D.N. Homes Pvt. Ltd. and Principal Officer-cum-Managing Director V. Union of India

CRLREV/408/2023

AI Insights

The case involves M/s. D.N. Homes Pvt. Ltd. and its Principal Officer-cum-Managing Director, who were accused of failing to deposit Tax Deducted at Source (TDS) within the stipulated time, as required under the Income Tax Act. The prosecution was initiated based on a complaint by the Assistant Commissioner of Income Tax (TDS), alleging delays ranging from 31 to 214 days in depositing TDS collected for the financial year 2020-21. The Petitioners argued that the delays were caused by the COVID-19 pandemic, which they claimed constituted a 'reasonable cause' under section 278AA of the I.T. Act, thus exempting them from prosecution. The court examined whether the pandemic conditions and the resultant delays constituted a reasonable cause for the late deposit of TDS, and whether the prosecution was justified under the circumstances.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 813258 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 13-10-2023
• Assessment Year: misc
• Other Referred Cases: Madhumilan Syntex Ltd. and Others Vrs. Union of India and Another, Dev Multicom Pvt. Ltd. and Another Vrs. State of Jharkhand and batch, Woodward Governor India Pvt. Ltd. Vrs. Commissioner of Income Tax and others, A.R. Antulay Vrs. R.S. Nayak, State of Haryana v. Bhajan Lal, Satya Narayan Sharma v. State of Rajasthan
• Laws Referred To: Code of Criminal Procedure, 1973, Income Tax Act, Income Tax Rules, 1962
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S S MOHAPATRA
• Assessee Lawyers: R P KAR; A K DASH
• Keywords: Covid-19 impact; Reasonable cause; TDS delay; Prosecution for Non-Deposit of TDS
• Section: 279(1); 401; 397; 2.35; 278B; 276B; 278AA

Judgement Text

" CRLREV NO.408 OF 2023 Page 1 of 48 IN THE HIGH COURT OF ORISSA AT CUTTACK CRLREV NO. 408 OF 2023 In the matter of a Revision under section-397 read with section-401 of the Code of Criminal Procedure, 1973 and from an order dated 02.02.2023 passed by the learned Additional Chief Judicial Magistrate (Special Court), Cuttack in 2(CC) Case No.04 of 2023. ---- M/s. D.N. Homes Pvt. Ltd., Khurda & Another …. Petitioners -versus- Union of India …. Opposite Party Appeared in this case by Hybrid Arrangement (virtual/physical mode) ============================================== For Petitioners - Mr. R.P. Kar, Senior Advocate, Mr. A.K. Dash Advocate. For Respondent - Mr.S.S. Mohapatra, Senior Standing Counsel, (Income Tax) CORAM: MR. JUSTICE D.DASH DATE OF HEARING::23.08.2023, DATE OF JUDGMENT:13.10.2023 D. Dash, J. The Petitioners, by filing this Revision under section-397 read with section-401 of the Criminal Procedure Code; 1973 (for short hereinafter referred to as ‘the Cr.P.C.’) have called in question the legality and propriety of an order dated 02.02.2023 passed by the learned Additional Chief Judicial Magistrate (Special Court), Cuttack in 2(CC) Case No.04 of 2023. A.F.R . // 2 // CRLREV NO.408 OF 2023 Page 2 of 48 2. On 13.01.2023 the Opposite Party represented by the Assistant Commissioner of Income Tax (TDS), Bhubaneswar filed a complaint alleging commission of offence punishable under section 276B of the Income Tax Act (for short ‘the IT Act’) by the Petitioner No.1, the Private Limited Company, as named and the Petitioner No.2 its Principal Officer-cum-Managing director arraigning them as the accused persons. The Trial Court by order dated 02.02.2023 has taken cognizance of the offences under sections 276B, section 2(35) and 278B of the IT Act and issued summon to these Petitioners who have been arraigned as accused persons in the said complaint alleging commission of the said offences. The impugned order taking cognizance of the offences alleged to have been committed by these Petitioners (accused persons) passed by the court below is now the subject matter of this present Revision. I. FACT OF THE CASE:- 3. Facts necessary for the purpose are as under:- (A) The Petitioner No.1 (Accused No.1) is a Private Limited Company having its registered office at Bhubaneswar has been accorded with the Tax Deduction and Collection Account Number (TAN) to Deduct Tax at Source (TDS) and the Opposite Party No.2 // 3 // CRLREV NO.408 OF 2023 Page 3 of 48 (Accused No.2) is the Director and Principal Officer of the Opposite Party No.1-Company (Accused No.1) who is accountable/responsible for the day to day affairs of Petitioner No.1-Company (Accused No.1) as per the provision of section 2(35) and section 278B of the IT Act. (B) By the virtue of the same, the Petitioner No.2 (Accused No.2) carries the responsibility to deduct and deposit TDS. As per the System Generated Statement reprieved from the portal, i.e., TDS Reconciliation and Correction Enabling System (TRACES), the Petitioner No.2 (Accused No.2) is said to have deducted a sum of Rs.2,58,29,945.00 for the Financial Year 2020-21 (Assessment Year 2021-22) as TDS. It is stated that the said amount was not deposited with the Central Government by the due dates. The Petitioner are said to have withheld such dues thereby have failed to pay in the account of the Central Government, the collected TDS. However, they have deposited the said amount in phased manner with delay of 31 days to 214 days. Hence, the complaint case, alleging that the Petitioners (accused persons) have committed the offence under section 276(B) of the IT Act punishable with rigorous imprisonment for a term not less than three months and may extend to 7 years and fine for contravention of the provisions contained in chapter-XVII-B of the IT Act and Rule- 30 of the Income Tax Rules, 1962 (for short, ‘IT Rules’), which // 4 // CRLREV NO.408 OF 2023 Page 4 of 48 mandates the deposits to be made by 7th of the next month and for the deduction for the month of March, the same be deposited by 30th of April of the next Financial Year. The specific allegation is that the Petitioners have caused delay in depositing the TDS amount in the account of the Opposite Party (Complainant) ranging from 31 days to 214 days. Thus, it is said that the Petitioners (accused persons) have defaulted in depositing the TDS amount in the account of the Opposite Party within the time stipulated under the law. It is further alleged that the Petitioners (accused persons) have violated the mandatory provisions contained in IT Act and Rules made in that regard and have deliberately withheld the dues for the period. (C) It is stated in the complaint by the Opposite Party (Complainant) that in this connection a show cause letter dated 28.02.2022 was issued to the Petitioners (accused persons) calling upon to file the reply on or before 22.03.2022 and responding to the same, the Petitioners (accused persons) had submitted the show cause. That reply being incomplete, the Opposite Party (complainant) further directed the Petitioners (accused persons) through the second show cause notice dated 04.05.2022 for furnishing certain additional informations which was responded to by the Petitioners (accused persons) on 30.05.2022. The Opposite Party (Complainant) identified the Petitioner No.2 (Accused // 5 // CRLREV NO.408 OF 2023 Page 5 of 48 No.2) as the Principal Officer of the Petitioner No.1 (Accused No.1) as per the provisions of section 2(35) read with section 278B of the IT Act. (D) On perusal of the records, the explanations furnished in the show cause reply by the Petitioners (accused persons) being found by the Authority to be unsatisfactory, two other notices were issued on 07.12.2022 calling upon the Petitioners (accused persons) to submit their reply on or before 21.12.2022, which were so tendered. Thereafter, the Commissioner, Income Tax (TDS), Bhubaneswar by an order under section 279(1) of the IT Act accorded sanction for launching the prosecution against the Petitioners for commission of offence under section 276B of the IT Act, the present complaint against the Petitioners have come to be filed in the court of law in which the Court below by the impugned order has taken the cognizance of the offences as afore-noted. Hence, this present Revision is at the instance of the Petitioners (accused persons) is at the instance of the Petitioners (accused persons). II. PETITIONERS SUBMISSION:- 4. Mr.R.P.Kar, learned Senior Counsel for the Petitioners submitted that the present prosecution which is being faced by the Petitioners is on account of non-deposit of the TDS with the Central Government // 6 // CRLREV NO.408 OF 2023 Page 6 of 48 account within the time provided under the statute, and therefore, it is said that the Petitioners have committed the offences under section- section-276B and 278B of the IT Act and accordingly, are to be visited with the penal consequences provided thereunder. He further submitted that in the instant case, the Petitioners have only deposited the TDS collected from different persons with the interest as per law within few months of respective