M/S Sri Ram Enterprises and Roshan Kumar Agrawal V. The Union of India and Sri Sandip Ganguly and The State of Jharkhand

Cr.M.P./3972/2018

AI Insights

The case involves M/S Sri Ram Enterprises and its partner, Roshan Kumar Agrawal, who faced criminal prosecution under sections 276-B and 278-B of the Income Tax Act, 1961, for failing to timely deposit TDS amounts for the financial years 2012-13, 2013-14, and 2014-15. The prosecution argued that the petitioners were chronic defaulters, causing substantial delays in TDS deposits. However, the petitioners contended that the delays were due to the illness and subsequent death of their long-time accountant, and that all due amounts, including interest and late fees, were deposited before the issuance of a show-cause notice. The court found that the petitioners had acted without any willful default or mala fide intention, and thus, under the provisions of section 278-AA of the Income Tax Act and the relevant CBDT circular, they were entitled to relief from prosecution.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 801405 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 22-02-2023
• Assessment Year: misc
• Other Referred Cases: Sonali Autos (P) Limited Vs. the State of Bihar and Ors, Bee Gee Motors & Tractors Vs. ITO (P & H), Vijay Singh Vs. UOI, M/s Dev Multicom Private Ltd. & Anr. Vs. The State of Jharkhand & Anr., M/s Maithon Power Limited & Anr. Vs. The State of Jharkhand & Anr., Kingfishers Airline Ltd. vs. Income Tax Department, Madhumilan Syntex Ltd. Vs. Union of India
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R N SAHAY
• Assessee Lawyers: SUNIL AGARWAL; GAUTAM KEJRIWAL
• Keywords: Criminal prosecution; Delay in deposit; Income Tax; Reasonable cause; TDS default
• Section: 276-B; 278-B; 278-AA

Judgement Text

" 1 Cr.M.P. No.3970 of 2018 With analogous cases IN THE HIGH COURT OF JHARKHAND AT RANCHI Cr. M.P. No.3970 of 2018 1. M/S Sri Ram Enterprises a partnership firm Through Roshan Kumar Agrawal 2. Roshan Kumar Agarwal ..... Petitioners Versus 1. The Union of India 2. Sri Sandip Ganguly, son of Sri Kanhai Lal Ganguly office of ACIT, TDS Circle Dhanbad, Aaykar Bhawan, Luby Circular Road, P.O. and P.S. Dhanbad, District – Dhanbad (Jharkhand) …. Opposite Parties With Cr. M.P. No.3972 of 2018 1. M/S Sri Ram Enterprises a partnership firm Through Roshan Kumar Agrawal 2. Roshan Kumar Agrawal ..... Petitioners Versus 1. The Union of India 2. Sri Sandip Ganguly son of Sri Kanhai Lal Ganguly office of ACIT, TDS Circle Dhanbad, Aaykar Bhawan, Luby Circular Road, P.O. and P.S. Dhanbad, District – Dhanbad (Jharkhand) …. Opposite Parties With Cr. M.P. No.634 of 2021 1. M/S Sri Ram Enterprises Through Roshan Kumar Agrawal 2. Roshan Kumar Agarwal ..... Petitioners Versus 1. The State of Jharkhand 2. The Union of India through Finance Department Govt. of India, New Delhi 3. Sri Sandip Ganguly son of Sri Kanhai Lal Ganguly office of ACIT, TDS Circle Dhanbad, Aaykar Bhawan, Luby Circular Road, P.O. and P.S. Dhanbad, District – Dhanbad (Jharkhand) …. Opposite Parties CORAM: HON’BLE MR. JUSTICE NAVNEET KUMAR For the Petitioner s : Mr. Sunil Kr. Agarwal, Advocate Mr. Gautam Kejriwal, Advocate For the State : Mr. Bishambhar Shastri, APP Mr. Bhola Nath Ojha, APP Mrs. Priya Shrestha, Spl. PP For the O.P. No.2 : Mr. R.N. Sahay, Advocate ----- 11/22.02.2023 Heard learned counsel appearing on behalf of the petitioners, the learned counsel for the opposite parties NOs.2 appearing on behalf of 2 Cr.M.P. No.3970 of 2018 With analogous cases Income Tax Department and learned APPs appearing on behalf of the State in their respective cases in all the aforesaid Cr.M.Ps. 2. In all the aforesaid Cr.M.Ps. the petitioner and the opposite parties are the same and similar question of law and facts are involved for different Financial Years (F.Y.) years namely, F.Y. 2012-13, F.Y.2013-14 and F.Y 2014-15 with respect to initiation prosecution case under sections 276-B & 278-B of the Income Tax Act, 1961 (Hereinafter referred to as ‘the Act’) and accordingly all the aforesaid Cr.M.Ps. have been heard together and are being disposed by the common order with the consent of the parties. 