them Incharge and responsible for affairs of accused
No.1 for relevant FY 2012-2013. He deposed that thereafter, a
proposal dated 07.03.2016 Ex. CW 1/8 was forwarded to the
office of CIT, TDS-1 for launching prosecution. That the show
cause notice dated 11/15.03.2016 along with proof of dispatch
ExCW1/9 was issued to accused persons by CIT (TDS-1) . He
further deposed that show cause notice was duly served upon the
accused persons and the accused persons had replied vide reply
dated 22.03.2016 Ex. CW-1/10. That The accused persons have
also filed an application for compounding of the offence before
the CCIT (TDS) Ex. CW-1/11. That accused No.1 company
through accused No.2 and 3 have not deposited the tax deducted
at source during the relevant financial year within the time as per
Rule 30 of The Income Tax Rules within the stipulated time and
had used the said money for the business / personal purposes
which was a trust money with the accused persons. That by not
depositing the same to the government account within stipulated
time, accused No.1 and accused No.2 and 3 have committed
offence punishable 276B read with 278B of The Income Tax
Act.
4.1.1 During the cross examination, the witness deposed that
he was posted as ACIT, Circle 73(1) from June 2017 to July
2018. He has official knowledge of the record of the case. He
does not have any personal knowledge. The entire demand of
TDS and interest has not beer paid by the accused till date.
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He has filed the details of TDS amount and interest deposited
by the accused alongwith chalları numbers, the same is
already on record at page no. 51 and is already part of Ex.
CW-1/11. That the said document was filed by accused
before CCIT. He denied the suggestion that the accused has
paid the entire due amount to the complainant by
compounding the offence and volunteered that the offence
has not been compounded. The challan with regard to to the
deposit of amount by the accused are not on record. The
accused has filed compounding for four years from 2012-13
to 2016-17. The aggregate demand for all financial years is
Rs. 8,68 970/- is pending against the accused till date and Rs.
1,09,610/- for financial year 2012-13. Witness admitted that
the suggestion that the accused had informed that due to
industrial recession and personal problems, the TDS could
not be deposited within the stipulated period of time. He
denied the suggestion that delay in depositing the TDS within
stipulated period of time was not intentional. It is denied by
witness that false case has been filed against the accused.
That the disputed transaction is for the financial year 2012-
2013 and assessment year 2013-14. That CW-1 was not
aware whether any unclaimed advance TDS was lying with
the Income Tax Department against the company. That
witness was not aware of any surplus amount lying with the
Income Tax Department before said period, however, if there
was any surplus assessee can always claim on its own the
said surplus on TRACES system. Witness denied the
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suggestion given by learned counsel that Income Tax
Department has surplus amount lying with it more than
Rs.4,39,000/-. That as on today witness was not having the
jurisdiction over the accused company, therefore, he could
not say whether any vendor had made any complaint against
the accused for non deposit of TDS on time for F.Y. 2012-13.
That CW-1 did not know whether complainant office had
suffered any loss due to late deposit of TDS. Witness denied
the suggestion that accused had deposited the entire TDS
with interest for F.Y. 2012-13, however, he voluntarily stated
that the demand as on today as per TRACES system is
Rs.4,39,000/- and for F.Y. 2012-13 is Rs.1,09,610/-. It is
admitted by witness that no outstanding amount is mentioned
in the complaint or that since there was no outstanding
amount due from the accused and therefore same is not find
mention in the complaint or that accused has filed reply to the
show cause notice. That the said reply was considered by the
department while granting sanction for prosecution. That
witness was not aware whether the competent authority
communicated to the accused and the decision on the reply
filed by the accused was respect to notice under Section
279(1) of the Income Tax Act. It is voluntarily stated by
witness that the reply of accused to notice under Section
2(35) of Income Tax was considered while passing order
under Section 2(35) of Income Tax Act and the same was
communicated to the accused. CW-1 denied the suggestion
that order under Section 2(35) of Income Tax Act was not
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received by the accused or that the reasonable cause was
explained by the accused in the reply on the notice under
Section 279(1) of Income Tax Act and the same was not
considered by the competent authority or that cash crunch
occurred with the accused company as a result of outstanding
payments receivable from the complainant which resulted
into delay in deposit of TDS. That witness was not aware
whether any survey was conducted by the department against
the accused. Witness denied the suggestion that he was
deposing falsely with respect to delay in deposit of TDS by
the accused company or that the delay was not intentional
and beyond the control of the accused persons.
