I deposited the TDS late but with interest, and years later the department filed a criminal complaint under s.276B. Can I get it quashed?
On these facts, yes. Where the deductor had deposited the tax with the stipulated interest before any complaint was filed, and the department then launched the prosecution long afterwards instead of exercising its power to compound, the Jharkhand High Court held that continuing the criminal proceeding was an abuse of the process of law and quashed the cognizance order.
Decided by the High Court (Anil Kumar Choudhary J) on 2025-05-08, reported as Cr.M.P. No. 1079 of 2025; neutral citation 2025:JHHC:13952 (Jharkhand High Court). It bears on section 276B, section 278B, section 279(2), section 119 of the Income Tax Act 1961, in Prosecution and TDS Defaults matters.
This is the single most useful line of authority for a deductor who has paid up. Two things carry it: the payment with interest preceded the complaint, and the department did not launch the complaint until long afterwards. The Court's route is worth noting because it does not depend on proving reasonable cause under s.278AA at all — it holds that s.279(2) empowers the Principal Chief Commissioner, Chief Commissioner, Principal Director General or Director General to compound an offence either before or after institution of proceedings and, importantly, to do so suo motu; and that the CBDT's prescribed application form does not take away that suo motu power. The department's stock answer, that no compounding application was made in Form No. 1, was rejected on that basis. But the reader must know the other side. The Delhi High Court in Indo Arya Central Transport Ltd. v. CIT (TDS) (12 March 2018) declined to interfere at the sanction stage on comparable facts and sent the deductor to trial, and the sanction order upheld there relied on Delhi authority that deposit before the complaint does not absolve the deductor. Which High Court you are in matters a great deal. Separately, and decisively for any current period, the Finance (No. 2) Act 2024 inserted a proviso to s.276B with effect from 1 October 2024 barring prosecution where the payment has been made to the credit of the Central Government before the time prescribed for filing the quarterly statement under s.200(3) for that quarter — so for recent defaults the statute itself may answer the notice before any of this case law is reached.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The first petitioner was a partnership firm and the second petitioner a partner and the person responsible for its acts. The firm deducted tax at source of Rs 25,27,355 which it was required to pay to the credit of the Central Government by 30 April 2016 and did not. It deposited that amount, together with interest to the date of deposit, on 22 June 2016 — a delay, as counsel for the Income-tax Department fairly accepted, of less than five months from the due date. Notwithstanding the deposit, Economic Offence Case No. 43 of 2019 was instituted on 13 April 2018, and by order dated 26 March 2021 the Special Judge, Economic Offences, Ranchi took cognizance of an offence punishable under s.276B read with s.278B. The petitioners moved the High Court under s.528 of the Bharatiya Nagarik Suraksha Sanhita 2023 to quash that order. The Department's answer was that although the specified authorities are empowered to compound an offence before or after institution of proceedings, the CBDT guidelines prescribe Form No. 1 for a compounding application, the petitioners had made no such application, and the complaint had therefore been instituted.
The petition was allowed and the order dated 26 March 2021 taking cognizance in Economic Offence Case No. 43 of 2019 was quashed and set aside against the petitioners. Where the deductor had deposited the tax with the stipulated interest before the complaint was filed and the complaint came long after that deposit (the Court describes the gap as more than three years; on the dates the judgment itself records it is one year and ten months), continuation of the criminal proceeding amounted to an abuse of the process of law.
