M/S GULAM MUSTAFA ENTERPRISES PVT LTD vs. THE COMMISSIONER OF INCOME TAX (TDS)
What did the High Court hold?
The High Court allowed the petition. It held that a perusal of the material on record, including the impugned order, indicated that the detailed replies and documents submitted by the petitioners, explaining the delay in TDS payment and demonstrating subsequent payment with penal interest, were not considered by the respondents in their proper perspective. Further, considering the petitioners' assertion that they could submit additional documents if given another opportunity, the Court adopted a justice-oriented approach. Consequently, the impugned order dated May 22, 2024, was set aside, and the matter was remitted back to the first respondent for reconsideration. The petitioners were granted liberty to submit additional pleadings and documents, and the respondent was directed to provide sufficient opportunity, including a personal hearing, before proceeding in accordance with the law.
What were the facts?
The petitioners, M/s. Gulam Mustafa Enterprises Pvt Ltd and its directors, are challenging an order dated May 22, 2024, passed by the Commissioner of Income Tax (TDS) under Section 279(1) of the Income Tax Act, 1961. This order granted sanction for prosecution against the petitioners under Sections 276B and 278B of the Act. The prosecution was recommended due to delayed deduction and remittance of Tax Deducted at Source (TDS) for the assessment year 2018-2019. The petitioners had remitted the TDS amount with penal interest on July 2, 2018, after a delay of 14 months. Subsequently, notices were issued by the Deputy Commissioner of Income Tax, seeking explanations for the delay. The petitioners provided replies, citing demonetization, GST implementation, and the COVID-19 pandemic as reasons for financial difficulties and cash flow issues, leading to the delay. They also requested an opportunity to produce additional supporting documents.
What were the issues?
1. Whether the impugned order dated May 22, 2024, passed by the first respondent under Section 279(1) of the Income Tax Act, 1961, granting sanction for prosecution, is liable to be quashed? (Question of law and fact) Assessee's Contentions: The petitioners contended that their delayed payment of TDS was due to reasonable causes, including demonetization, GST implementation, and the COVID-19 pandemic, which severely impacted their financial health and cash flow. They argued that the impugned order failed to consider their detailed replies and the supporting documents submitted. They also asserted that they requested further time to produce additional documents to substantiate their claims. Revenue's Contentions: The respondents argued that the impugned order was a detailed and well-considered order and did not warrant interference by the Court. They contended that sufficient opportunities had already been granted to the petitioners, and they were not entitled to any further indulgence.
Which sections of the Income-tax Act were involved?
Section 279(1), Section 276B, Section 278B
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
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 HC-KAR NC: 2025:KHC:54257 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."
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 HC-KAR NC: 2025:KHC:54257 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.
Pursuant to the aforesaid notices and replies, the respondent proceeded to pass the impugned order dated 22.05.2024 granting sanction for prosecution under HC-KAR NC: 2025:KHC:54257 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.
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.
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 HC-KAR NC: 2025:KHC:54257 part of the petitioners, the same has not been considered by the respondents in its proper perspective.
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.
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. HC-KAR NC: 2025:KHC:54257 (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. (S.R.KRISHNA KUMAR) JUDGE NS CT:TSM List No.: 2 Sl No.: 0
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