4.2 CW-2 Ashish Chaurasia deposed that he was posted as ACIT,
Circle-73(1), New Delhi between April 2015 to May 2016. That
during the course of official proceedings he noticed that M/s.
ACE Data Devices Private Limited has deducted an amount of
Rs.60,93,000/- and not deposited as per the Rule 30 of the
Income Tax Act. That in response to this witness issued two
separate show cause notices dated 15.12.2015 Ex. CW 1/5
(exhibited as Ex. CW 2/1 in the testimony of CW-2) to Sh.
Neeraj Mediratta, which bears his signature at point A. That in
response to above notices, Sh. Manu Narang, counsel for the
assesses submitted that Sh. Anuj Mediratta and Sh. Neeraj
Mediratta were the principal officers during financial year 2012-
2013 (the said note sheet already Ex. CW 1/6). That on
26.02.2016, witness perused the complete record and passed the
order under Section 2(35) of The Income Tax Act Ex. CW 1/7
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(further exhibited in the testimony of CW-2 as Ex. CW 2/2) after
satisfying the conditions of Section 2(35) of the Act. That on
07.03.2016, witness made a proposal including brief facts of the
case and Form-F for launching of prosecution against both the
directors of M/s. ACE Data Devices Pvt. Ltd. for the financial
year 2012-13 Ex. CW 1/8 which bears his signature at point A.
4.2.1 During cross examination witness stated that at the
time of cross examination he was posted as Deputy
Commissioner of Income Tax from 04.07.2022. That sanction
was given by CIT-1 TDS for filing the present complaint
against the accused persons and the company. That witness
came to know about the default from ITD (TRACES)
systems after which notice for identifying the principal
officer of the accused company was sent to accused No.2 and
3 Neeraj Mediratta and Mr. Anuj Mediratta and reports in this
regard Ex. CW 1/3 are already on record. That first notice
was issued to the accused 15.12.2015 to the above named
persons only, however, he stated that he did not remember
whether he had issued the said notice to anybody else. That
after seeing the judicial file witness stated that there is only
two notices Ex. CW 1/5 and Ex. CW 2/5 present in the file.
That office of concerned circle maintains all the proceedings.
That witness had not filed the present complaint therefore he
could not say whether all the proceedings done in the present
case were filed with the present case or not. After seeing the
judicial file witness stated that all the records of the
proceedings are not on judicial file. Thereafter a question was
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put to witness "Q. Can you tell why all the record of
proceedings were not filed with the present complaint? to
which he answered "Ans. No. I cannot tell as I have not filed
the present complaint or that I am not the custodian of the
present charge." Witness admitted the suggestion that there is
noting on Ex. CW1/6 at point D that one prosecution notice
has been generated by system to the assessee on 20.02.2015.
That the said noting is not bearing any signature of the then
officer or the AR of the accused company and same is not
present in the judicial file. Witness denied the suggestion that
the department had deliberately not filed the abovesaid
notice or the record of proceedings with the present
complaint. Witness was asked question "Q. Can you tell
whether the department had maintained record of directors of
the accused company?' to which he replied "Ans. Yes. All
the details can be retrieved from ITR/ITD systems. Further a
question was put to witness that "Q. Have you issued the
notice to all the directors or selected one? to which he replied
"A. As the matter is approximately 7 years old after perusal
of judicial file above named accused only." CW2 admitted
the suggestion they had not issued notice to Ms. Kamlesh
Mediratta as she had already expired. That the department did
due diligence and the AR of the accused company used to
visit the office of Circle 73(1) frequently and during the
course of informal discussions with AR of accused company,
it was brought to his notice in the year 20152016 that Ms.
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Kamlesh Mediratta was no more. That he could not tell the
exact date and time when he came to know about the death of
Ms. Kamlesh Mediratta as the matter is approximately 7
years old. That CW2 never asked the accused No. 2 and 3 to
appear before him. Further that witness issued show cause
notices to them to file the reply through their AR. That the
order under Section 2(35) of Income Tax Act were duly
served to the accused through speed post. Witness admitted
the suggestion that the speed post receipt is not on judicial
file, however, voluntarily stated that he could check from the
relevant office record. That on the day of recording of cross
examination, CW2 had brought the office record and the
copy of register maintaining the speed post record and placed
on judicial record Marked CW2/D1. That the document
showing the speed post tracking number at point 3 and 4.
