N.L.Tibrewal, J. - (1.) IN all these petitions, common questions of law are involved and, hence, they are disposed of by a common order. IN all the petitions, the petitioners are the same and they have prayed for quashing the criminal proceedings initiated against them under Section 276B read with Section 278B of the INcome-tax Act, 1961 (for short, "the Act").
(2.) NON-petitioner No. 2, viz., Deputy Commissioner, Assessment-I, Income-tax, Jaipur, filed eight separate complaints against the petitioners on December 21, 1988, for the offence under Section 276B read with Section 278B of the Act which pertains to the assessment year 1987-88. The accusation against the petitioners is that they had deducted income-tax at source on the interest amount paid by them under Section 194A of the Act, but did not pay/deposit the same to the credit of the Central Government within the prescribed time as required under Section 200 of the Act read with rule 30(1)(b)(i) of the Income-tax Rules, 1962. As per the said rules, the tax so deducted should be deposited within two months from the date of the deduction. The details of the cases and the amount of tax deducted at source and the delay in depositing the amount to the account of the Central Government are given in the following chart : JUDGEMENT_222_ITR206_1994Html1.htm The prosecution case, as per the complaint, is that the petitioner-firm, Messrs. Universal Supply Corporation, is a registered partnership-firm under the Income-tax Act, 1961, and, in the assessment year 1982-83, the firm was reconstituted, whereby petitioners Nos. 2, 3 and 4 were made partners. For the assessment year 1987-88, the returns of income were filed on behalf of the firm which were verified by its partner, Arun Kumar Sogani, on July 9, 1987, During the course of assessment of tax, the Inspecting Assistant Commissioner of Income-tax (Assessment)-I, Jaipur, noticed that the petitioners had paid interest exceeding Rs. 1,000 to various creditors on which income-tax was deducted at source under Section 194A of the Act, but the same was not deposited in the account of the Central Government within two months as required under Section 200 read with Rule 30(1)(b)(i), (ii) of the Rules. Then a notice was given to the petitioners by the Inspecting Assistant Commissioner of Income-tax (Assessment)-I, Jaipur, on November 17, 1987, to explain as to why interest under Section 201(1A) may not be charged. This notice was replied to on January 5, 1988. It was stated in the complaint that the explanation given by the petitioners was not accepted by the. Inspecting Assistant Commissioner of Income-tax who passed an order at the time of making assessment to charge interest under Section 201(1A) of the Act. All these complaints were filed before the Chief Judicial Magistrate (Economic Offences), Jaipur, who took cognizance and issued process against the petitioners. The petitioners, after putting in appearance in the court, moved an application under Section 245(2) of the Code of Criminal Procedure to drop the proceedings but it was rejected by the learned Magistrate, vide order dated July 22, 1989. Feeling aggrieved against the said order, the petitioners filed the present petitions under Section 482, Criminal Procedure Code, with a prayer to quash the criminal proceedings. I have heard Mr. Kasliwal, learned counsel for the petitioners, and Mr. Amar Singh, learned counsel for the Department, at length. Mr. Kasliwal has contended that the criminal proceedings against the petitioners in all the criminal cases deserve to be quashed on the following grounds : (i) the assessing authority, at the time of passing the assessment order, was satisfied that charging interest under Section 201(1A) of the Act was sufficient in the present case and, as such, he did not think it proper to initiate penalty proceedings under Section 221 of the Act. According to learned counsel, in a case where charging penalty was not thought proper, launching of criminal prosecution which is a harsh remedy, is an abuse of the process of the court ; (ii) that the order of the Commissioner of Income-tax under Section 279(1) of the Act directing prosecution of the petitioners is invalid as it was done without application of mind and on taking into consideration certain facts which did not exist on the record ; (iii) that before launching prosecution against the petitioners, a notice should have been given to explain their position in a case like the present one where the delay in depositing the tax amount in the Central Government treasury was not abnormal. On the other hand, learned counsel for the Department argued that it was not necessary to issue any show-cause notice to the petitioners before filing a complaint as there is no such statutory requirement either under the Act or the Rules. According to learned counsel, the offence under Section 276B of the Act was committed by the petitioners as the provisions of Sections 194A and 200 of the Act, read with rule 30(1)(b)(i), (ii) created an absolute liability on the part of the petitioners to have deposited the tax amount within the stipulated period. It was then contended that, in the instant case, the petitioners were given notice by the Inspecting Assistant Commissioner on November 17, 1987, and the assessing authority was' not satisfied with the explanation given by the petitioners and ordered interest to be charged under Section 201(1A) of the Act on the tax amount. Mr. Amar Singh further argued that imposition of pepalty by the Assessing Officer under Section 221 of the Act is not a condition precedent for launching prosecution under Section 276B read with Section 278B, inasmuch as the prosecution of the petitioners is an independent recourse provided under the Act. It was then argued that cognizance was rightly taken by the Magistrate and there are no exceptional circumstances to quash the proceedings by invoking the inherent powers under Section 482, Criminal Procedure Code. Both learned counsel have referred to a number of decisions which I shall refer to later on.
(3.) TO appreciate the above submissions, it is necessary to consider the relevant provisions of the Act and the Rules. In Chapter XIV of the Income-tax Act, procedure for assessment is provided. Chapter XVII deals with collection and recovery of tax. Section 190 provides that, notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter. Then, Section 194A provides for deduction of tax at source on payment of interest other than interest on securities. It provides that any person who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. We are not concerned with the proviso to the section in the present case. Then, Section 200 provides as under : "200. Duty of person deducting tax.--Any person deducting any sum in accordance with the provisions of Sections 192 to 194, Section 194A, Section 194B, Section 194BB, Section 194C, Section 194D, Section 194E, Section 194EE, Section 194F, Section 194G, Section 194H, Section 195, Section 196A and Section 196B, shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs." Then, Section 201 provides the consequence of failure to deduct or pay the tax at source. For the sake of convenience, the relevant parts of the section are reproduced as under : "201. (1) If any such person and in the cases referred to in Section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax ; Provided that no penalty shall be charged under Section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons fails to deduct and pay the tax. (1A) Without prejudice to the provisions of Sub-section (1), if any such person, principal officer or company as is referred to in that subsection does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at fifteen per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid." Rule 30(1)(b)(i) and (ii) provides a period of two months for making payment to the credit of the Central Government of such tax deducted at source under Section 194A. In addition to the amount of interest as provided under Section 201(1A) of the Act, penalty can also be charged under Section 221 of the Act. However, before levying any such penalty, the assessee is to be given a reasonable opportunity of being heard and in case the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section. ;