3. The Cr.M.P. No. 3970 of 2018 has been preferred for quashing the order dated 14.03.2018 passed by the court of learned Special Judge, Economic Offences, Dhanbad in complaint case No. C.O. 18 of 2018, whereby the cognizance of the offences under sections 276-B and 278-B of the Income Tax Act, 1961 have been taken against accused/petitioners. Similarly Cr.M.P. No. 3972 of 2018 has been preferred against the order dated 14.03.2018 passed by the court of learned Special Judge, Economic Offences, Dhanbad in complaint case No. C.O. 17 of 2018, whereby the cognizance of the offences under sections 276-B and 278-B of the Income Tax Act, 1961 has been taken against accused/petitioners, and Like-Wise Cr.M.P. No. 634 of 2021 has been preferred against the order dated 14.03.2018 passed by the court of learned Special Judge, Economic Offences, Dhanbad in complaint case No. C.O. 19 of 2018, whereby the cognizance of the offences under sections 276-B and 278-B of the Income Tax Act, 1961 has been taken against accused / petitioners. 4. It is submitted on behalf of the petitioners that petitioner No.1 is the partnership firm and the petitioner No. 2 was one of the partners of the said petitioner-firm having its principal office at Bhagalpur in the State of Bihar. It has further been pointed out that the petitioner No.1 3 Cr.M.P. No.3970 of 2018 With analogous cases being the juristic person is a civil contractor who has been engaging the services of Sub-contractor for executing contracts and the allegation against them is that the TDS amount has been deducted by the said partnership firm, but failed to deposit in time to the credit of central government as per the provisions of the Act without any reasonable cause for the financial years 2012-13, 2013-14 & 2014-15. 5. For the sake of brevity and in order to appreciate the allegations made against the petitioners for the respective financial years 2012-13, 2013-14 & 2014-15 are given in the tabular form as under: Sr. No. F.Y. Amount of TDS deducted Due date of deposit of TDS Date of actual deposit Period of delay 1 2012-13 4, 57,009/- 07.04.2013 03.06.2013 2 months 2 2012-13 17, 15,801/- 07. 04.2013 30. 09.2013 5 months 3 2013-14 8, 31, 513/- 07.04.2014 21.11.2014 7 months 4 2014-15 5, 22, 680/- 07.04.2015 31.10.2015 6 months 5 2014-15 12, 59,040/- 07.04.2015 15.03.2016 11 months 6. It is submitted on behalf of the petitioners that the cause for delay in deposit of TDS amount to the credit of central government is very genuine and reasonable in view of the fact that non-deposit of the TDS amount in time was not intentional and the same could not be deposited in time because of the ailing accountant, who was associated with the petitioner No.1 and for the last several years he was suffering from various ailments and due to his untimely death, the TDS amount in question was not deposited in time for the relevant financial years in question namely, 2012-13, 2013-14 & 2014-15. 7. It has further been pointed out that the TDS so deducted for the financial years 2012-13 was deposited on 03.06.2013 and 30.09.2013 and the amount of interest and the late filing fee amount of financial years 4 Cr.M.P. No.3970 of 2018 With analogous cases 2012-13 was deposited on 21.02.2015. It has further been pointed out that the TDS so deducted for the financial years 2013-14 was deposited on 21/11/2014 and the amount of interest and the late filing fee amount of financial years 2013-14 was deposited on 04/09/2017. Similarly it has been submitted that TDS so deducted for the financial years 2014-15 was deposited on 31.10.2015 and 15.03.2016 and the amount of interest and the late filing fee amount of financial years 2014-15 was deposited on 06.09.2017. 8. It has further been pointed out that the TDS so deducted for all the three financial years 2012-13, 2013-14, and 2014-15 was deposited along with the amount of interest and the late filing fee amount much before the show-cause notice, which was issued by the Income Tax Department on 05/12/2017 for all the three financial years 2012-13, 2013- 14, and 2014-15. It has also been pointed out that the show-cause notice was issued on 05.12.2017 for launching of the criminal prosecution in terms of the provisions under sections 276-B and/or 278-B of the Act to verify the genuineness, reasonableness and acceptability of reason by the assesse (petitioners) for the alleged delay caused in depositing TDS amount to the credit of central government, in spite of having deducted from the concerned parties well within the prescribed time limit. Further it has been pointed out that the order of sanction annexed with complaint petition filed before the learned court below by the Income Tax Department indicates that the sanctioning authority did not apply its judicious mind to the reply submitted by the petitioners on 16.02.2018 to take into consideration the genuine ground for the non-payment of the TDS amount, which was deducted in time, but not deposited to the credit of central government in time and the delay was sufficiently explained by the petitioners but still the sanctioning authority did not rely upon them and passed the sanction order for launching the prosecution case against these petitioners. 