Further it is stated by wintess that he did not know Mr. Manu
Narang, personally, however, voluntarily stated that the AR
Mr. Manu Narang used to frequently visit the office of
Income Tax located at Laxmi Nagar. That due to lapse of
time, he did not remember whether Mr. Manu Narang had
filed the power of attorney or not. CW2 stated that he could
not even tell whether letter of authority was filed with the
present complaint or not. That he could not tell whether any
written representation was filed by Mr. Manu Narang,
however, voluntarily stated that he could tell from the office
record. That after seeing the office record witness presented
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the document filed by accused Neeraj Mediratta dated
31.12.2015 and placed the same on judicial record and
exhibited the same Ex. CW2/D1. That Ex. CW1/6 showing
that Mr. Manu Narang AR of the accused company and its
directors submitted before him that Accused No. 2 and 3
were the principal officer of the accused No.1 company for
the F.Y. 20122013. That it was also submitted by Mr. Manu
Narang that Ms. Kamlesh Mediratta has passed away and
Accused No. 2 and 3 may be treated as principal officer.
Witness was further put a question "Q. Was there any written
reply to the Show Cause Notice issued by you? to which he
replied "Ans. Due to lapse of time I cannot recollect whether
any written reply to the Show Cause Notice was filed or not."
That due to lapse of time he could not tell how many cases
were handled by him during that time. That even he could
not tell how many proposals were sent by him. It is denied by
witness that he had deliberately passed order dated
26.02.2016 in haste without calling and accepting detailed
representation from the accused person or that order dated
26.02.2016 was passed on wrong facts and with malafide
intent or that order dated 26.02.2016 was never served to the
accused or that therefore the accused have not been given
proper opportunity to represent their case or that the order
dated 26.02.2016 and proposal dated 07.03.2016 were
defected one or that the proposal sent by me to the Ld. CIT1,
TDS was incomplete and therefore the same is not filed
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before the Court. That accused were liable to deduct and
deposit Rs. 60,93,000/ within the due time as prescribed in
Rule 30 of the Income Tax Rules. CW2 stated that he was
not aware whether the accused had deposited the said TDS
amount later on. That he was not aware whether there was
any credit balance of the TDS amount deposited by the
accused with the department. Witness denied the suggestion
that there was mismatch of TDS amount with the department
or that the accused were entitled to refund from the
department even after the adjustment of the abovesaid TDS
default. That CW2 did not remember whether any survey
was done or not during his tenure. It is denied by CW2 that
the survey was done twice by the department and no anomaly
was found against the accused company. That CW2 could
not tell how many prosecution cases have been filed by
Income Tax Department. That there is default as per Rule 30
of the Income Tax Rule, the TDS Wing of the Income Tax
Department takes corrective measure of deterrence measures
by filing prosecution. Witness denied the suggestion that the
department has personal vendetta upon the accused so the
present case has been filed or that the CA Mr. Manu Narang
was referred by CW2 to represent accused company or that
the actions taken by me were in arbitrary and selectively.
5 Upon conclusion of CE, statement of AR of accused No.1 company
u/s 313 Cr.P.C recorded on 01.02.2023.
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6 Accused in its defence evidence examined two witnesses as under:
6.1 DW1 Sh. Gaurav Garg, DCIT has brought the summoned
record i.e. 1.The list of unconsumed challans and Ex. DW1/1
(running into 4 pages). (Vol. It is not possible at present to
determine the list of unconsumed challans on the date of start of
proceedings.); 2. Number of TDS returns revised by company
M/s ACE Data devices Pvt. Ltd. to correct its record. The data
showing the number of corrections made by accused company
M/s Ace Data devices Pvt. Ltd. are the revised returns Ex.
DW1/2 (colly) (running into 10 pages); 3. The process of
revising TDS returns Ex. DW1/3; 4. The reasons for rejection of
refund Ex. DW1/4 and 5. The email asking the status of
outstanding demand and its reply Ex. DW1/5 (colly). The cross
examination of witness was nil despite opportunity.
