The Delhi Court convicted the Prasvnath Developers for delay in depositing the TDS amount on the grounds that the mere recession cannot be cited as an excuse for nonpayment of the TDS amount.
It is alleged that in the survey under Section 133 A of the Income Tax Act conducted at the business premises of accused company, Prasvnath Developers it was found that accused company has deducted the TDS of Rs.10,59,08,557 and has failed to deposit the TDS for the financial year 20132014.
In the survey Mr. Ashish Verma, G.M Taxation in his statement admitted that the accused company has not deposited the TDS and he undertook that the TDS will be deposited by February 28, 2014. It is stated that only an amount of Rs. 6.95 Crore out of Rs. 13.17 Crore of TDS demand was deposited by the accused company by March 20. 2014.
A proposal to initiate prosecution under section 276 B of Income Tax Act was sent by the then, Assessing officer to CIT.
It has been argued by the Special Public Prosecutor for the complainant that accused
company as well as its Principal Officer being the Managing Director failed to deposit the TDS within the stipulated time and therefore are liable to be punished for the offence under section 276B read with Section 278 B of the Income Tax Act.
It has been further argued that the company failed to show any reasonable cause for nondeposit of the TDS. It is submitted that the documents on record shows that the Managing Director was actively involved in day to day affairs of the accused company and therefore liable to be prosecuted.
On the other hand, the Defence Counsel of the accused company submitted that the complete tax deducted at source is already deposited by the accused company. However, the delay in deposit of TDS is not disputed. It is argued that neither the notice under Section 2(35) of the Income Tax Act nor the order under section 2(35) of the Income Tax Act is served upon the Managing Director and therefore, he can not be treated as the Principal Officer.
It is further argued that the accused is not the Managing Director of the accused company and has been prosecuted under erroneous presumption. It is submitted that the Form 27A on record clearly shows that it was Mr. Yogender Singh who was responsible for deduction and deposit of the TDS but despite that the accused has been erroneously prosecuted.
The coram of Abhilash Mahotra, ACMM said that merely because the business suffered from recession and the working capital stifled, cannot be termed as sufficient cause for nonpayment of TDS amount. A company cannot be permitted to use the TDS amount for channelizing and fulfilling its working capital deficit.
The court noted that the company has failed to show any circumstances which has prevented the company from payment of TDS amount especially when the payment to the associate companies and directors were continuing. The court held that the case of the accused company is clearly not covered under section 278AA Income Tax Act, 1961 and accordingly the accused company is convicted for the offence under section 276 B Income Tax Act, 1961 for delay in depositing the TDS amount.
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