9. Learned counsel appearing on behalf of the petitioners has relied upon the provisions of section 278 AA of the Act where there is a 5 Cr.M.P. No.3970 of 2018 With analogous cases categorical provision that no person shall be punishable for any failure, inter alia, under section 276-B of the Act if he proves that there was a reasonable cause for such failure. It has further been pointed out that it is admitted case that the petitioners after deducting the TDS for all the three financial years 2012-13, 2013-14, and 2014-15 have deposited the TDS amount to the credit of the central government with the interest and late filing fee within the span of delay of 2 to 11 months of maximum delay. 10. Learned counsel appearing on behalf of the petitioners further relied upon the circular/instructions of Central Board of Direct Taxes (CBDT) as contained in F. number 255/339/79-IT(Inv.) dated 28.05.1980 under the heading “Prosecution-proposals regarding” which is Annexure-4 of the main petition (Cr.M.P. 634/2021) filed by the petitioner wherein clause-g indicated that prosecution under section 276- B 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. No such consideration will, of course, apply to levy of interest u/s 201(1A). 11. Learned counsel appearing on behalf of the petitioners has relied upon the fallowing rulings in support of his contentions which are as under:- 1. Sonali Autos (P) Limited Vs. the State of Bihar and Ors vide Judgment dated 02.08.2017 passed in Cr. Misc. No.16498 of 2014 by Patna High court 2. Bee Gee Motors & Tractors Vs. ITO (P & H) reported in (1996) 218 ITR 155 (P&H) 3. Vijay Singh Vs. UOI reported in (2005) 278 ITR 467 MP 4. And recently the judgments of this High court of Jharkhand M/s Dev Multicom Private Ltd. & Anr. Vs. The State of Jharkhand & Anr. passed in Cr.M.P. No. 2941 of 2018 and analogues cases vide order dated 28.02.2022 and also in another judgment of M/s Maithon Power Limited & Anr. Vs. The State of Jharkhand & Anr. Passed in Cr.M.P. No. 2193 of 2018 dated 14.02.2022. 6 Cr.M.P. No.3970 of 2018 With analogous cases 12. On the other hand, learned counsel appearing on behalf of opposite party (Income Tax Department) opposed the contentions raised on behalf of the petitioners and submitted that the defence of the petitioners that they had deposited the TDS amount of the financial years 2012-13, 2013-14 & 2014-15 does not absolve them for the offence under section 276-B of the Act, which they have already committed and in the present case, the circular of the CBDT, upon which the petitioner relied upon, does not apply under the facts and circumstances of this case because of the fact that the petitioners are chronic defaulters for the continuously three financial years 2012-13, 2013-14 & 2014-15 and there is substantive delay in the deposit of the TDS amount and also there is an inordinate delay in the deposit of the interest and late filing fee and therefore the petitioners in all the three Cr.M.Ps., who are running the same partnership firm do not deserve to get any relief under the circular of the CBDT or under the section 278- AA of the Income Tax Act. 13. Learned counsel appearing on behalf of the Income Tax Department has furnished the chart indicating about causing the delay in the deposit of the actual TDS amount and also in the deposit of the amount of interest with late filing fee are as under: Sr. No. F.Y. Amount of TDS deducted Due date of deposit of TDS Date of actual deposit Period of delay 1 2012-13 4, 57,009/- 07.04.2013 03.06.2013 2 months 2 2012-13 17, 15,801/- 07. 04.2013 30. 09.2013 5 months 3 2013-14 8, 31, 513/- 07.04.2014 21.11.2014 7 months 4 2014-15 5, 22, 680/- 07.04.2015 31.10.2015 6 months 5 2014-15 12, 59,040/- 07.04.2015 15.03.2016 11 months 7 Cr.M.P. No.3970 of 2018 With analogous cases Sr. No. Financial Year Amount of Interest and late filing fee Date of deposit 1 2012-13 245, 359.00 21.02.2015 2 2013-14 146, 520.00 04.09.2017 3 2014-15 342, 660.00 06.09.2017 14. It has further been submitted on behalf of the opposite parties that the due date of deposit of TDS deducted was first week of April as the TDS was deducted in the month of March. However, the TDS was deposited in the month of June 2013 and September 2013 for the financial year 2012-13, November 2014 for the financial year 2013-14 and October 2015 and March 2016 for the financial year 2014-15 and thus causing delay in the range of two months to eleven months. Further it has been pointed out that the delay is not only of one financial year, but it has been happening continuously for three years and apparently it is a willful default on the part of the petitioners