6.2 DW-1 Sh. Vipin Chandra, Commissioner State Information
Commission has stated that the present case pertains to TDS
default. That as the Commissioner of Income Tax is the
Authority for granting Sanction, witness had granted sanction in
the present case for launching the prosecution against the
accused persons as he was posted as CIT TDS-I, Delhi. That the
proposal from the Assessing Officer for sanctioning prosecution
was received by his office and he perused the documents
produced by Assessing Officer alongwith the proposal. That on
the basis of said proposal, show cause notice and the
documents/file, the show cause notices were issued against the
accused company and its Principal Officers. That in reply to that
the accused filed their reply. That he had perused the proposal
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received by his office which consist of proposal issued by
Assessing Officer forwarded by Joint Commissioner/concerned
Commissioner. That due to lapse of time, witness did not
recollect what were the all documents perused by him for
granting sanction, however, the sanction was passed strictly as
per rules/SOPs. A question was put to witness "Q. I put it to
you that have you found any outstanding amount payable by the
accused persons at the time of passing the sanction order?
However, Court has disallowed the question being a leading
question which cannot be permitted to be asked in examination-
in-chief. Further a question was put to witness "Q. I put it to you
that at the time of passing sanctioning order, unconsumed
challans are also considered, what you have to say? and same
was also disallowed by the court being a leading question which
cannot be permitted to be asked in examination-in-chief and
learned counsel for accused was advised not to ask question
which are leading in nature.
6.2.1 During cross examination witness admitted the
suggestion that the proposal which was received by his office
having the documents i.e. TRACES Report downloaded by
AO, notice under Section 2 (35) of Income Tax Act and the
order passed by AO under Section 2 (35) of Income Tax Act.
6.3 DW-2 Sh. Nitesh Kumar, Inspector was a summoned witness
and brought the summoned record Ex. DW 2/1 (colly.). The
cross examination of witness was nil despite opportunity.
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7 During final argument it is vehemently submitted by learned SPP
that the present complaint has been filed for default in payment of
TDS in time by the accused No.1 company for the financial year
2012-2013 under Section 276B read with Section 278B / 278E of
The Income Tax Act, 1961. It is submitted that during post charge
evidence complainant has examined its witness Sh. Saurabh Goyal
and Sh. Ashish Chaurasia who have proved all the required
documents which are Ex. CW 1/2 sanction, Ex. CW 1/3 TRACES
report, Ex. CW 1/4 certificate under Section 65B of The Indian
Evidence Act, Ex. CW 1/5 Notice under Section 2(35) of the
Income Tax Act (OSR), Ex. CW 1/6 order sheet recorded on
24.02.2016, Ex. CW 1/7 order under Section 2(35) of The Income
Tax Act, Ex. CW 1/8 Proposal, Ex. CW 1/9 show cause notice qua
sanction, Ex. CW 1/10 reply to Ex. CW 1/9, Ex. CW 1/11
compounding application. It is submitted that proving these
documents, the complainant has proved its case beyond reasonable
doubt that there was default in payment of TDS within time
provided by the Income Tax Act. It is submitted that accused has
taken the defence of unconsumed challans and refunds from Income
Tax Department, however, the refund of the amount due from the
Income Tax Department can not be cited as defence in case of
default in payment of TDS within time prescribed. Learned SPP has
relied upon judgment of Indo Arya Central Tansport vs.
Commissioner of Income Tax (TDS), Delhi-1 & Anr. WP(C)
No.3964/2017 decided on 12.03.2018 in this regard. It is further
submitted that accused has further taken the defence of slow down
business of accused during the relevant period, however, no proof
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of such slow down in business has been proved in the present case.
Further it is submitted that the accused has cited the personal reason
of murder of sister of accused No.2 and 3, due to which they could
not pay attention to the business and compliances, however, as per
the defence itself, the said incident took place in year 2010,
however, case pertains to financial year 2012-13. It is submitted that
though the burden on complainant to prove the guilt of accused is
not beyond reasonable doubt, however, complainant has proved the
guilt of accused beyond reasonable doubt. Further it is submitted
that though the burden on accused to prove its defence is beyond
reasonable doubt, however, accused has not brought any evidence to
substantiate its defence even prima facie. A request has been made
to convict the accused persons and punished accordingly.
