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/21990/2024

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The case involves M/s. Gulam Mustafa Enterprises Pvt Ltd and its directors, who filed a writ petition against the Commissioner of Income Tax (TDS) and the Deputy Commissioner of Income Tax TDS Circle 1(1). The petition challenged an order sanctioning prosecution under Section 276B read with Section 278B of the Income Tax Act, due to delayed payment of TDS for the assessment year 2018-2019. The petitioners argued that the delay was caused by financial difficulties stemming from demonetization, GST implementation, and the COVID-19 pandemic. 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 case for fresh consideration.

• Counselvise Citation: [] 140 COUNSELVISE.COM (IT) 823837 (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 V CHAVAN
• Assessee Lawyers: VANI H
• 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:54257 WP No. 21990 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. 21990 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, R/AT NO.1-66, 3RD MAIN ROAD, 15TH CROSS,6TH SECTOR, HSR LAYOUT, BANGALORE-560102. 3. SRI M J STEPHEN DIRECTOR OF M/S GULAM MUSTAFA ENTERPRISES PVT LTD., S/O LATE SRI M C JACOB, AGED ABOUT 59 YEARS, R/AT NO.1, SILVER OAK APARTMENT, IST MAIN, AMBEDKAR LAYOUT, R T NAGAR POST, KAVALBYRASANDRA, BANGALORE-560032 …PETITIONERS Printed from counselvise.com Digitally signed by AASEEFA PARVEEN Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:54257 WP No. 21990 of 2024 (BY SMT. VANI H.,ADVOCATE) AND: 1. THE COMMISSIONER OF INCOME TAX (TDS), HMT BHAVAN, NO.59, BELLARY ROAD, GANGANAGAR, BENGALURU-560032 2. THE DEPUTY COMMISSIONER OF INCOME TAX TDS CIRCLE 1(1), HMT BHAVAN, NO.59, BELLARY ROAD, GANGANAGAR, BENGALURU-560032. …RESPONDENTS (BY SRI. ARAVIND V. CHAVAN,ADVOCATE) THIS WRIT PETITION 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/17/2024.25/1065085229(1) DTD. 22.05.2024 PASSED BY THE R1 UNDER SECTION 279(1) OF THE ACT VIDE ANNX-F AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR Printed from counselvise.com - 3 - HC-KAR NC: 2025:KHC:54257 WP No. 21990 of 2024 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/17/2024-25/1065085229(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 2018-2019, the petitioner deducted tax at source (TDS) and remitted the said amount to the credit of the Central Government by 02.07.2018, after 14 months along with penal interest. Subsequently, on 07.01.2020, the second respondent issued a notices to the petitioners seeking explanation as to why prosecution proceedings should not be Printed from counselvise.com - 4 - HC-KAR NC: 2025:KHC:54257 WP No. 21990 of 2024 recommended against the petitioners on account of the delayed payment deduction of TDS by the petitioners. The petitioners having submitted replies dated 20.01.2023 and 28.01.2020, the first respondent issued a show cause notices dated 19.03.2024 and 29.04.2024 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. 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 Printed from counselvise.com - 5 - HC-KAR NC: 2025:KHC:54257 WP No. 21990 of 2024 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 subsequently paid together with penal interest and offering an explanation as to why there was a delay on the Printed from counselvise.com - 6 - HC-KAR NC: 2025:KHC:54257 WP No. 21990 of 2024 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. (iii) The matter is remitted back to first respondent for reconsideration afresh in accordance with law. Printed from counselvise.com - 7 - HC-KAR NC: 2025:KHC:54257 WP No. 21990 of 2024 (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.: 0 Printed from counselvise.com "