Rural Works Dept’s TDS Delay: Patna HC Permits Dept to Decide on Equal Split of Compounding Charges Among Officers [Read Order]

In a recent ruling, the Patna High Court allowed the Rural Works Department of Bihar to decide whether compounding charges related to a delayed TDS deposit can be equally apportioned among four responsible officers.

The case arose from a writ petition filed by Upendra Narayan, an Executive Engineer in the Rural Works Department, who was served a show cause notice under Sections 276B and 276BB of the Income Tax Act. The notice alleged a delayed deposit of TDS during the financial year 2012–13 and sought to initiate prosecution. The department had already recovered Rs. 34.14 lakh from the department’s bank account, covering short deduction, interest, and late fees.

Unlock the full scope of TDS & TCS with the 2025 amendments from The Finance Act: Click Here

An internal inquiry by the Rural Works Department, via letter dated 21.02.2018, held that the responsibility for the default was shared equally among four officials: the Executive Engineer (petitioner), the Divisional Accounts Officer, the Accounts Clerk, and the Cashier. It directed that the interest and fine be equally divided, with 25% payable by each officer. The petitioner argued that the same logic should apply to the compounding charges of Rs. 14.46 lakh demanded by the Income Tax Department.

Read More: Rule 8 of Central Excise Valuation Rules Inapplicable Where there is No Sale or Captive Consumption: CESTAT in BSNL case

The petitioner submitted that the department had already recognized shared responsibility in writing, and it would be unfair to make him bear the entire compounding charge. He expressed willingness to pay his portion and requested the court to prevent prosecution.

The Income Tax Department argued that only the Principal Officer in this case, the petitioner, could be held liable for defaults in TDS deposit.

Crack the Fraud Code. Master the Law. Stay Ahead! Click Here

The State of Bihar, through its counsel, did not contest the apportionment decision but explained that the Secretary of the Rural Works Department had found all four officials negligent and had recommended equal liability for interest and penalties. The State suggested that the same reasoning could apply to the compounding fee, but acknowledged that this decision lies within the department’s discretion.

The division bench of Justices Rajeev Ranjan Prasad and Shailendra Singh observed that no writ can be issued to compel the Income Tax Department to split the compounding charges. The court left it open for the Rural Works Department to examine and decide, after hearing all parties, whether to distribute the charges equally, as was done with the penalty and interest.

Your go-to resource for understanding TDS & TCS amendments in the 2025 Finance Act: Click Here

The court also observed that the petitioner had not yet paid his 25% share as directed in the department’s letter dated 30.03.2022. It directed him to make the payment within four weeks, stating that only after this payment would the department consider the request for apportionment. With these directions and observations, the writ petition was disposed of.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates