MS FORTUNE INFOVISION PVT LTD AND ORS vs. DY COMMISSIONER OF INCOME TAX AND ANR
What did the High Court hold?
The High Court held that penal proceedings cannot be initiated merely because it is lawful to do so, unless the conduct of the assessee is malicious or contumacious, referencing the Supreme Court's decision in Hindustan Steel Ltd. versus State of Orissa. The Court noted that the explanation provided by the petitioners for the delay in TDS deposit, attributing it to e-commerce transactions and delays in bill submissions by companies like Amazon, Naaptol, and Ebay, was neither doubted nor rejected. It was undisputed that the TDS was deposited voluntarily along with interest before the show cause notice was issued. The Court found that delayed compliance with the provisions of deducting and depositing TDS, standing alone, is not sufficient grounds for granting prosecution sanction. Given that the writ petition has been pending since 2018 with interim protection and no prosecution launched, and considering the explanation provided by the petitioners, the Court concluded that no case was made out for prosecution. Consequently, the impugned order granting sanction for prosecution was set aside. The Court did not expressly leave any issue undecided.
What were the facts?
M/s Fortune Infovision Pvt. Ltd. (Petitioner No. 1) and its directors (Petitioners 2-4) filed a writ petition challenging the sanction for prosecution proceedings. The liability in dispute was Rs. 79,893/- for the assessment year 2014-15. The company was liable to deduct Tax Deduction at Source (TDS) from payments made to other companies and deposit it. There was a delay in depositing the TDS, which was eventually deposited along with 18% interest after a delay of up to ten months. The Commissioner, Income Tax (TDS), Jaipur, granted sanction for prosecution, relying on the Supreme Court decision in Madhumilan Syntex Ltd. & Ors. versus Union of India & Ors. The petitioner company explained that the delay was due to e-commerce transactions and the late submission of bills by companies like Amazon, Naaptol, and Ebay, which affected the quantification of TDS. The writ petition has been pending since 2018, with interim protection granted to the petitioners, and no prosecution has been launched.
What were the issues?
1. Whether the Commissioner, Income Tax (TDS), Jaipur, was justified in granting sanction for prosecution against M/s Fortune Infovision Pvt. Ltd. and its directors under Section 279(1) of the Income Tax Act, 1961, for delayed deposit of Tax Deducted at Source (TDS). Assessee's Contentions: The petitioners argued that penal proceedings cannot be initiated merely because it is lawful to do so, unless the conduct of the assessee is malicious or contumacious, citing the Supreme Court decision in Hindustan Steel Ltd. versus State of Orissa. They also contended that the explanation provided for the delay, relating to e-commerce transactions and delays in bill submission by third-party companies, was neither doubted nor rejected. The TDS was deposited voluntarily along with interest before the show cause notice was issued. Delayed compliance alone should not suffice for prosecution sanction. Revenue's Contentions: The revenue relied on the decision of the Supreme Court in Madhumilan Syntex Ltd. & Ors. versus Union of India & Ors. to hold that appropriate action can be taken under the Act in case of failure to comply with statutory procedures. The Commissioner granted sanction for prosecution based on this.
Which sections of the Income-tax Act were involved?
Section 279(1)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Order 18/03/2025 AVNEESH JHINGAN, J. (ORAL)
This writ petition is filed challenging order for sanctioning of prosecution proceedings for liability of Rs.79,893/-.
The brief facts of the case are that the petitioner No.1 for the assessment year 2014-15 was liable to deduct for Tax Deduction at Source (T.D.S.) from the payments made to the other companies and to deposit it. There was a delay in deposit of the T.D.S., but was deposited alongwith 18% interest after a delay upto ten months. The notice dated 23.02.2018 issued
[2025:RJ-JP:12284-DB] (2 of 3) [CW-11431/2018] under Section 279(1) of the Income Tax Act, 1961 (for short ‘the Act of 1961’), was responded to the petitioner-company. It was stated that the business activity of the petitioner No.1 relates to e-commerce transactions and due to delay on the part of the companies like Amazon, Naaptol & Ebay etc. in submitting the bills by which T.D.S. to be deducted could be quantified.
1 The Commissioner, Income Tax (T.D.S.), Jaipur passed impugned order was granting sanction to prosecute petitioner No.1 and directors of company. Reliance was place upon the decision of the Supreme Court in the case of Madhumilan Syntex Ltd. & Ors. versus Union of India & Ors. reported in (2007) 11 SCC 297, to hold that in case of failure to comply with the procedures stipulated in the statute, appropriate action can be taken under the Act.
There cannot be a quarrel with the proposition that penal proceedings cannot be initiated merely because it is lawful to do so, unless the conduct of the assessee is malicious or contumacious. Reference be made to the decision of the Supreme Court in the case of Hindustan Steel Ltd. versus State of Orissa reported in (1969) 2 SCC 627. 4. This petition is pending since year 2018 and the interim protection was granted in favour of the petitioners and there is no prosecution launched till date. Even otherwise, the explanation given by the petitioners was neither doubted nor rejected. The case in hand is not of TDS not being deducted and deposited. It is undisputed that before issuance of show cause notice, the T.D.S. was deposited voluntarily by the petitioner-company along with the interest. The delayed compliance of provision of deducting and depositing TDS stand alone shall not suffice for grant of prosecution sanction.
[2025:RJ-JP:12284-DB] (3 of 3) [CW-11431/2018]
In the facts & circumstances, no case is made out for prosecution against the petitioner. Accordingly, the impugned order is set aside. The present writ petition is allowed. (MANEESH SHARMA),J (AVNEESH JHINGAN),J SAHIL SONI /185 Whether Reportable: Yes
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