and therefore they do not deserve any lenient view in launching of the prosecution and the learned court below has rightly passed the order taking cognizance. Further it has been pointed out that it is not only a case of substantive delay in the deposit of the TDS amount in the central government account, but the amount of the TDS so deducted but not deposited to the credit of central government was also substantial that is Rs.21,72,810/- for the financial year 2012-13, Rs.8,31,513/- for financial year 2013-14 and Rs.17,81,720/- for the financial year 2014-15 and thus from any angle it cannot be said that the delay as well as the amount were not substantial and since the petitioner is a habitual offender as per the provisions of Section 201 of Income Tax Act and cannot claim that the delay was not intentional or deliberate. It has further been submitted that in the present case the petitioner has failed to establish that there was a reasonable cause for not depositing the tax deducted and the amount so deducted as TDS but not deposited in the 8 Cr.M.P. No.3970 of 2018 With analogous cases central government account is huge and substantial by taking into consideration all the three financial years collectively, which comes to Rs.47,86,043/- (Rupees Forty Seven Lacs eighty six thousand forty three only) and therefore he cannot get the benefit from being prosecuted under Section 276B of the Income Tax Act. 15. Further it has been pointed out that the judgments of several high courts as relied upon by the petitioners also do not help him where it has been held under the circumstances of the case that no person for any failure referred to under section 276B of the Income Tax Act shall be punished ordinarily if he proves that there was reasonable cause for such failure and the amount so deducted but not deposited within due time is not substantial, but in the instant case the petitioner has failed to establish that there was reasonable cause for delay in not depositing the Tax deducted in time and as such only because of subsequent deposit of TDS deducted and that too with the interest and the late filing fee will not absolve the petitioners from dishonest and mala fide intention to defraud the government revenue by using the same for the purpose of furthering its own business and deny the government from its rightful application. 16. Learned counsel appearing on behalf of the Income Tax Department has relied upon the rulings of High Court of Karnataka in Kingfishers Airline Ltd. vs. Income Tax Department (2014) 43 taxmann.Com 201 (Karnataka) wherein the Hon’ble High Court has held as under:- “Wherever a company fails to deduct the tax at source and remit the same to the account of the Central Government, it attracts criminal prosecution and also recovery proceedings. The criminal proceedings are independent of recovery proceedings. The criminal proceedings are not dependent on the recovery proceedings. Therefore, the pendency of proceedings initiated under section 201 (1) and section 201 (1A) is not a legal impediment to continue the criminal prosecution against of petitioners. The pendency of 9 Cr.M.P. No.3970 of 2018 With analogous cases proceedings under section 201 (1) and 201 (1A) cannot act as a bar to the institution and continuance of criminal prosecution for offences punishable under section 276B. Quantification of amount for the purpose of initiation of criminal proceedings is not necessary. Therefore, the proceedings initiated against the petitioners cannot be quashed on the ground that the proceedings under section 201 (1) and section 201 (1A) are pending.\"(para 10) It is on the basis of these documentary evidence, admissions and the audited accounts the criminal prosecution is initiated against the petitioners. Therefore the outcome of the proceedings initiated by the Assessing Authority under section 201 (1) and 201 (1A) has no bearing on the prosecution proceedings. Therefore point No. 1 is answered in negative and against the petitioners.\"(para11) It has further been submitted on behalf of Income Tax Department that the offence under Section 276B of the Income Tax Act is committed as soon as the person fails to deposit the TDS amount with the Income Tax Department till the due date. The subsequent act of payment of TDS amount to the Income Tax Department with delay will not absolve the concerned person from the offence under Section 276B. 17. Further reliance has also been placed on the rulings of Hon’ble Supreme Court by the Income Tax Department as set out in Madhumilan Syntex Ltd. Vs. Union of India in (2007) 160 Taxman 71 (SC) while dealing with the same issue of section 276B and 278B of the Income Tax Act where under the circumstances of the case it has been held:- \"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 10 Cr.M.P. No.3970 of 2018 With analogous cases or its directors in default of deducting or paying tax is not envisaged by the Act. [Para 22] It is no doubt true that company is not a natural person but 'legal' or 'juristic' person. That, however, does not mean that company is not liable to prosecution under the Act. 