8 Accused No.3 has advanced final arguments and had also filed
written submissions on his behalf as well as on behalf of accused
No.1 and 2. It is submitted on behalf of accused persons that
accused could not make the payment of TDS return as a significant
return is owed to accused No.1 company by the department, which
created the cash flow constraint. It is further submitted that there
was error in tagging tax challans which had effected the timely
filing of return and in this regard the accused persons had requested
the assistance from department in re-reconciling these challans to
facilitate full compliance. It is submitted that accused persons were
assured verbally by the then Sanctioning Authority that prosecution
would not proceed if rectifications were undertaken. It is submitted
that on the basis of assurance given by the then Sanctioning
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Authority, the accused persons had started correcting the returns
immediately. It is submitted that without considering the above said
background of the case, the proceedings have been initiated against
the accused persons. It is submitted that on the date of filing of
complaint, there was no dues against the accused persons, which
does not require filing of any complaint against the accused
persons. It is submitted on behalf of accused persons that despite
summoning of record of unconsumed challans and surplus of
accused available with the department, by the accused persons from
the department, the said details was not furnished on the ground that
same was not available with the department. On behalf of accused
the defence of slow down of business and sad full murder of sister
of accused No.2 and 3 on 28.09.2010 was cited as reasonable
ground under Section 278AA of The Income Tax Act, 1961 as
reasonable cause for the acquittal of accused persons.
9 Before proceeding ahead, it is important to refer to provisions of
law which will guide this court arriving at the correct decision:-
276B. If a person fails 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--
(i) sub-section (2) of section-115-O; or
(ii) the second proviso to section-194B,
he shall be punishable with rigorous imprisonment for a term which
shall not be less than three months but which may extend to seven years
and with fine.
278B. Offences by companies. (1) Where an offence under this Act has
been committed by a company, every person who, at the time the
offence was committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company as well as the
company shall be deemed to be guilty of the offence and shall be liable
to be proceeded against and punished accordingly:
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Provided that nothing contained in this sub-section shall render any such
person liable to any punishment if he proves that the offence was
committed without his knowledge or that he had exercised all due
diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an
offence under this Act has been committed by a company and it is
proved 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, such
director, manager, secretary or other officer shall also be deemed to be
guilty of that offence and shall be liable to be proceeded against and
punished accordingly.
(3) Where an offence under this Act has been committed by a person,
being a company, and the punishment for such offence is imprisonment
and fine, then, without prejudice to the provisions contained in sub-
section (1) or sub-section (2), such company shall be punished with fine
and every person, referred to in sub-section (1), or the director, manager,
secretary or other officer of the company referred to in sub-section (2),
shall be liable to be proceeded against and punished in accordance with
the provisions of this Act.
Explanation.--For the purposes of this section,--
(a) "company" means a body corporate, and includes--
(i) a firm; and
(ii) an association of persons or a body of individuals whether
incorporated or not; and
(b) "director", in relation to--
(i) a firm, means a partner in the firm;
(ii) any association of persons or a body of individuals, means any
member controlling the affairs thereof.
278E. Presumption as to culpable mental state.-(1) In any prosecution
for any offence under this Act which requires a culpable mental state on
the part of the accused, the court shall presume the existence of such
mental state but it shall be a defence for the accused to prove the fact
that he had no such mental state with respect to the act charged as an
offence in that prosecution.
(2) For the purposes of this section, a fact is said to be proved only
when the court believes it to exist beyond reasonable doubt and not
merely when its existence is establish by a preponderance of
probability."]
278AA. Punishment not to be imposed in certain cases-Notwithstanding
anything contained in the provisions of Section 276A, Section 276B no
person shall be punishable for any failure referred to in the said
provisions if he proves that there was reasonable cause for such failure.
10 From the consideration of submissions including written
submissions and from perusal of record, it can be noted that in the
CC No. 9289/2018
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case at hand it is an admitted position on behalf of both the parties
that there was delay in deposition of TDS by accused No.1
company. The court has to examine now whether complainant has
been able to prove its case which warrants the conviction of accused
and whether accused have been able to prove reasonable cause, for
being entitled to acquittal.