collections and the delay is ranging between 31 to 214 days and such payments have already accepted by the Authorities without any demure. Hence, the same is revenue neutral. He next submitted that the delay occasioned in such deposit of the collected TDS by the Petitioners is solely for the reason of prevalence of COVID-19 Pandemic situation during that Financial Year 2020-21 and the Petitioners having not been able to deposit the collected TDS within the time stipulated, they had requested the Authority not to launch the prosecution for such delay in depositing the collected TDS as it was beyond the care and control of the Petitioners but for unforseable and unavoidable situations emerged due to lockdowns / shutdowns imposed on the advent of the novel Corona-19 Pandemic. For the said measures imposed by the Central and State Government, all work places including their offices which remained closed. Due to which there was lack of a coordination amongst the staff dealing with // 7 // CRLREV NO.408 OF 2023 Page 7 of 48 matters and the staff worked from their house which caused the delay. And as such the same way not a willful attempt to delay or evade payment. Drawing the Court’s attention to the record, learned Senior Counsel submitted that the Authority several times being moved with request not launch the prosecution on such delayed deposit of the collected TDS by the Petitioners as the non-deposit by the time was backed by reasonable cause have paid no heed to the same and as such prayers were whittled-down. The learned Senior Counsel at this juncture endeavoured to press into service the provisions of law under I.T. Act submitting therein that the penal provision for failure to deposit TDS prescribed under section 276B of the I.T. Act is not qualified and must be read with the provision contained in section 276AA of the I.T. Act. In effect that the penal provision only stands attracted when the assessee fails to show to the satisfaction that there was no reasonable cause for such failure. It was submitted that the Authority had thus decided to file the complaint taking a view that there was no reasonable cause for the failure on the part of the Petitioners in depositing the collected TDS during the period covered under the Financial Year 2020-21. // 8 // CRLREV NO.408 OF 2023 Page 8 of 48 Further citing the position of law laid down by the Hon’ble Apex Court in case of Madhumilan Syntex Ltd. and Others Vrs. Union of India and Another; (2007) 11 SCC 297; learned Senior Counsel submitted that the Hon’ble Apex Court while dealing with the provision under section 276B of the I.T. Act has held therein that whenever Company is required to deduct tax at source and pay it to the account of the Central Government, failure on the part of the Company in deducting or in paying such amount constitute an offence under the Act and is punishable. Therefore, it cannot be said that the prosecution against the Company or its Directors in default of deducting or paying tax is not envisaged by the Act. Distinguishing this present case in hand, he points out that the non-deposit of tax deducted at source by the Petitioners in time as provided under law albeit is a delayed deposit of the said TDS along with interest but was for ‘reasonable cause’ i.e. for the reason of prevalence of first bout of COVID-19 Pandemic situation not only in the entire country but also across the globe when the normalcy with respect to life, livelihood and business activities came to a grinding halt and life of the citizens remained confined to four walls of their respective houses grappling under panic stricken condition fighting with the Pandemic. Therefore, according to him, the Authority in this // 9 // CRLREV NO.408 OF 2023 Page 9 of 48 particular case with its peculiar factual matrix should have held that there was a reasonable cause for delayed deposit of such TDS after expiry of the statutory time stipulated which in the given case is also not that long. Therefore, the causes of this nature is squarely covered within the ambit of “reasonable cause” employed in section 278AA so as to come to the rescue of the Petitioners as per the learned Senior Counsel. Consequently, he with emphasis submitted that the Petitioners here are not projecting the reasonable cause for their failure citing the reason/s centering round the Company’s affair and the employees in charge which by no doubt can and would only stand for consideration in the Trial as has been posited/ observed in case of Madhumilan Syntex Ltd. and Others (supra); however in the present case, the delay occasioned due to the Pandemic situation prevailing at that point is a globally admitted fact, that would not warrant any proof by leading evidence. He submitted that the clear intention of the legislature behind employment of the word ‘reasonable cause’ as expressed in section- 276A, 276AB, 276B; and section-176BB is in order to protect the TDS collector from being saved from prosecution for the delay in depositing the TDS being prevented by such type of reason/s which are not personal but general and therefore, it is said that in case of existence of // 10 // CRLREV NO.408 OF 2023 Page 10 of 48 such admitted reasonable cause, no offence under section 276B would stand attracted. He then contended that in the peculiar factual settings of the case, the reasonable cause for such failure being quite real and not apparent there arises no need to be further proved for being decided on the basis of the evidence during trial in as much as when the Petitioners for establishing such reason for delay would not be required to prove any such fact as those stand accepted across the globe including highest Court of the Country as well as Government Authorities. Thus according to him, this complaint could not have been accorded the sanction in taking the steps of launching prosecution against these Petitioners for such violation as to non-deposit of the TDS within the prescribed time limit; for the delay was due to reasonable cause which is an established and admitted one and the delay in doing so was neither intentional nor deliberate nor even for the reasons or causes centering round the Petitioners affair or their employees but for the COVID-19 Pandemic situation, a global phenomenon. Moreso, placing reliance on various notifications, he submitted that Central Government and the State Government had made several notifications under the Disaster Management Act, 2005 and when even the Hon’ble Apex Court taking cognizance of such situation has // 11 // CRLREV NO.408 OF 2023 Page 11 of 48 extended the period of limitation by providing several exemptions to the statutory provisions being not made applicable and keeping those in suspension during the period. He submitted that when the Authority had repelled the contentions of the Petitioners that there was reasonable cause for such failure to deposit the TDS in time and taken a view to the contrary, the learned Magistrate while taking cognizance of the offences has failed to apply its mind in finding out as to whether on the basis of the materials placed from the side of the Petitioners in their reply to the show-cause notice, the action of the Authority in launching the prosecution without due consideration and dealing with the submissions furnished to that effect that there was reasonable cause for such non-compliance of the provision contained in section-278AA of the I.T. Act read with the relevant rule is arbitrary or unjust. He further contended that the learned Magistrate in the particular case thus ought to have applied his judicial mind in arriving at a prima facie satisfaction on that score and on factual aspects which stand admitted before taking cognizance of the offence based on the complaint. The learned Senior Counsel urged that such non-application of judicial mind in taking a view as to whether there was reasonable cause for the alleged failure on the part of the Petitioners is premised on facts admitted, makes the order impugned in this Revision vulnerable and // 12 // CRLREV NO.408 OF 2023 Page 12 of 48 thus it suffers from the vice of non-application of mind and is illegal and liable to be interfered. Thus he submits that it would be evident when cognizance for the offences under section 2(35) and also under section 278(B) of the I.T. Act which two are not the penal provisions have been taken. In view of all these, he contended that the prosecution initiated under the order of cognizance is an abuse of process of Court. 