Altamas kabir, J. - (1.) AS the appeal involves a question of law, on consent of the parties the appeal itself was taken up for consideration along with the application for stay of operation of the judgment and order dt. 11th June, 2003, since reported as passed by the learned Single Judge on the writ petition filed by the appellant herein, being WP No. 992 of 2003 [reported as Shaw Wallace and Co. Ltd. vs. CIT and Ors. (2003) 185 CTR (Cal) 444--Ed.].
(2.) IN the writ petition the appellant-company challenged the decision of the respondents to initiate prosecution against the appellant under s. 276B of the IT Act, 1961, for the years 1995-96, 1997- 98, 1998-99 and 1999-2000 for the appellant's failure to deposit and/or pay to the credit of the Central Government the tax deducted by the appellant at source, hereinafter referred to as 'TDS'. By his judgment and order dt. 11th June, 2003, the learned Single Judge dismissed the writ petition upon holding, inter alia, that there was no scope for pre-empting the criminal proceedings unless it could have been established that even if the allegations made by the respondents were all true, they did not constitute any offence under s. 276B of the IT Act, 1961. Disagreeing with the reasoning of the learned Single Judge, Mr. Sudipto Sarkar urged that even if the allegations constituted an offence under s. 276B of the IT Act, 1961, grant of sanction for prosecution was not automatic and the surrounding circumstances did not warrant grant of sanction for prosecution. Mr. Sarkar submitted that admittedly the appellant had defaulted in depositing the TDS for the financial years in question, but such default was neither intentional nor with a motive to avoid payment of the said tax, but because of severe financial crisis faced by the appellant-company which was duly recognised both by the Court and the IT authorities themselves. Mr. Sarkar submitted that the appellant-company had been permitted to pay off the tax in instalments without imposition of penalty and that the company had honoured the commitments and had paid off the entire outstanding dues. Mr. Sarkar submitted that the conduct of the appellant-company did not warrant prosecution for the default in question.
(3.) MR. Sarkar contended that prosecution for default in paying TDS to the credit of the Central Government did not automatically follow such default and the provision had, therefore, been made under s. 279 of the IT Act for sanction to be granted for such prosecution by the Chief CIT. MR. Sarkar urged that it had repeatedly been held by the Courts that whenever the decision was left to the subjective satisfaction of a statutory authority, it necessarily implied that such authority was required to apply its mind to all relevant factors before arriving at a decision. MR. Sarkar submitted that grant of sanction for launching prosecution was a very serious business having serious consequences which entailed proper exercise of discretion upon consideration of all relevant materials, including mitigating circumstances in favour of the defaulter. According to MR. Sarkar, if the legislature had intended otherwise it would not have provided the safeguard against prosecution in s. 279 of the above Act. In support of his aforesaid contention, Mr. Sarkar firstly referred to and relied on the decision of the Supreme Court in CIT vs. Mahindra and Mahindra Ltd. and Ors. (1983) 36 CTR (SC) 300 : (1983) 144 ITR 225 (SC), wherein while considering the decision of the Bombay High Court in connection with an application for amalgamation, the Supreme Court, inter alia, observed that whenever a decision-making function was entrusted to the subjective satisfaction of a statutory functionary, there was an implicit obligation to apply his mind to proximate matters only and to eschew the irrelevant and the remote. If the decision of the authority was perverse or was such that no reasonable person could have arrived at such decision, the High Court would be justified in interfering with the decision.;