'Corporate criminal liability' is not unknown to law. The law is well-settled on the point and it is not necessary to discuss it in detail. (Para 23] Therefore, prosecution could have been ordered against the company and charge could have been framed against it. [Para 24] From the statutory provisions, it is clear that to hold a person responsible under the Act, it must be shown that he/she is a 'principal officer' under section 2(35) of the Act or is 'in for charge of' and ‘responsible for’ the business of the company or firm. It is also clear from the various cases that where necessary averments have been made in the complaint, initiation of criminal proceedings, issuance of summons or framing of charge cannot be held illegal and the Court would not inquire into or decide correctness or otherwise of the allegations levelled or averments made by the complainant. It is a matter of evidence and an appropriate order can be passed at the trial. [Para 39] In the case at hand, in the show-cause notice issued under section 276B, read with section 278B, it was expressly stated by the ITO, that the directors were considered to be principal officers under section 2(35 ). In the complaint filed by the Commissioner also, it was stated that appellants were considered as principal officers. In the above view of the matter, it was to be held that the complaint filed against the appellants, particularly against the directors was well-founded and, hence, maintainable. [Para 40] No separate notice and/or communication ought to have been issued before issuance of show-cause notice under section 276B, read with section 278B, that the directors were to be treated as principal officers under the Act. When in the show- 11 Cr.M.P. No.3970 of 2018 With analogous cases cause notice itself it was stated that the directors were to be considered as principal officers under the Act and a complaint was filed, such complaint was entertainable by a Court, provided it was otherwise maintainable. [Para 41] In view of the aforesaid discussion, the sanction to prosecute granted by the Commissioner could not be held illegal or unlawful, nor the complaint could be held bad in law. [Para 42] The contention of the appellant that though tax deducted at source had been deposited late but since TDS had already been deposited to the account of the Central Government, there was no default and no prosecution can be ordered, could not be accepted. [Para 43] 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. Interpretation canvassed by the appellant would make the provision relating to prosecution nugatory. [Para 44]\" 18. Having heard the parties, perused the record of the case. 19. It is admitted case that the petitioners company in all the aforesaid cases have been deducting the TDS amount regularly, but there is default in the payment of TDS amount in the account of central government within the prescribed time for the financial years 2012-13, 2013-14 & 2014-15. Later on all the TDS amount and also the amount of interest and the late filing fee was deposited, which is evident from the chart given below:- 12 Cr.M.P. No.3970 of 2018 With analogous cases Sr. No. F.Y. Amount of TDS deducted Due date of deposit of TDS Date of actual deposit Period of delay 1 2012-13 4, 57,009/- 07.04.2013 03.06.2013 2 months 2 2012-13 17, 15,801/- 07. 04.2013 30. 09.2013 5 months 3 2013-14 8, 31, 513/- 07.04.2014 21.11.2014 7 months 4 2014-15 5, 22, 680/- 07.04.2015 31.10.2015 6 months 5 2014-15 12, 59,040/- 07.04.2015 15.03.2016 11 months Sr. No. Financial Year Amount of Interest and late filing fee Date of deposit 1 2012-13 245, 359.00 21.02.2015 2 2013-14 146, 520.00 04.09.2017 3 2014-15 342, 660.00 06.09.2017 20. The ground for the delay in the deposit of TDS amount taken by the petitioners is that all the partners of the partnership firms were engaged in procurement and execution of the the contracts and compliance of the legal requirement were entrusted to full time accountant who has been working with the petitioners for decades. It is further found that the said accountant was confined to the bed, due to ill-health and during the year under reference, he used to get the books of account audited and in the process complied with the