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, setting aside the impugned order dated May 22, 2024, and remitting the matter back to the first respondent for reconsideration. The Court found that while the petitioners had submitted detailed replies and documents explaining the delay in TDS payment and offered reasons for it, these explanations were not considered by the respondents in their proper perspective. The Court noted the petitioners' assertion that they would submit additional documents if given another opportunity. Adopting a justice-oriented approach, the Court deemed it appropriate to set aside the order and grant liberty to the petitioners to submit additional pleadings and documents. The first respondent was directed to consider these submissions, provide a reasonable opportunity, including a personal hearing, and then proceed in accordance with the law. The Court expressly left undecided the merits of the petitioners' explanation for the delay.
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, sanctioning prosecution. For assessment year 2019-2020, the petitioners deducted tax at source (TDS) and remitted it on January 22, 2021, approximately 23 months late, along with penal interest. Subsequently, the Deputy Commissioner of Income Tax issued a notice seeking an explanation 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. Despite these explanations and a request to submit additional documents, the Commissioner sanctioned prosecution.
What were the issues?
1. Whether the impugned order dated 22.05.2024, sanctioning prosecution under Section 279(1) of the Income Tax Act, 1961, is liable to be quashed on the grounds that the petitioners' explanations and request for further opportunity to submit documents were not properly considered by the respondent. (Question of law and fact) Assessee's contentions: The petitioners argued that the delay in TDS payment was due to genuine reasons such as demonetization, GST implementation, and the COVID-19 pandemic, which severely impacted the company's financial health and cash flow. They contended that their detailed replies and the request to produce additional supporting documents were not adequately considered by the first respondent before passing the impugned order. They sought a justice-oriented approach. Revenue's contentions: The respondents argued that the impugned order was detailed and well-considered, and therefore, it did not warrant interference by the High Court. They submitted that sufficient opportunity 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
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/17/2024-25/1065084558(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 2019-2020, the petitioner deducted tax at source (TDS) and remitted the said amount to the credit of the Central Government by 22.01.2021, after 23 months along with penal interest. Subsequently, on 17.01.2023, the second respondent HC-KAR NC: 2025:KHC:53913 issued a notice to the petitioners seeking explanation as to why prosecution proceedings should not be recommended against the petitioners on account of the delayed payment deduction of TDS by the petitioners. The petitioners having submitted replies dated 27.01.2023, 17.03.2023 and 16.02.2024, the first respondent issued a show cause notice dated 19.03.2024 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. HC-KAR NC: 2025:KHC:53913
Pursuant to the aforesaid notices and replies, the respondent proceeded to pass the impugned order dated 22.05.2024 granting sanction for prosecution under 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 HC-KAR NC: 2025:KHC:53913 subsequently paid together with penal interest and offering an explanation as to why there was a delay on the 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. HC-KAR NC: 2025:KHC:53913 (iii) The matter is remitted back to first respondent for reconsideration afresh in accordance with law.
(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.: 54
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