5. He next referred to several similar cases being dealt with and disposed by the Hon’ble High Court of Jharkhand on 28.02.2022. In Dev Multicom Pvt. Ltd. and Another Vrs. State of Jharkhand and batch; (2022 SCC OnLine Jhar 537); (2023) 454 ITR 48) wherein the High Court was of the view that the prosecution for such failure to deposit the TDS by the person concerned when is not launched after receiving the said amount with interest and not immediately amounts to abuse the process of Court. It was additionally submitted that the Hon’ble Jharkhand High Court in those cases having taken that view has taken a cue from the CBDT instructions, vide F.No.255/339/79-IT (Inv.) dated 28.05.1980 which reads that the prosecution under section- 276B of the I.T. Act shall not normally be proposed when the amount involved and/or the period of default is not substantial and the amount in default has been deposited in the meantime to the credit of Government. // 13 // CRLREV NO.408 OF 2023 Page 13 of 48 It was submitted that in the present case, admittedly there has been no loss of the revenue and it is not in dispute that the Petitioners while depositing the collected TDS have also deposited the interest being computed in terms of the provisions contained in the statute. Therefore, it was contended that the prosecution initiated by the order of cognizance is an abuse of process and the Court below by going through the discussion of the facts contained in the sanction order ought not to have taken cognizance of said offences and thus according to him, the impugned order has caused failure of justice. 6. Per contra, Mr. S.S. Mohapatra, learned Senior Standing Counsel for the Income Tax, while not disputing the distinguishing factual settings of the case of Madhumilan Syntex Ltd. and Others (supra) to the extent that the Petitioners therein had not projected the situation like Pandemic COVID-19 to be the reasonable cause for the failure to deposit the TDS; however at the outset raised, the question as to maintainability of this Revision in challenging the order by which the learned Magistrate has taken cognizance of the offences and issued process to the Petitioners. According to him, the order being an interlocutory one as the right of the Petitioners to raise the main ground on which they now question the impugned order to be // 14 // CRLREV NO.408 OF 2023 Page 14 of 48 bad and illegal is not altogether foreclosed during trial, this Revision calling in question the order of cognizance is not maintainable. He, however, also submitted that for the delayed deposit of TDS, since the statute provides that the person concerned is liable for prosecution; the question of existence of reasonable cause is a matter to be only decided in the trial and not at this stage. He further submitted that while directing that the prosecution be launched against the Petitioners, the Authority having taken into account all those contentions and upon their consideration since has not found favour with the defence of the Petitioners that the delay in depositing the TDS was backed by reasonable cause for prevalence of Pandemic COVID-19, now the only course left open to the Petitioners is to establish all those in their defence for being taken into account in the trial which is to adjudicate the culpability of the Petitioners on account of such failure which is not factually denied. 7. In response to the first limb of objection raised by Mr. Mohapatra, learned Senior Standing Counsel for the Income tax; Mr. Kar, learned Senior Counsel for the Petitioners responded that the order impugned cannot be taken to be an interlocutory order even though at the same time, it would be impermissible to term it as a final order in view of the law laid down in case of ‘Girish Kumar // 15 // CRLREV NO.408 OF 2023 Page 15 of 48 Suneja Vrs. Central Bureau of Investigation; (2017) 14 SCC 809; reiterating the earlier view taken in case of Madhu Limaye v. State of Maharashtra;(1977) 4 SCC 551. He relying on the line of decisions submitted that the Revision against said order of taking cognizance is squarely maintainable and does not get caught within the net of the provision contained in sub-section-2 of Section-397 of the Cr.P.C. IV. ISSUES FOR CONSIDRATION:- 8. Having heard the respective parties and on perusal of the material on record, the issues falling for consideration to be dealt are as follows:- (A) Whether the present Revision is maintainable? (B) Whether the impugned order suffers from the vice of non-application of mind as the learned Magistrate without going through the sanction order and without taking a prima facie view that the failure on the part of the Petitioners to deposit the collected TDS was not because of some reasonable cause which are apparent and thus being improper and illegal has caused failure of justice and amount to abuse of process? 9. Addressing the objection as to the maintainability of the Revision in challenging the order impugned hereafter as at 8(A); it is noticed that when the text of sub-section-1 of Section-397 of the Cr.P.C. is too wide in conferring the powers upon the Court in // 16 // CRLREV NO.408 OF 2023 Page 16 of 48 exercising the Revisional jurisdiction, it has been drastically curtailed by the very next sub-section i.e. sub-section (2) of said section. This provision introduces a complete prohibition on the Revisional Court in respect of interlocutory orders. Therefore, the nature of order whose legality and propriety is called in question before a Revisional Court liable for interference in exercise of revisional jurisdiction is the focal point for ruling touching on the entertainability of the Revision so as to exercise the jurisdiction conferred thereunder. 10. Further, reiterating and clarifying this conundrum, the Hon’ble Apex Court has been held in case of Girish Kumar Suneja (supra) that there are three categories of order that a Court can pass:- “final, intermediate and interlocutory. There is no doubt that in respect of a final order, a court can exercise its revision jurisdiction – that is in respect of a final order of acquittal or conviction. There is equally no doubt that in respect of an interlocutory order, the court cannot exercise its revision jurisdiction. As far as an intermediate order is concerned, the court can exercise its revision jurisdiction since it is not an interlocutory order” 11. In subsequent paragraphs of the said decision, the Hon’ble Apex Court has further discussed on the subject as under:- “17. The concept of an intermediate order first found mention in Amar Nath v. State of Haryana; (1977) 4 SCC 137; 1977 SCC (Cri) 585 in which case the interpretation and impact of Section 397(2) of // 17 // CRLREV NO.408 OF 2023 Page 17 of 48 the Cr.P.C. came up for consideration. This decision is important for two reasons. Firstly it gives the historical reason for the enactment of Section 397(2) of the Cr.P.C. and secondly considering that historical background, it gives a justification for a restrictive meaning to Section 482 of the Cr.P.C. 18. As far as the historical background is concerned, it was pointed out that the Cr.P.C. of 1898 and the 1955 amendment gave wide powers to interfere with orders passed in criminal cases by the subordinate courts. These wide powers were restricted by the High Court and Hon’ble Apex Court, as matter of prudence and not as a matter of law, to an order that “suffered from any error of law or any legal infirmity causing injustice or prejudice to the accused or was manifestly foolish or perverse.” (Amar Nath (supra).This led to the courts being flooded with cases challenging all kinds of orders and thereby delaying prosecution of a case to the detriment of an accused person. 19. The Statement of Objects and Reasons of the Cr.P.C. state that the Government kept in mind the following for the purposes of enacting the Cr.P.C.:- “3. (i) an accused person should get a fair trial in accordance with the accepted principles of natural justice; (ii) every effort should be made to avoid delay in investigation and trial which is harmful not only to the individuals involved but also to society; and (iii) the procedure should not be complicated and should, to the utmost extent possible, ensure fair deal to the poorer sections of the community.” As regards Section 397(2) of the Cr.P.C. paragraph 5(d) of the Statement of Objects and Reasons mentioned that:-” // 18 // CRLREV NO.408 OF 2023 Page 18 of 48 “(5) Some of the more important changes proposed to be made with a view to speeding up the disposal of criminal cases are – (d) the powers of revision against interlocutory orders are being taken away, as it has been found to be one of the main contributing factors in the delay or disposal of criminal cases.” In reply to the debate on the subject, it was stated by Shri Ram Niwas Mirdha the concerned Minister that:- “It was stated before the Select Committee that a large number of appeals against interlocutory orders are filed with the result that the appeals got delayed considerably. Some of the more notorious cases concern big business persons. So, this new provision was also welcomed by most of the witnesses as well as the Select Committee. . . . This was a well-thought out measure so we do not want to delete it.” 20. As noted in Amar Nath (supra) the purpose of introducing Section 397(2) of the Cr.P.C. was to curb delays in the decision of criminal cases and thereby to benefit the accused by giving him or her a fair and expeditious trial. Unfortunately, this legislative intendment is sought to be turned topsy-turvy by the appellants. 