other provisions the Act by giving instruction to his junior staff, which was done regularly over the years. The petitioners never went into details of taxes, they were asked to deposit and they were totally dependent upon their employee, who was the accountant, who ultimately passed away. It is found that the TDS amount for all the financial years in question was deposited with maximum delay of 2 months to 11 months only and further it is found that the amount of interest and late 13 Cr.M.P. No.3970 of 2018 With analogous cases filing fee of ₹2,45,359/- for the financial year 2012-13, Rs.1,46,520/- for the financial year 2013-14 and Rs.3,42,660/- for the financial year 2014- 15 were deposited on 21.02.2015, 04.09.2017 and 06.09.2017 respectively and the actual TDS amount, which was deducted for the concerned financial year 2012-13, a sum of ₹17,15,801/- on 30.09.2013 and Rs.4,57,009/- on 03.06.2013 and for the financial year 2013-14, a sum of Rs.8,31,513/- on 21.11.2014 and for the financial year 2014-15, a sum of Rs.5,22,680/- on 31.10.2015 and Rs.12,59,040/- on 15.03.2016 and as such the entire TDS amount along with the interest and the late filing fee for the financial year 2012-13 to the financial year 2014-15 was completely deposited by 06.09.2017 and all these amount have been deposited before the receipt of the show-cause by the petitioners, which is also an admitted fact and after the submission of the show- cause, the prosecuting agency, the Income Tax Department did not consider the ground of non-deposit of the amount in question in time and sanction order was given after the lapse of 4 years and the complaint in question in all three cases have been filed in the year 2018 for the financial years 2012-13, 2013-14 & 2014-15 and therefore it is manifest that there is inordinate delay on the part of the Income Tax Department also for launching the delayed prosecution. The offence committed by the petitioners under section 276B, which reads as under:- “276(B) Failure to pay tax to the credit of the Central Government under Chapter XII-D or Chapter XVII-B-if a person fails to pay to the credit of the Central Government: (a) The tax deducted at source by him as required by or under the provisions of Chapter XVII-B; or (b) The tax payable by him, as required by or under,- (i) Sub-section (2) of section 115-O; or (ii) The second proviso to section 194B, he shall be punishable with rigorous imprisonment for a term which shall be less than three months but which may extend to seven years and with fine.\" 14 Cr.M.P. No.3970 of 2018 With analogous cases Further there is a proviso for the institution of the prosecution case, which has been provided under section 278-B of the Income Tax Act, 1961 which reads and under:- 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: 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 Principal Director or Director, manager, secretary or other officer of the company, such Principal Director or 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. (3) Where an offence under this Act has been committed by a person being a company, and the punishment for such offence is imprisonment and fine, then, without prejudice to the provisions contained in sub-section (1) or sub-section (2), such company shall be punished with fine and every person referred to in sub-section (1), or the Principal Director or Director, manager, secretary or other officer of the company referred to in sub-section (2), shall be liable to be proceeded against and punished in accordance with the provisions of this Act. 15 Cr.M.P. No.3970 of 2018 With analogous cases 21. It is well settled principle of law that the purpose of issuance of show cause notice before launching criminal prosecution in terms of the provisions of section 276 B and/or section 278B of the act is to verify the genuineness, reasonableness and acceptability of the cause shown by the assessee for the alleged delay caused in depositing TDS amount in spite of having deducted from the concerned parties to the credit of the central government well within the prescribed time limit. It is so because such a prior consideration is a condition precedent for institution of a criminal case so as to subject the concerned assessee to punishment in terms of the provisions of the act. Such condition is prescribed in section 278 AA of the act which requires prior satisfaction of the sanctioning authority as regards fitness of a particular case for launching of criminal prosecution. The provision of section 278 AA of the act is reproduced hereunder for ready reference: \"278AA - Punishment Not to Be Imposed in Certain Cases - notwithstanding anything contained in the provisions of section 276A, section 276AB, or section 276B, 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. 