Gulam Mustafa Enterprises Pvt. Ltd. and Sri. M. J. Stephen and Sri. Imran Abed Khan V. The Commissioner of Income Tax (TDS) and The Deputy Commissioner of Income Tax TDS Circle 1(1)

WP/21876/2024

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The case involves M/s. Gulam Mustafa Enterprises Pvt. Ltd., which faced prosecution under Section 276B read with Section 278B of the Income Tax Act for delayed payment of TDS (Tax Deducted at Source). The petitioners contended that the delay was due to financial difficulties exacerbated by demonetization, GST implementation, and the COVID-19 pandemic. Despite submitting detailed replies and documents explaining the delay, the first respondent issued a sanction for prosecution. The petitioners challenged this order in the High Court, seeking its quashing. The court found that the respondents had not adequately considered the petitioners' explanations and documents, leading to the decision to set aside the impugned order and remit the matter for fresh consideration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 824238 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 17-12-2025
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ARAVIND CHAVAN
• Assessee Lawyers: VANI
• Keywords: Cash flow; Covid-19; Debentures; Demonetization; Financial loss; GST Implementation; NBFC; Prosecution; TDS
• Section: 226; 279(1); 227; 278B; 276B

Judgement Text

" - 1 - HC-KAR NC: 2025:KHC:53913 WP No. 21876 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF DECEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 21876 OF 2024 (T-IT) BETWEEN: 1. M/S. GULAM MUSTAFA ENTERPRISES PVT. LTD., A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING OFFICE AT NO. 6, G.M. PEARL, BTM LAYOUT, I STAGE, I PHASE, BENGALURU-560 068, REPRESENTED BY ITS DIRECTOR, SRI. M. J. STEPHEN, S/O. LATE SRI. M. C.JACOB, AGED ABOUT 59 YEARS. 2. SRI. IMRAN ABED KHAN DIRECTOR OF M/S. GULAM MUSTAFA ENTERPRISES PVT. LTD., S/O. SRI. ABAD AZIS KHAN, AGED ABOUT 34 YEARS, RESIDING AT NO. 1-66, 3RD MAIN ROAD, 15TH CROSS, 6TH SECTOR, HSR LAYOUT, BANGALORE-560 102. 3. SRI. M. J. STEPHEN DIRECTOR OF M/S. GULAM MUSTAFA Printed from counselvise.com Digitally signed by AASEEFA PARVEEN Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:53913 WP No. 21876 of 2024 ENTERPRISES PVT. LTD., S/O. LATE SRI. M. C. JACOB, AGED ABOUT 59 YEARS, RESIDING AT NO.1, SILVER OAK APARTMENT, 1ST MAIN, AMBEDKAR LAYOUT, R.T. NAGAR POST, KAVALBYRASANDRA, BANGALORE-560 032. …PETITIONERS (BY SMT VANI H.,ADVOCATE) AND: 1. THE COMMISSIONER OF INCOME TAX (TDS) HMT BHAVAN, NO. 59, BELLARY ROAD, GANGANAGAR, BENGALURU-560 032. 2. THE DEPUTY COMMISSIONER OF INCOME TAX TDS CIRCLE 1(1), HMT BHAVAN, NO. 59, BELLARY ROAD, GANGANAGAR, BENGALURU-560 032. …RESPONDENTS (BY SRI. ARAVIND V. CHAVAN, ADVOCATE) THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASHING THE ORDER BEARING DIN AND ORDER NO. ITBA/COM/F/17/2024- 25/1065084558/(1) DTD 22.05.24 PASSED BY THE R1 UNDER SECTION 279(1) OF THE ACT VIDE ANNEXURE-F AND ETC. Printed from counselvise.com - 3 - HC-KAR NC: 2025:KHC:53913 WP No. 21876 of 2024 THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition the petitioners seeks for the following reliefs: \"a. Issue a writ of certiorari quashing the order bearing DIN & Order No.ITBA/COM/F/17/2024-25/1065084558(1) dated 22.05.2024 passed by the first respondent under Section 279(1) of the Act vide Annexure-F. b. Pass such other Writ or direction as this Hon'ble Court deems fit to grant in the facts and circumstances of the present case.\" 2. A perusal of the material on record will indicate that for the assessment year 2019-2020, the petitioner deducted tax at source (TDS) and remitted the said amount to the credit of the Central Government by 22.01.2021, after 23 months along with penal interest. Subsequently, on 17.01.2023, the second respondent Printed from counselvise.com - 4 - HC-KAR NC: 2025:KHC:53913 WP No. 21876 of 2024 issued a notice to the petitioners seeking explanation as to why prosecution proceedings should not be recommended against the petitioners on account of the delayed payment deduction of TDS by the petitioners. The petitioners having submitted replies dated 27.01.2023, 17.03.2023 and 16.02.2024, the first respondent issued a show cause notice dated 19.03.2024 to which the petitioners submitted detailed replies dated 16.02.2024 and 02.05.2024, interalia contending that the reasonable cause for delayed payment of TDS was on account of demonetization policy and subsequent GST implementation as also the COVID-19 pandemic on account of which the company faced financial loss and cash flows where cash flow was badly affected and huge monies had to be borrowed from NBFC's by way of debentures to run the business activities. It is submitted on instructions that the petitioners also requested time to produce additional documents in support of its claim. Printed from counselvise.com - 5 - HC-KAR NC: 2025:KHC:53913 WP No. 21876 of 2024 3. Pursuant to the aforesaid notices and replies, the respondent proceeded to pass the impugned order dated 22.05.2024 granting sanction for prosecution under Section 276B read with Section 278B of the Income Tax Act, aggrieved by which the petitioners are before this Court by way of the present petition. 4. Per contra learned counsel for the respondents would reiterate the various contentions urged in the statement of objections and submit that since the impugned order is detailed and a well considered order, the same does not warrant interference by this Court in the present petition and sufficient opportunity had been extended/granted in favour of the petitioners who are not entitled to any indulgence in the present petition. 5. A perusal of the material on record including the impugned order will indicate that though the petitioners had submitted detailed replies along with documents to indicate that the TDS amount was Printed from counselvise.com - 6 - HC-KAR NC: 2025:KHC:53913 WP No. 21876 of 2024 subsequently paid together with penal interest and offering an explanation as to why there was a delay on the part of the petitioners, the same has not been considered by the respondents in its proper perspective. 6. Further in the light of the specific assertion on the part of the petitioners that if one more opportunity is provided, the petitioners would submit additional documents in support of its claim, I deem it just and appropriate to adopt a justice oriented approach and set aside the impugned order at Annexure-F passed by the first respondent and remit the matter back to the first respondent for reconsideration afresh in accordance with law. 7. In the result the following: ORDER (i) The petition is allowed. (ii) The impugned order dated 22.05.2024 at Annexure-F is hereby set aside. Printed from counselvise.com - 7 - HC-KAR NC: 2025:KHC:53913 WP No. 21876 of 2024 (iii) The matter is remitted back to first respondent for reconsideration afresh in accordance with law. (iv) Liberty is reserved in favour of the petitioners to submit additional pleadings, documents, replies etc., which shall be considered by the respondent, who shall provide sufficient and reasonable opportunity to the petitioners and provide an opportunity of personal hearing to the petitioners and proceed further in accordance with law. Sd/- (S.R.KRISHNA KUMAR) JUDGE NS CT:TSM List No.: 2 Sl No.: 54 Printed from counselvise.com "