21. The concept of an intermediate order was further elucidated in Madhu Limaye v. State of Maharashtra; (1977) 4 SCC 551: 1978 SCC (Cri) 10, by contradistinguishing a final order and an interlocutory order. This decision lays down the principle that an intermediate order is one which is interlocutory in nature but when reversed, it has the effect of terminating the proceedings and thereby resulting in a final order. Two such intermediate orders immediately come to mind – an order taking cognizance of an offence and summoning an accused and an order for framing charges. Prima facie these orders are interlocutory in nature, but // 19 // CRLREV NO.408 OF 2023 Page 19 of 48 when an order taking cognizance and summoning an accused is reversed, it has the effect of terminating the proceedings against that person resulting in a final order in his or her favour. Similarly, an order for framing of charges if reversed has the effect of discharging the accused person and resulting in a final order in his or her favour. Therefore, an intermediate order is one which if passed in a certain way, the proceedings would terminate but if passed in another way, the proceedings would continue. 22. The view expressed in Amar Nath (supra) and Madhu Limaye (supra) was followed in K.K. Patel v. State of Gujarat;(2000) 6 SCC 195, wherein a revision petition was filed challenging the taking of cognizance and issuance of a process. It was said:- “11……It is now well-nigh settled that in deciding whether an order challenged is interlocutory or not as for Section 397(2) of the Code, the sole test is not whether such order was passed during the interim stage (vide Amar Nath v. State of Haryana, Madhu Limaye v. State of Maharashtra, V.C. Shukla v. State through CBI; 1980 Supp. SCC 92 and Rajendra Kumar Sitaram Pande v. Uttam; (1999) 3 SCC 134). The feasible test is whether by upholding the objections raised by a party, it would result in culminating the proceedings, if so any order passed on such objections would not be merely interlocutory in nature as envisaged in Section 397(2) of the Code. In the present case, if the objection raised by the appellants were upheld by the Court the entire prosecution proceedings would have been terminated. Hence, as per the said standard, the order was revisable.” 23. We may note that in different cases, different expressions are used for the same category of orders – sometimes it is called an intermediate order, sometimes a quasi-final order and sometimes it is called an order that is a matter of moment. Our preference is for the expression ‘intermediate order’ since that brings out the nature of the order more explicitly.” // 20 // CRLREV NO.408 OF 2023 Page 20 of 48 12. In proceeding to further deliberate upon the subject, the Hon’ble Apex Court has held as follows:- “3. While we fully agree with the view taken by the learned Judge that where a revision to the High Court against the order of the Subordinate Judge is expressly barred under sub-section (2) of Section 397 of the 1973 Code the inherent powers contained in Section 482 would not be available to defeat the bar contained in Section 397(2). Section 482 of the 1973 Code contains the inherent powers of the Court and does not confer any new powers but preserves the powers which the High Court already possessed. A harmonious construction of Sections 397 and 482 would lead to the irresistible conclusion that where a particular order is expressly barred under Section 397(2) and cannot be the subject of revision by the High Court, then to such a case the provisions of Section 482 would not apply. It is well settled that the inherent powers of the Court can ordinarily be exercised when there is no express provision on the subject-matter. Where there is an express provision, barring a particular remedy, the Court cannot resort to the exercise of inherent powers.” 25. The persistent view has been reaffirmed as settled by the Hon’ble Apex Court in the landmark case of Madhu Limaye (supra) when the following principles were approved in relation to Section 482 of the Cr.P.C. in the context of Section 397(2) thereof. The principles are:- (1) That the power is not to be resorted to if there is a specific provision in the Code for the redress of the grievance of the aggrieved party; (2) That it should be exercised very sparingly to prevent abuse of process of any Court or otherwise to secure the ends of justice; // 21 // CRLREV NO.408 OF 2023 Page 21 of 48 (3) That it should not be exercised as against the express bar of law engrafted in any other provision of the Code. Therefore, it is quite clear that the prohibition in Section 397 of the Cr.P.C. will govern Section 482 thereof. We endorse this view. 26. In this context, reliance on A.R. Antulay Vrs. R.S. Nayak; (1988) 2SCC 602 is completely misplaced. In that case, this Court was concerned with Section 9 of the Criminal Law Amendment Act of 1952 which reads as follows:- 9. Appeal and revision -The High Court may exercise, so far as they may be applicable, all the powers conferred by Chapters XXXI and XXXII of the Code of Criminal Procedure, 1898 (5 of 1898) on a High Court as if the Court of the Special Judge were a Court of Session trying cases without a jury within the local limits of the jurisdiction of the High Court”. It is quite obvious that the Section is with reference to the Cr.P.C. of 1898 and not the Cr.P.C. of 1973. The law as it stood with reference to the Criminal Procedure Code of 1898 is radically different from the law with reference to the Criminal Procedure Code of 1973. Moreover and quite obviously, since this Court had directed in A.R. Antulay (supra) that the trial would have to be conducted not by the Special Judge but by the High Court, no revision would lie to the High Court from its own order. Therefore, we are of opinion that the appellants cannot draw any support for their submissions from A.R. Antulay (supra).” 27. Our conclusion on this subject is that while the appellants might have an entitlement (not a right) to file a revision petition in the High Court but that entitlement can be taken away and in any event, the High Court is under no obligation to entertain a revision petition – such a petition can be rejected at the threshold. If the High Court is inclined to accept the revision petition it can do so only against a final order or an intermediate order, namely, an // 22 // CRLREV NO.408 OF 2023 Page 22 of 48 order which if set aside would result in the culmination of the proceedings. As we see it, there appear to be only two such eventualities of a revisable order and in any case only one such eventuality is before us. Consequently the result of paragraph 10 of the order passed by this Court is that the entitlement of the appellants to file a revision petition in the High Court is taken away and thereby the High Court is deprived of exercising its extraordinary discretionary power available under Section 397 of the Cr.P.C. 28. However, this does not mean that the appellants have no remedy available to them – paragraph 10 of the order does not prohibit the appellants from approaching this Court under Article 136 of the Constitution. Therefore all that has happened is that the forum for ventilating the grievance of the appellants has shifted from the High Court to this Court. It was submitted by one of the learned counsel that this is not good enough for the appellants since this Court is not obliged to give reasons while dismissing such a petition unlike the High Court which would necessarily have to give reasons if it rejected a revision petition. In our opinion, the mere fact that this Court could dismiss the petition filed by the appellants under Article 136 of the Constitution without giving reasons does not necessarily lead to the conclusion that reasons will not be given or that some equitable order will not be passed. The submission of learned counsel has no basis and is only a presumption of what this Court might do. We cannot accept a submission that has its foundation on a hypothesis. 29. This leads us to another facet of the submission made by learned counsel that even the avenue of proceeding under Section 482 of the Cr.P.C. is barred as far as the appellants are concerned. As held in Amar Nath (supra) and with which conclusion we agree, if an // 23 // CRLREV NO.408 OF 2023 Page 23 of 48 interlocutory order is not revisable due to the prohibition contained in Section 397(2) of the Cr.P.C. that cannot be circumvented by resort to Section 482 of the Cr.P.C. There can hardly be any serious dispute on this proposition. 