22. Further there is categorical provisions of CBDT circular /instruction bearing F.No.255/339/79-IT (Inv.) dated 28.05.1980 issued in this regard by the CBDT and these guidelines issued by the CBDT have been duly considered by the Hon’ble Punjab and Haryana high court in Bee Gee Motors & Tractors (Supra), Hon’ble Madya Pradesh High Court (Indore Bench) in Vijay Singh Vs. UOI (Supra) , Hon’ble Patna High Court in case Sonali Autos (P) Ltd. (Supra) and co- ordinate bench of this High court in M/s Dev Multicom Private Ltd. & Anr. Vs. The State of Jharkhand & Anr. passed in Cr.M.P. No. 2941 of 2018 and analogues cases vide order dated 28.02.2022 and also in another judgment of M/s Maithon Power Limited & Anr. Vs. The State of Jharkhand & Anr. Passed in Cr.M.P. No. 2193 of 2018 dated 14.02.2022 after considering these guidelines, the court has interfered 16 Cr.M.P. No.3970 of 2018 With analogous cases with the matter and quashed the entire criminal proceedings. In CBDT instructions, it is found that the prosecution under section 276-B of the Act shall not normally be initiated 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. No such consideration will of course apply to levy of interest under section 201 (1A) of the Act. 23. In the present case, it is found that the total amount, even if it is taken, the total amount of the TDS in all the financial years namely 2012-13, 2013-14 & 2014-15, comes around 47,86,043/- and from the chart given above, entire amount has been deposited with the delay of maximum 11 months and further the interest with the late filing fee was also deposited. It appears that the petitioners/partners were involved in business of civil contracts for the substantive period of time and petitioners are law abiding citizen because before issuance of show-cause, they have deposited the entire TDS amount along with the amount of interest and late filing fee, and therefore It will be considered as a bona fide mistake without any willful or deliberate action or criminal intent on their part. It is true that they have been defaulting in depositing the TDS amount to the credit of central government in time for successive three years, but the reasons assigned by them for causing the delay appears to be very genuine and reasonable in view of the fact that their accountant was bedridden and he was anyhow managing the affairs of the accounts of the company of the partnership firm and therefore in the interest of justice, they deserve to get benefit of the provisions of section 278AA of Income Tax Act and in the light of Circular / instruction of the CBDT. It is admitted case of the prosecution that the petitioners have deposited the entire TDS amount in the account of the central government along with the interest and late fine on his own since he came to know that the concerned accountant of the company although deducted the TDS amount, but does not deposit in the account of the 17 Cr.M.P. No.3970 of 2018 With analogous cases central government as per the mandate of the statute. It is pertinent to mention that there was no willful default or mala fide intention on the part of the petitioners inasmuch as it is admitted position that before the issuance of show-cause notice the entire TDS amount to the credit of the central government with interest and late fine have been deposited by the petitioners for all financial years. In this backdrop, the petitioners are entitled to get the relief from being prosecuted by virtue of the categorical provisions of sections as provided in 278 AA of the Income Tax Act and the circular of the CBDT No F.No.255/339/79-IT (Inv.) dated 28.05.1980. 24. Under the facts and circumstances of this case, it is further found that the rulings relied upon by the Income Tax Department does not apply in view of the bona fide intention of the petitioners in the deposit of the TDS amount to the credit of the central Government account before the receipt of the show-cause from the Income Tax Department as discussed in detail in the foregoing paragraphs. The TDS amount so deducted for all the three financial years 2012-13, 2013-14 & 2014-15 by the petitioners along with amount of interest and late filing fee with some minor delay ranging from two months to eleven months was deposited voluntarily by the petitioners as soon as it came into the knowledge of the petitioner who is the partner of the firm because the said delay was caused due to severe acute illness of the accountant of the firm which is found not intentional and deliberate because before any show-cause notice