11 From the consideration of the evidence led by the
complainant, it can be noted that complainant has proved the case of
non deposition of TDS by the accused persons within time
stipulated by law by proving the notices and order under Section
2(35) of The Income Tax Act, proposal issued and sanction granted
for the prosecution and by proving the relevant documents in this
regard. complainant's witnesses have been consistent in their
testimony during their cross examination. In fact the copy of reply
filed by accused to the show cause notice under Section 279(1) and
Section 276B of The Income Tax Act dated 22.03.2016 itself shows
that in point No.6 it is mentioned by accused persons that the non
compliance of different requirements happened during this period as
there was a temporary lack of discipline in adhering to the time
lines, which along with point No.16 of the said reply show nothing
but the admission on the part of accused persons regarding default
in payment of TDS within time.
12 For considering the ground of defences and understanding the
reasonable cause within the purview of Section 278AA of The
Income Tax Act, the court is guided by the following judicial
pronouncement:-
CC No. 9289/2018
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In Banwarilal Satyanarain v. State of Bihar, 1989 SCC OnLine
Pat 137 Hon'ble Patna High Court held that:
"33. Now it has to be seen as to what is the effect of the amendment.
Can it be said that after amendment, the question whether an accused
had any reasonable cause or not for not deducting and paying tax within
time is of academic importance and not relevant for a criminal court?
My answer is emphatically in the negative. Section 278AA is nothing
else but a proviso to section 276B of the Act, but a separate section has
been inserted in the Act, as similar provisions have been made with
respect to prosecution under sections 276A, 276AB, 276DD and 276E.
Cumulative effect of the amendment, in my view, is that in case of
prosecution under section 276B of the Act, two things have to be
shown; firstly, that there was failure on the part of the assessee in
deducting or paying the tax within time and, secondly, that the failure
was without any reasonable cause.
"36. In order to appreciate the import of the words "good and sufficient
reasons" within the meaning of section 201 read with section 221 of the
Act, "reasonable cause or excuse" as used in section 276B prior to 1986
amendment and "reasonable cause" as used in section 278AA, it would
be necessary to refer to the dictionary meanings of the expression
"reasonable", "good" and "sufficient". In of libel English Dictionary
(first edition published in 1933 and re-printed in 1961-volume VIII), the
expression "reasonable" has been defined to mean "fair, not absurd, not
irrational and not ridiculous". Likewise, the expression "good" has been
defined in the said Dictionary in volume IV to mean "adequate, reliable,
sound". Similarly, the expression "sufficient" has been defined under
the same very Dictionary in volume: X to mean "substantial, of a good
standard".
37. From the definitions referred to above, it would appear that
reasonable cause or excuse is that which is fair, not absurd, not
irrational and not ridiculous. A cause which is reasonable within the
meaning of sections 276B and 278AA of the Act may not be sufficient
and good reason within the meaning of sections 201 and 221 of the Act
as sufficient reason would mean a substantial reason or a reason of good
standard would mean a reason which is adequate, reliable and sound. A
cause may be reasonable but the same may not be necessarily good and
sufficient. On the other hand, if a reason is good and sufficient, the same
would necessarily be a reasonable cause. These facts show that the
obligation which an accused has to discharge in a criminal prosecution
under section 276B of the Act in showing that he had reasonable cause
for not deducting the tax or paying the same within time is much more
lighter than the obligation to be discharged by him in a penalty
proceeding under section 201 read with section 221 of the Act."