30. What then is the utility of Section 482 of the Cr.P.C.? This was considered and explained in Madhu Limaye (supra) which noticed the prohibition in Section 397(2) of the Cr.P.C. and at the same time the expansive text of Section 482 of the Cr.P.C. and posed the question: In such a situation, what is the harmonious way out? This Court then proceeded to answer the question in the following manner:- “In such a situation, what is the harmonious way out? In our opinion, a happy solution of this problem would be to say that the bar provided in sub-section (2) of Section 397 operates only in exercise of the revisional power of the High Court, meaning thereby that the High Court will have no power of revision in relation to any interlocutory order. Then in accordance with one of the other principles enunciated above, the inherent power will come into play, there being no other provision in the Code for the redress of the grievance of the aggrieved party. But then, if the order assailed is purely of an interlocutory character which could be corrected in exercise of the revisional power of the High Court under the 1898 Code, the High Court will refuse to exercise its inherent power. But in case the impugned order clearly brings about a situation which is an abuse of the process of the Court or for the purpose of securing the ends of justice interference by the High Court is absolutely necessary, then nothing contained in Section 397(2) can limit or affect the exercise of the inherent power by the High // 24 // CRLREV NO.408 OF 2023 Page 24 of 48 Court. But such cases would be few and far between. The High Court must exercise the inherent power very sparingly.” 31. The expanse of Section 482 of the Cr.P.C. was also discussed in great detail in State of Haryana v. Bhajan Lal; 1992 Supp (1) 335 in the context of quashing a first information report or a complaint. After giving several illustrations, this Court cautioned that the power available under Section 482 of the Cr.P.C. should be exercised in the “rarest of rare” cases. It was said: “103. We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice.” 32. In Satya Narayan Sharma v. State of Rajasthan; (2001) 8SCC 607 this Court considered the provisions of the PC Act and held that there could be no stay of a trial under the PC Act. It was clarified that that does not mean that the provisions of Section 482 of the Cr.P.C. cannot be taken recourse to, but even if a litigant approaches the High Court under Section 482 of the Cr.P.C. and that petition is entertained, the trial under the PC Act cannot be stayed. The litigant may convince the court to expedite the hearing of the petition filed, but merely because the court is not in a position to grant an early hearing would not be a ground to stay the trial even temporarily. With respect, we do not agree with the proposition that for the purposes of a stay of proceedings recourse could be had to Section 482 of the Cr.P.C. Our discussion above makes this quite clear. // 25 // CRLREV NO.408 OF 2023 Page 25 of 48 13. In the light of the above settled legal principles, the order impugned in this Revision being put to the feasibility tests for obtaining the result, it can be well said that the objection raised by the Petitioners to the impugned order if accepted and upheld, the entire prosecution will stand terminated. Therefore, the order in question clearly falls within the ambit of intermediate order. Thus, it is amenable to revisional jurisdiction and is revisable. The objection of the learned Senior Standing Counsel for the Income Tax stands accordingly answered. 14. Coming to the core contention of the learned Senior Counsel for the Petitioners that the order of taking cognizance of the offences impugned in this Revision suffers from the vice of illegality and impropriety as at 8(B). The ground being that the said failure of the Petitioners in depositing the collected TDS within the time stipulated, premised on the admitted facts was for all the reasonable causes in support. In that view of the matter, while passing said order in question initiating the proceeding against the Petitioners that aspect has been totally over looked besides the fact that the sanction for prosecution passed mechanically has also been given a go by. 15. In case of Madhumilan Syntex Ltd. and Others (supra), the Hon’ble Apex Court delving with a factual matrix wherein // 26 // CRLREV NO.408 OF 2023 Page 26 of 48 prosecution had been launched against the Company and its officials who were the Petitioners therein for commission of the offences punishable under section-278B of the I.T. Act for the failure of the Petitioners-Company and others in crediting the TDS to the Central government as required by section-276B of the I.T. Act. The Petitioner-Company and others therein contended that they had not committed any offence for violation of the provision of I.T. Act. It was stated that it was not a case of non-payment of TDS. The amount of tax along with interest had been paid and all the statutory provisions had been complied with. They further contended that there was some delay in receiving the loan from their Banker due to which the TDS could not be paid in time and furthermore, because of construction of one unit by the Company, there being shortage of liquid fund, the payment was delayed. So, they stated that there was reasonable cause for non-payment of the collected TDS within the prescribed period and thus, when the payment had been made with interest and there was no loss to the revenue, according to the Petitioners therein, no case had been made out for taking action against them by launching the prosecution. 16. The Hon’ble Apex Court while answering the controversy discussed as under:- // 27 // CRLREV NO.408 OF 2023 Page 27 of 48 “23. Before adverting to the controversy raised in the appeal, it is necessary to consider the relevant provisions of the Act. Chapter XVII deals with \"Collection and Recovery of Tax\" and 'Deduction at Source' in certain cases. It requires certain persons to deduct tax at source and also consequences of failure to deduct or pay such tax. Whereas Section 200 provides that any person deducting any sum under the Act has to pay within the prescribed period the sum so deducted to the credit of the Central Government, Section 201 lays down consequences of failure to deduct or to pay such tax. 24. Chapter XXII relates to offences and prosecutions. Section 276B deals with \"Failure to pay tax”. The section at the relevant time read as under:- “276B. Failure to pay the tax deducted at source.- If a person fails to pay to the credit of the Central Government, the tax deducted at source by him as required by or under the provisions of Chapter XVII-B 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. 25. Section 278B covered cases where offences were committed by Companies. The section stated: “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: // 28 // CRLREV NO.408 OF 2023 Page 28 of 48 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. 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”. 26. Clause (20) of Section 2, inter alia, defines 'Director' in relation to a Company having the meaning assigned to it in the Companies Act, 1956. Section 2(13) of the Companies Act, 1956 defines 'Director'. The definition is inclusive and includes \"any person occupying the position of Director by whatever name called\". Clause (31) of Section 2 defines // 29 // CRLREV NO.408 OF 2023 Page 29 of 48 'person' which includes Company. Clause (35) defines 'principal officer' and it reads; “2. (35) ‘principal officer’, used with reference to a local authority or a company or any other public body or any association of persons or anybody of individuals, means- (a) the secretary, treasurer, manager or agent of the authority, company, association or body; or (b) any person connected with the management or administration of the local authority, company, association or body upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof;”. 27. From the above provisions, it is clear that wherever a Company is required to deduct tax at source and to pay it to the account of the Central Government, failure on the part of the Company in deducting or in paying such amount is an offence under the Act and has been made punishable. It, therefore, cannot be said that the prosecution against a Company or its Directors in default of deducting or paying tax is not envisaged by the Act. 17. In the present case in hand, the distinguishable factual settings of the facts behind the projected reasonable cause vis-à-vis the case of Madhumilan Syntex Ltd. and Others (supra) is that here the Petitioners do not project the causes concerning the Petitioner- Company or its officials-in-charge or their business affairs or the conduct of some other party/agency posing any hurdle/hindrance to the Petitioner-Company in operation causing hindrance to the smooth // 30 // CRLREV NO.408 OF 2023 Page 30 of 48 running of their business activities, but they proffer the prevalence of Pandemic COVID-19 situation in the country to be the reasonable cause standing on their way leading to the delay in depositing the collected TDS, thereby failing to strictly comply with the provision contained in the provision in Chapter-XVII-B of the IT Act read with the Rule-30 of the I.T. Rules thereunder which is a punishable offence. 