issued by the Income Tax Department, the petitioner immediately deposited the entire TDS to the credit of the central Government along with the amount of interest and late filing fee as soon as it came into their knowledge by exercising all due diligence to prevent the commission of such offence. The sanctioning authority seemingly did not apply its judicious mind and simply recorded all non-acceptance of the reply submitted by the petitioners, which as per section 278-AA of the Act is not sufficient. It is so because the statutory prescription of exercise of such an obligation 18 Cr.M.P. No.3970 of 2018 With analogous cases under law requires a higher degree of consideration and not mere formality, which would appear to have been done in the present case by the sanctioning authority for launching prosecution against the petitioner and therefore such grant of sanction order and very institution of criminal proceeding against the petitioners appear to be against the spirit of law as provided under Section 278-AA of the Act. It is crystal clear from the admitted fact that the petitioners have voluntary stepped ahead to deposit the entire TDS amount collected for the financial years 2012-13, 2013-14 & 2014-15 to the credit of central government with the delay of two to eleven months along with the interest and late filing fee and they are much before the show-cause notice dated 05.12.2017. It is also found from the sanctioning order that the concerned sanctioning authority simply copied the reply to the show-cause and passed the order without any consideration of explanation tendered by the petitioners. It is well settled principal of criminal jurisprudence that the basic ingredients required for the purpose of criminal prosecution of a person in such type of cases is the existence of guilty / wrongful / dishonest mind / intention behind the incriminatory act. It is not automatic and technical that failure in strict adherence to a particular procedure prescribed in law would attract criminal liability and push the person concerned towards prosecution. Section 278-AA of the Act specifically emphasizes on a test to be carried out to adjudge as to whether the default committed by the assesse has been intentional or attributable to the factors beyond his control giving rise to a reasonable cause. It appears from the sanction order that no such wrongful / guilty or dishonest intention has been pointed out by the opposite parties against the petitioners. The petitioner No.2 as soon as learnt about the delay already having taken place in depositing the said TDS amount, he took immediate step for depositing the said amount to the credit of the central government and therefore there is no deliberate intention to cause delay. Hence the bona fide acts of the petitioners in taking steps for the immediate 19 Cr.M.P. No.3970 of 2018 With analogous cases deposits of the TDS amount to the credit of the central government is commensurate to the instruction of the central board of direct taxes as contained in the circular/letter bearing reference number F. number 255 /339/79 – IT (Inv.) dated 28.05.1980 wherein it has been stated that prosecution under section 276B should not normally be proposed ordinarily when the amount involved or the period of default is not substantial and it is admitted fact in the present case that the entire TDS amount in default has been deposited before the issuance of show-cause notice. A bare perusal of the sanction accorded by the CIT (TDS) Patna shows that no such issues have been considered while applying mind to the reply submitted by the petitioners, much less to the instruction of the Central Board of Direct Taxes. As such the order sanctioning prosecution of the petitioners is apparently illegal and bad in law. In the present case neither the amount involved and / or the period of default is substantial and the amount in default, i.e. the entire TDS amount along with the interest and late fine has been deposited much before the date of issuance of show cause, sanctioning order and institution of criminal prosecution. 25. In the backdrop of the aforesaid discussions, it is found that the impugned orders dated 14.03.2018 passed by the court of learned Special Judge Economic Offences, Dhanbad in all the aforesaid Cr.M.Ps. are bad in law and fit to be set aside. 26. Accordingly all the impugned orders dated 14.03.2018 passed by the court of learned Special Judge Economic Offences, Dhanbad in Economic Offences complaint case No. C.O. 18 of 2018, in complaint case No. C.O. 17 of 2018 and in complaint case No. C.O. 19 of 2018 are quashed and all the three Cr.M.Ps. are allowed. (Navneet Kumar, J.) R.Kumar "