CC No. 9289/2018
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In Greatway (P) Ltd. v. Assistant Commissioner of Income-Tax,
1991 SCC OnLine P&H 1353 Hon'ble Punjab & Haryana High
Court held that:
"11. The words "without reasonable cause or excuse" as they occur in
section 276B are significant. The act of non-deduction or non-payment
was an offence only if the act was done without any reasonable cause or
excuse. The initial onus remains on the prosecution to establish all the
ingredients of an offence and, for a charge under section 276B, this
necessary ingredient has to be alleged and proved by the respondent. In
case the prosecution is able to discharge the initial onus, then of course,
the onus will shift to the accused-persons to show that he/they had a
reasonable cause for failure to deduct or to deposit the tax. It is
significant to note that section 278AA provides that the proof of
reasonable cause for failure will be a complete defence for offences
under section 276A. Section 278AA was inserted on September 10,
1986, that is to say, at the time amendment to section 276A was made
and the words “without reasonable cause or excuse” were deleted. The
section, as framed, did not absolve the prosecution of its obligation to
allege and prove the absence of reasonable cause or excuse for the
default in deduction of the tax and its due deposit. ”
In Sonali Autos Private Limited vs State of Bihar and Others,
2017 SCC OnLine Pat 3620 the Hon’ble High Court of Patna held
that:
“26. The petitioners have stated in the petition that the aforesaid tax
could not be deposited within time due to oversight on the part of the
Accountant, who was appointed to deal with the Accounts and Income
Tax matters. This mistake was detected at the time of audit of Books of
Accounts by the Statutory Auditors of the petitioner-company in
August, 2010. Thereafter, the petitioner immediately deposited the
amount of tax along with interest in the year 2010 itself. Section 278
AA of the Act specifically says that no person shall be punished for any
failure referred to under the said provisions if the assessee proves that
there was reasonable cause for such failure. Reasonable cause would
mean a cause which prevents a reasonable man of ordinary prudence
acting under normal circumstances, without negligence or inaction or
want of bonafides.”
In Sasi Enterprise Vs. The Union of India, 2006 SCC OnLine
Mad 1087 Hon’ble High Court of Madras held that:
CC No. 9289/2018
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63. Apart from these, before the introduction of Section 278E, the
prosecution also had to prove that the person or the assessee committed
the above default “wilfully”. Now, that responsibility has been lifted
from the shoulders of the prosecution and placed on the person or the
assessee. It is true that the Section says that it is for the assessee to
prove the absence of culpable mental state, but what exactly does this
mean? It means that the assessee will have to prove the circumstances
which prevented the assessee from filing the return as above in due time
as per Section 139(1) or in response to the notices under Sections 142,
148 and 153A, as the case may be. Previously, it was the duty of the
prosecution to prove the absence of such circumstances. Now, if there
are circumstances which prevent an assessee from discharging his duty,
as provided for under the Income Tax Act, it is something specially
within his knowledge and he is required to prove it. The Indian
Evidence Act and the law laid down by Indian Courts as well as the
Courts elsewhere with regard to proof of facts specially within the
knowledge of the accused provides that the burden must necessarily be
cast on that person. At the same time, it was, of course, vehemently
contended on behalf of the petitioners that in the present case the
presumption amounts to proof of guilt and it was submitted, and with
much force, that the impugned provision is a legislative presumption of
guilt. I am afraid not. The law does not presume and the law has not
presumed that the assessee is guilty. The law has only asked the Court to
presume that nothing prevented the assessee from filing his return in
accordance with law and in response to the notices and therefore, the
failure is wilful. If there were such compelling circumstances, it is
always open to the assessee to prove them in accordance with law. That
does not seem to be and cannot be a difficult thing to do. In fact,
obviously, the Parliament found that it was well nigh impossible for the
prosecution to prove the absence of compelling circumstances which
prevented the assessee from what in law the assessees were bound to,
i.e., prove the negative, so in its wisdom, decided that it would be easier
and more practicable, and in the context of the objects sought to be
achieved, require the assessee to show those facts which would lead the
Court to infer that act ‘A’, namely filing the return in due time was not
possible. If the assessee proves it, then the prosecution will fail. Can it
be said that this is arbitrary or unreasonable? I think not.
13 Let us consider the different ground of defences taken by
accused persons as reasonable cause within the purview of Section
278AA of The Income Tax Act, 1961:-
13.1 Unconsumed challans and refunds:- The accused persons
have vehemently relied upon the consumed challans and refundsCC No. 9289/2018
24 of 27due from the Income Tax Department as defence for non
payment of TDS in time prescribed by Income Tax Act. The
same has been opposed by learned SPP on the ground that there
is no mechanism for settling out the TDS to be deposited by
accused and refund to which accused is entitled. It is
vehemently submitted by learned SPP that both the process are
distinct and different and unconsumed challans and refund can
not be cited as defence for non payment of TDS within
stipulated time by Income Tax Act. Though the submissions of
accused seems to be reasonable however, the same is not
supported by any Rules of Income Tax Act or anys case law. The
accused have not cited any rule of law or judgment requiring the
settling of refund to which accused is entitled with the TDS
which accused required to be deposited. The court has found
substance in the submissions of learned SPP where he has relied
upon the judgment of hon’ble High Court of Delhi in Indo Arya
Central Transport Limited (SUPRA) to assert that hon’ble High
Court of Delhi has not entertained the plea of petitioner in the
said petition and directed the petitioner to file separate petition
for refund, if any. The court has not found any substance in the
submissions of accused that they are not liable to be prosecuted
and convicted for default in payment of TDS in time as they
were entitled to refund from the department and number of
chllans were unconsumed.