18. The above being the crucial distinguishable factual aspect in the cited case of Madhumilan Syntex Ltd. and Others (supra) to that of the case at hand which is being now dealt with, this Court is of the considered view that the prevalence of COVID-19 Pandemic situation in the country, when stands admitted, it would not be impermissible to say that the said factual settings being projected by the Petitioners as the reasonable cause occasioning their failure thus cannot be taken to be the failure falling within the ambit of reasonable cause which cannot be gone into at this stage but to be delved upon only in the trial; more so when that aspect can be judged without even the Petitioners tendering any evidence in support of the same. Therefore, now it stands to be examined as to whether prevalence of the Pandemic COVID-19 situation in the given factual settings of the case at hand was the reasonable cause which had stood // 31 // CRLREV NO.408 OF 2023 Page 31 of 48 on the way of the Petitioners to comply with the provisions contained in the I.T. Acts and Rules in relation to the deposit of the TDS. 19. The word ‘reasonable’; we find from the Black’s Law Dictionary, 10th Edition as fair, proper or moderate under the circumstance. What is reasonable cause cannot be laid down with precision which would depend on the factual background. The reasonable cause as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. Expression reasonable is not susceptible be of a clear and precise definition; for a an attempt to give a specific meaning to the word reasonable would be trying to count what is not number and measure what is not space. It has to be described as rational according to the dictates of reasons and is not excessive was immoderate. The word reasonable has in law, the prima facie meaning of reasonable with regard to those circumstances of which actor, called on to act reasonably, knows or ought to know [see-In-re, A Solicitor,(1945) KB 368 (CA)]. The expression ‘reasonable cause’ used in section 278AA of the I.T. Act in my considered view may not be ‘sufficient cause’. But such ‘reasonable cause’ would have a wider connotation than the expression ‘sufficient cause’. Therefore, the phrase ‘reasonable cause’ // 32 // CRLREV NO.408 OF 2023 Page 32 of 48 for not visiting with the penal consequences would have to be considered liberally based on facts of each individual case. It is thus not in dispute that issue of there being a reasonable cause or not is a question of fact and inference of law can be drawn. Reasonable can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence, acting under normal circumstances, without negligence or inaction or want of bona fides. The test then is an objective one so as to warrant a belief by a reasonable man. 20. The legislative intent would be well discernable when simultaneously, we glance at the provision of section 201 and 221 of the IT Act which says that penalty is not leviable when the Company proves that the default was for ‘good and sufficient reasons’; whereas, the expression used in section-278AA is ‘reasonable cause’. The legislature has carefully and intentionally used these different expressions in the situations envisaged under those provisions. The intent and purport being to mitigate the hardship that may be caused to genuine and bonafide transactions where the assessee was prevented by the cause that is reasonable. Such cases thus can be well visualized by the legislature. Therefore, the Court must lean for an interpretation which is consistent with the “object, good sense and // 33 // CRLREV NO.408 OF 2023 Page 33 of 48 fairness” thereby eschew the others which render the provision oppressive and unjust, as otherwise, the very intent of the legislature would be frustrated. It is in all plausibility therefore to be inferred that to cater such exigencies, the legislature has enacted section 278AA of the I.T. Act. It is also crucial to note that the legislative intent is well discernable so far the usage of the word ‘reasonable cause’ under section 278AA of the I.T. Act is concerned which qualifies the penal provision laid under section 276B of the Act. Both the provisions accordingly are to be read together to ascertain the attractability of the penal provision. 21. It is well settled law that in a criminal proceeding by merely showing a reasonable cause, an accused can be exonerated and for showing that reasonable cause, the standard of proof of such fact in support of the same is lighter than the proof of such fact in support of good and sufficient reason. A reasonable cause may not necessarily be a good and sufficient reason. It may not be out of place to note here that in case the ITO Vrs. Roshni Cold Storage; 2000 245 (ITR) 322 (Madras), the terrible financial stringency, heavy losses, colossal losses and carry forward losses, have been recognized as reasonable cause in further holding that paucity of funds and financial stringency // 34 // CRLREV NO.408 OF 2023 Page 34 of 48 would fall as reasonable cause within the scope and ambit of the meaning of reasonable cause. 22. Coming to the case before us, the prosecution has been launched against the Petitioners for delay in deposit of the collected TDS for the Financial Year, 2020-21 (Accounting Year, 2021-22). The collected TDS was admittedly not deposited with the Central Government by the due date. The Petitioners thus have failed to deposit the collected TDS within the time stipulated as ordained under provision of the I.T. Act and Rules. They have deposited the said amount in phase manner with the delay in making the deposit which begins with the minimum of 31 days, ending at 214 days. It is not in dispute that the Petitioners have by the time of consideration of the matter as to launching of the prosecution for such delayed deposit, had deposited the entire TDS with the interest as they were liable to pay as per this statutory provision for such delayed deposit of the TDS. The collected TDS with interest as above has been accepted and gone to the State Exchequer when by then no loss to the Revenue was standing to be viewed. 23. COVID-19 had come as a novel virus and disease resulting in a Pandemic for the entire world. The whole world has faced this phenomenon with differing intensity, mutations and waves, impacting // 35 // CRLREV NO.408 OF 2023 Page 35 of 48 life itself, healthcare systems, livelihood, access to amenities, liberties etc. making it a global health challenge affecting all countries. When COVID-19 virus started spreading in our country, the Union of India proactively notified COVID-19 as a pandemic in order to exercise the responsibility of mitigating the loss of life under Disaster Management Act, 2005 (DMA, 2005). The Ministry of Home Affairs, keeping in view the spread of COVID-19 virus in India vide its letter dated 14.03.2020 decided to treat it as ‘notified disaster’ for the purpose of providing assistance under the State Disaster Response Fund (SDRF). It has always been considered as a ‘disaster’ within the meaning of DMA, 2005. Several important steps have been taken by the Central Government under DMA, 2005, as also, the steps taken specifically as Nation’s response to COVID-19 Pandemic wherein more comprehensive, multipronged, multi sectoral, whole of society and whole of Government, while at the same time dynamic approach has been adopted, from time to time with the evolving nature of COVID- 19 virus during first, second and third surges. Various steps have been taken by the Union of India, to strategies nations response to COVID- 19, a once in a lifetime Pandemic inflicted on the entire world, wherein not just the funds of NDRF and SDRF, but even from the // 36 // CRLREV NO.408 OF 2023 Page 36 of 48 Consolidated Fund of India had been utilized. Specific steps have been taken for ramping up the entire health care infrastructure, preparedness, relief, restoration, mitigation and reconstruction, in a very short time to include:- a) testing, tracing, treatment and quarantine facilities; b) augmenting hospital facilities, oxygenated, beds, ventilators, ICU facilities etc; c) augmentation of health work force and their insurance; d) augmentation, allocation, supply and transportation of oxygen and other essential drugs; e) research, development, enhanced production and administration of vaccinations to rapidly cover one of the world’s largest eligible population of beneficiaries; f) ensuring food security to the vulnerable groups; g) minimizing the adverse impact of large-scale economic disruptions by multipronged approach; and h) rehabilitation, protection