The Jharkhand High Court quashed the prosecution for illegal TDS deduction against the finance advisor who is neither an employee of HEC Ltd.
S.M. Jain, the petitioner filed the criminal misc. petition for quashing the entire criminal proceeding including the order taking cognizance dated 05.10.2001 passed in Complaint Case No. 41 of 2001 whereby and whereunder, prima facie case is made out under Sections 276B read with 278B of Income Tax Act and Sections 409, 34 of IPC.
The prosecution case against the petitioner and other officers of HEC is that TDS deductions were not remitted to Income Tax Department on time. The complaint has been filed by the Union of India through Sebastian Kujur, Deputy Commissioner of Income Tax, Circle-II, Ranchi (In-charge of T.D.S).
It was alleged that all the accused persons were responsible for deductions of tax from the payments of the contractors, employees and others of HEC, Ltd. It was alleged that a deduction of tax was made by HEC, Ltd. from the payment of the contractors, employees and others during the financial years 1995-96, and thereafter on several occasions the accused persons have not deposited the deducted tax 2, within the stipulated period under the Income Tax Act, with the authority.
A notice to that effect was issued to the accused. As per the complaint, the accused persons submitted a reply stating therein that there was a delay in remitting the TDS, as HEC was a sick organization. The explanation was rejected by the complainant and a penalty of Rs. 1,00,000/- was imposed under the Act.
A complaint was filed alleging the commission of an offence under Sections 276-B read with Section 278 B of the Income Tax Act, and also under Section 409 read with Section 34 of the Indian Penal Code.
It was argued that the is neither an employee of HEC, Ltd. nor is responsible for the collection of tax, on behalf of the HEC, from any contractors, employees or others. He was a retainer and not a regular employee and was not responsible for deducting tax from anyone. It is also his case that he is not responsible for depositing any amount as a tax on behalf of HEC, Ltd. It has been submitted that the complaint petition suggests that the petitioner is merely an advisor.
It was submitted that the petitioner is an independent consultant hiredby HEC, Ltd., on a contractual retainer-ship basis, to improve the system of finance and costing. It has been further submitted that in terms of the Income Tax Act, this petitioner can never be held responsible for the alleged offence committed by the company or its employees.
It was evident that the petitioner is not an employee of HEC, but has been hired for improving the system of finance and costing. The petitioner never had any control over the affairs of the company including the liability of deducting tax from the employees or the contractor and 4 depositing the same with the department.
It was observed that the petitioner neither falls within the definition of “Assessee”, “Principal Officer” nor an “Employee”. He was also not part and parcel of the management of HEC.
The Single judge bench Comprising Justice Gautam Kumar Choudhary quashed and set aside the impugned complaint since there is no material to summon the petitioner.
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