13.2 Slow down of business:- The accused have cited slow down
of business as one of the ground under Section 278AA of The
Income Tax Act as reasonable cause for their acquittal. IfCC No. 9289/2018
25 of 27accused were taking the defence of slow down the business, the
accused was required to place on record and prove the Balance
Sheet of accused No.1 company of the relevant year and years
prior to that along with bank statement of accused No.1
company and audited accounts to substantiate its claim of slow
down of its business. However, no evidence has been brought by
the accused persons on record during defence evidence, so as to
prove that the accused persons have suffered any slow down in
business or faced financial crises or any cash deficit during the
relevant year. In fact in reply dated 22.03.2016 by the accused
persons to the department, it is mentioned that the business
suffered for more than 6 months from 2009-10-11, meaning
thereby there was no slow down in the relevant financial year. In
the absence of any evidence with regard to slow down in
business, the ground taken by accused had remained a mere
averment and could not become evidence to be considered as a
reasonable cause under Section 278AA of The Income Tax Act.
13.3 Murder of sister of accused No.2 and 3:- The accused No.2
and 3 had taken the ground of their diverted attention and
interest due to sad full murder of their sister on 28.09.2010. The
court considers it reasonable that in case of murder of the sister
of accused persons, it would have been difficult for them to
attend their business and to comply the different mandates of
law concerning their business. However, the alleged murder of
sister of accused No.2 and 3 took place on 28.09.2010 and the
default in question pertains to financial year 2012-13. The
alleged default was not in the same financial year in which theCC No. 9289/2018
26 of 27sister of accused No.2 and 3 was murdered or immediately after
that. Besides it, the accused persons who are duty bound to
prove their defence beyond reasonable doubt, were required to
place on record and prove the sufficient material so as to show
their involvement in the investigation and prosecution of offence
committed against their sister. However, apart from averment no
record regarding the sad full murder of sister of accused No.2
and 3, which might have been in the form of FIR, recording of
statements of accused No.2 and 3 or some other proof showing
the presence of accused No.2 and 3 at some other places, apart
from their business to deal with the situation resulted from the
sad full murder of their sister. From the mere fact that the sister
of accused No.2 and 3 was murdered on 28.09.2010, it can not
be believed that accused No.2 and 3 had diverted interest after
almost one and a half year of the sad full incident.
14 Considering the ratio of above judgments and the facts of the
present case, the court is not convenienced that accused persons
have been able to prove any diverted intention due to death of their
sister or suffered any financial losses / crises during the relevant
financial year. The fact that TDS was timely deducted as per rules
of Income Tax Act, shows that accused No.1 company was
incurring expenses and running its business.
15 On the basis of above discussion, accused could not prove
that they have any reasonable cause within the meaning of Section
278AA of the Income Tax Act, 1961 which prevented them from
deposition of TDS within time as per rules of Income Tax Act,CC No. 9289/2018
27 of 271961. Complainant as discussed above has been able to prove its
case that accused persons have not deposited the TDS within time
stipulated by law and accused No.2 and 3 are Principal Officer of
accused No.1 company, which fact was not even disputed by
accused No.2 and 3. Accordingly, accused No.1, 2 and 3 are
convicted for offence under Section 276B read with 278B/278E of
The Income Tax Act, 1961.
Announced in the open court Digitally signed by
MAYANK MAYANK MITTAL
on this 18th January 2025 MITTAL Date: 2025.01.18
16:55:29 +0530
MAYANK MITTAL
ACJM (Spl. Acts), CENTRAL
TIS HAZARI COURTS, DELHI
This judgment consists of 27 pages
and each and every page of this
judgment is signed by me.
CC No. 9289/2018