and education of children orphaned due to COVID-19. The situation required day to day expenditure, day to day monitoring, day to day change in priorities and day to day change in the methods and modalities to deal with the same. 24. It goes without saying that COVID-19 Pandemic has caused serious economic disruption. However, the Government both at // 37 // CRLREV NO.408 OF 2023 Page 37 of 48 Central and State level have made herculean efforts to deter it from becoming a matter of economic distress. In order to contain and arrest, the sporadic / rapid spread of the Virus, there have been frequent lock downs, shut downs, declaration of contentment zones, total ban on some activities, partial allowance of in some specific activity and even restraints on number of employees coming to perform those allowable activities. The Real Estate Sector heavily faced the wrath of Pandemic COVID-19 situation when even there were serious labour migrations, stoppage of all forms of construction activities as well as buying and selling of real estate projects which are all undeniable facts. Considering the economy wide impact, the Government of India announced several packages, protecting cheap credit to small and medium business, relaxing the payment of loan dues by extending the period of repayment, exempting payments of certain taxes and fees in many areas and sectors and extending the submission of tax returns from time to time waiver of interest and / or restructuring of loan account. Similarly, various State Governments also declared all such relaxations in various Revenue related matters. The press release dated 30.12.2020 of the Ministry of Finance Department of Revenue, Government of India and the circular dated 11th January, 2022 state // 38 // CRLREV NO.408 OF 2023 Page 38 of 48 all these reliefs etc., keeping in view the challenges faced by taxpayers in meeting the statutory and regulatory compliances due to outbreak of COVID-19. All these situations caused by such COVID-19 Pandemic passing though first, second and third surges somehow came to normalize only after March, 2022 which as such as a phenomenon is irrefutable. 25. At this juncture, it would be pertinent to take note of a Division Bench decision of the High Court of Delhi in case of Woodward Governor India Pvt. Ltd. Vrs. Commissioner of Income Tax and others; (2001) SCC Online Del 1429. In that case in dealing with the provision of levying of penalty as envisaged under section-271C of the IT Act, the question was of the existence of reasonable cause or otherwise was linked with the main question as to whether there was short deduction of tax at source. It was held that the stand of the Petitioner was on terra firma. On going through the pivotal provisions of the I.T. Act, the Division Bench has been held as under:- “6. Section 273B starts with a non obstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271C, no penalty shall be imposable on the person or the assessed, as the case may be, for any failure referred to in the said provisions, if he proves that there was // 39 // CRLREV NO.408 OF 2023 Page 39 of 48 reasonable cause for the said failure. A clause beginning with \"notwithstanding anything\" is sometimes appended to a section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect over the provision or Act mentioned in the non obstante clause. (See Orient Paper & Industries Ltd. v. State of Orissa AIR 1991 SC 672). A non obstante clause may be used as a legislative device, to modify the ambit of the provision or law mentioned in the non obstante clause, or to override it in specified circumstances (See T.R. Thandar v. Union of India; AIR 1996 SC 1643). The true effect of the non obstante clause is that in spite of the provision or Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstante clause will not be an impediment for the operation of the enactment (See Smt. P.F.K. Kalliani Amma v. K. Devi; AIR 1996 SC 1963). Therefore, in order to bring in application of section 271C in the backdrop of section 273B, absence of reasonable cause, existence of which has to be established by the assessed, is the sine qua non. 7. Levy of penalty under section 271C is not automatic. Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision the same was without a reasonable cause. The initial burden is on the assessed to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessed or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. \"Reasonable cause\" as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means // 40 // CRLREV NO.408 OF 2023 Page 40 of 48 an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences follow.” Having said above, for non-consideration of the plea raised by assessee about the existence of the reasonable cause, the order impugned therein was held to have been vitiated. 26. The Petitioners in their show cause before the Authority considering the question of launching the prosecution appear to have placed all those factual settings stated therein for consideration in their proper perspectives which can be seen on a plain reading of the same which forms a part of the record. It appears from the record that the Petitioners in their show-cause while describing all those difficulties which they had faced during the prevalence of the COVID-19 situation had also stated as under:- “1. The assessee has duly deducted the TDS and deposited the same along with interest in the account of Central Government-No prosecution be launched. Due to the certain conditions beyond the control o the assessee which primarily were severe effect of COVID-19, non-availability of staff, non-availability of consultants or their staff, frequent lockdowns, cash flow crisis there was a slight delay in deposit of the amount as against the prescribed dates. It is // 41 // CRLREV NO.408 OF 2023 Page 41 of 48 submitted that the Chartered Accountant who was handling the TDS matters of assessee died due to COVID which made really difficult for the assessee to deposit the amount in time. The Department has issued a show cause for launch of prosecution proceedings for such default of the assessee. The provisions related to launching of prosecution in case of failure of assessee to pay TDS have been prescribed in section 276B of the Act. The said section states that where the assessee has failed to pay to the credit of the Central Government tax deducted at source as required by or under the provisions of chapter-XVII-B, the person shall be punishable with imprisonment In this case, we submit that the assessee has paid the amount of Tax Deducted at Source to the account of Government and has neither used the money for personal purposes of the directors nor has mis-utilized the money nor has earned any interest on the same. The only fact is that there was a delay in deposit to conditions beyond the control of the assessee. At the cost of repeatation, it is important to bring before you the exact delay in deposit of TDS made by the assessee. A crux chart depicting the same is as under:- TDS Deposit due dates and payment dates Month Due Date Date of Deposit Delay April 07.05.2020 07.07.2020 61 May 07.06.2020 31.07.2020 54 June 07.07.2020 30.09.2020 85 July 07.08.2020 31.10.2020 85 August 07.09.2020 30.11.2020 84 September 07.10.2020 31.12.2020 85 October 07.011.2020 30.01.2021 84 November 07.012.2020 27.02.2021 82 // 42 // CRLREV NO.408 OF 2023 Page 42 of 48 December 07.01.2021 31.03.2021 83 January 07.02.2021 30.04.2021 82 February 07.03.2021 30.04.2021 54 March 30.04.2021 31.05.2021 31 Your attention is drawn to provisions of section 278AA of the Act which reads as under:- 278AA.Notwithstanding anything contained in the provisions of section-278A, section 276AB or section 276B (or section 276BB), 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. A perusal of the above section reveals that where there is a reasonable cause for any failure on the part of the assessee, it may not be punished. In the present case, the delay was beyond the control of the assessee as has been explained herein above by the assessee. Your attention is drawn to the CBDT Instructions F.No.255/339/79-IT (Inv.), dated 28.05.1980 where it has been stated that “The prosecution under section 276B should not normally be proposed when the amount involved and/ or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit of the Government.” In the present, the TDS liability has arose on day to day transactions of the assessee. The CBDT intention vide this circular that where the amount has been by the assessee, the prosecution proceedings need not be launched. Moreover, if each entry is seen majority of entries of deduction of TDS are meager and very small in amount, as law as Rs.50/-. Therefore, launching of prosecution may be undue hardship on the assessee. // 43 // CRLREV NO.408 OF 2023 Page 43 of 48 27. It would not be out of place to state that the Hon’ble Apex Court during that period prevalence of Pandemic COVID-19 situation in the country in suo moto Writ Petition (C) No.03 of 2020 from time to time, has taken cognizance of the said situation and has even extended the period of limitation for all proceedings before the Courts/ Tribunals w.e.f. 15.03.2020 first of all, till 14.03.2021. But then due to second surge in COVID-19 cases, the move being made by the Supreme Court Advocates On Record Association (SCORA) that period was further extended from 15.03.2020 till 28.02.2022 by stating that the same period would stand excluded. 28. In the given case, it is simply stated in the complaint that the Commissioner of Income Tax (TDS), Bhubaneswar after thorough analysis and due application of mind on the basis of perusal of each of the documents and after scrutinizing the same, he held that there was no justification for late deposit of TDS amount by the accused person. The point for consideration by the Authority was not cull out the justification for delay in depositing the TDS since no justification is permissible to be accepted in law for delaying the deposit and that is the reason automatically, the interest starts running notwithstanding any justification and as such no justification whatsoever can // 44 // CRLREV NO.408 OF 2023 Page 44 of 48 exonerate the deductee from paying the interest. The matter for consideration is however whether to launch the prosecution. In the order under section-279(1) of the I.T. Act, it is stated as under:- “8.Assessee deductor’s submission were carefully considered. The financial year 2020-21 is the year of consideration of this sanction for launch of prosecution. As COVID restriction measures were imposed during the month of March 2020 and as the delay in remittance is not limited only to the period when pandemic restrictions were imposed, and as the assessee has not been able to submit copy of any circular / notification granting relaxation, if any, of the limitation period regarding remittance of TDS sum covering the various periods of delay for the relevant Financial Year, the explanation of the deductor assessee for late remittance ascribing COVID restriction measures as the cause is not acceptable. Once tax has been deducted from the payments made to the party or from the amount credited to the party’s account in the books of the assessee, the deductor is duty bound to remit the sum so deducted to the Central Govt. account. Day to day difficulties in managing finance or employee staff/management cannot be taken as exceptions for not doing so. The explanations mentioning the reasons for delay, therefore, do NOT constitute a reasonable cause as contained in section 278AA of the Act. Due diligence needs to be exercised by the assessee deductor for remittance of the amount which duly belongs to the Government once the amount has been deducted. From the compliance pattern of the assessee deductor it is observed that substantial delays are noticed in respect of remittance of TDS amount for the Financial Year 2019-20 and 2021-22 as well. Delay in remittance deprives the Government of the funds which genuinely // 45 // CRLREV NO.408 OF 2023 Page 45 of 48 belong to the Government and also results in undue delay in granting credit to the person from whose behalf tax has been deducted/ collected. The bonafides of the reasons explained for delay on various occasions have not been clearly established in this case. After considering various fettering and manacling circumstances as being ameliorating causes put forth by the assessee deductor, the factual evidence of delayed remittance in respect of the quantum of tax belatedly remitted and the periods of delay, it can be safely concluded that the causes as attributed do not constitute a reasonable cause as prescribed in section 278AA of the Act. It is further contended that TDS has already been remitted to the Govt. Account along with late payment interest and therefore, sanction for launching prosecution may not be warranted. In this regard, it is apt to quote the Hon’ble Apex Court judgment in Madhumilan Syntex Vrs. Union of India (290 ITR 199) wherein disapproving Hon’ble Calcutta High Court Judgment, it is held as below- “Once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period. If the payment is not made within that period, there is default and an appropriate action can be taken under the Act.” 9. The assessee deductor deducted TDS but failed to deposit the deducted tax to the Government within stipulated period. The assessee itself admitted the said fact. The deductor Assessee is duty bound to remit the deducted TDS amount within stipulated period of time as prescribed in Rule 30 of the Income Tax Rules 1962 and the failure to remit the TDS after its deduction within stipulated period of time attracts penal provisions contained in section 276B of the Income Tax Act. The deducted TDS amount belongs to the Government and the prayer acts in fiduciary capacity. Thus, it is the // 46 // CRLREV NO.408 OF 2023 Page 46 of 48 bounden duty to remit TDS to the Government account and no amount of helplessness and financial difficulty will come in the rescue of the prayer. The prayer is not entrusted to retain the deducted TDS and use the same for any other purpose. Thus, the assessee has failed to comply with the statutory provisions without reasonable cause, hence committed an offence punishable under section 276B of the Act. 10. It is not disputed that the assessee deductor had made delayed remittance in respect of the TDS amount ofRs.2,58,29,945/- during the Financial Year, 2020-21 involving various periods of delay as noted above. It is admitted that the assessee deductor has not deposited said amount (comprising of various sums) within stipulated period i.e. on or before 7th day of next month. Rule 30 of the Income Tax Rules, 1962 states that: xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx 11. It is also admitted position that subsequently out of the total amount deducted under various sections, the assessee paid all the amounts with interest of Rs.12,37,782/- as required under section 201(1A) of the Act owing to the delay in payment of TDS amount. The deductor remitted the TDS amount after the statutory period. The assessee thus deducted TDS but not deposited during the statutory time limit but after substantial period of delay ranging from 31 to 214 delays. The deductor has not denied these facts. Since the assessee deductor is responsible to remit/ deposit the deducted TDS amount within the stipulated time as per sanction 200 and 204 of the Act, the assessee deductor has committed the default // 47 // CRLREV NO.408 OF 2023 Page 47 of 48 which comes under the offence as provided in section 276B of the Act. 12. Section 3(38) of General Clauses Act defines an “offence” to mean “any act or omission made punishable by any law for the time being in force”. Payment of the TDS is an obligation and duty covered bystatute and the default of such payment, which has been made an offence continuous from day to day till the payment, is made. The evidence regarding the delay in remittance is not only admitted but also unassailable ex-facie. The evidence is not un- worthy of credit or absurd as such to make it a prima-facie fit case for launch of prosecution. In view thereof, the case prima-facie is a fit one in which prosecution needs to be launched.” 29. The above part of the order being tested in the touchstone of what have been discussed in the foregoing paras, the view taken by the Commissioner, Income Tax (TDS), Bhubaneswar is found to be suffering from the vice of non-consideration of the admitted factual settings as to the existence of reasonable cause for the said failure of the Petitioners in depositing the TDS. 30. For all the aforesaid, this Court is of the considered view that the present complaint is vitiated as the failure on the part of the Petitioners to comply within the provision of law as to deposit of the deducted TDS was on account of the reasonable causes for the prevalence of COVID-19 Pandemic standing on their way. The order of sanction thus being found to have been passed without due application of mind and in a mechanical manner even putting the // 48 // CRLREV NO.408 OF 2023 Page 48 of 48 blame upon the Petitioners for not filing any exemption/ relaxation notifications / circulars, the same stands vitiated. The Court below in the facts and circumstances ought not to have taken cognizance of the offence under section-279B, section 2(35) and 278(B) of the I.T. Act when even the latter two are no penal provisions and as such is bad in law and liable to be set aside. 31. Accordingly, the Revision is allowed. The impugned order dated 02.02.2023 passed by the learned ACJM (Spl.), Cuttack in 2(CC) Case No.04 of 2023 stands set aside. (D. Dash), Judge. Narayan Digitally Signed Signed by: NARAYAN HO Designation: Peresonal Assistant Reason: Authentication Location: OHC Date: 07-Nov-2023 10:54:33 Signature Not Verified "