The Court read s.276B together with s.279(2). Section 279(2) vests the power to compound in the Principal Chief Commissioner, Chief Commissioner, Principal Director General or Director General, and does so in terms that permit compounding either before or after institution of the proceedings. The purpose of s.276B is to create a deterrence against failure to deposit tax deducted at source within the stipulated period; but the very purpose of conferring the compounding power on senior officers is that where the defaulting person deposits the amount before institution of the complaint, the offence should be compounded rather than a complaint instituted, which merely harasses a person who has already paid with interest and wastes the time of the court and of the officers of the Department (paragraph 6). The Court then held that the words of s.279(2) make it clear that those authorities may also exercise the compounding power suo motu, and that instructions issued to subordinate authorities under s.119, though intended for the proper administration of the Act and though they prescribe a form for an application by a person desiring compounding, nowhere debar the specified authorities from exercising that power of their own motion — the more so where the amount has been deposited with the stipulated interest before the complaint was filed (paragraph 7). Applying that, the Court noted that the complainant had filed the complaint neither before the deposit nor immediately after it, but long after the defaulted amount had been deposited with interest (the Court describes the gap as more than three years; on the dates the judgment itself records it is one year and ten months), perhaps in ignorance that it had been deposited, and concluded that continuation of the proceeding would be an abuse of process (paragraph 8).
the very purpose of vesting the power of compounding the offence upon the senior officers of the Income Tax Department, as already indicated above in this judgment, is that in case the defaulting person deposits the amount before institution of the complaint, the offence is required to be compounded; instead of instituting a complaint and thereby harassing the person who has deposited the amount with stipulated interest before filing of the complaint and wasting the precious time of the court as well as the officers concerned of the Income Tax Department.
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Handle my notice → Ask a CA on WhatsAppOn these facts, yes. Where the deductor had deposited the tax with the stipulated interest before any complaint was filed, and the department then launched the prosecution long afterwards instead of exercising its power to compound, the Jharkhand High Court held that continuing the criminal proceeding was an abuse of the process of law and quashed the cognizance order. This was decided by the High Court (Anil Kumar Choudhary J) and bears on section 276B, section 278B, section 279(2), section 119 of the Income Tax Act 1961. It is reported as Cr.M.P. No. 1079 of 2025; neutral citation 2025:JHHC:13952 (Jharkhand High Court). This is the single most useful line of authority for a deductor who has paid up. Two things carry it: the payment with interest preceded the complaint, and the department did not launch the complaint until long afterwards. The Court's route is worth noting because it does not depend on proving reasonable cause under s.278AA at all — it holds that s.279(2) empowers the Principal Chief Commissioner, Chief Commissioner, Principal Director General or Director General to compound an offence either before or after institution of proceedings and, importantly, to do so suo motu; and that the CBDT's prescribed application form does not take away that suo motu power. The department's stock answer, that no compounding application was made in Form No. 1, was rejected on that basis. But the reader must know the other side. The Delhi High Court in Indo Arya Central Transport Ltd. v. CIT (TDS) (12 March 2018) declined to interfere at the sanction stage on comparable facts and sent the deductor to trial, and the sanction order upheld there relied on Delhi authority that deposit before the complaint does not absolve the deductor. Which High Court you are in matters a great deal. Separately, and decisively for any current period, the Finance (No. 2) Act 2024 inserted a proviso to s.276B with effect from 1 October 2024 barring prosecution where the payment has been made to the credit of the Central Government before the time prescribed for filing the quarterly statement under s.200(3) for that quarter — so for recent defaults the statute itself may answer the notice before any of this case law is reached. If it applies to you, the first step is this: Fix three dates on a single sheet before anything else: the due date of deposit, the date the tax and interest actually reached the Government, and the date the complaint was instituted. The case turns on the second preceding the third.
The first petitioner was a partnership firm and the second petitioner a partner and the person responsible for its acts. The firm deducted tax at source of Rs 25,27,355 which it was required to pay to the credit of the Central Government by 30 April 2016 and did not. It deposited that amount, together with interest to the date of deposit, on 22 June 2016 — a delay, as counsel for the Income-tax Department fairly accepted, of less than five months from the due date. Notwithstanding the deposit, Economic Offence Case No. 43 of 2019 was instituted on 13 April 2018, and by order dated 26 March 2021 the Special Judge, Economic Offences, Ranchi took cognizance of an offence punishable under s.276B read with s.278B. The petitioners moved the High Court under s.528 of the Bharatiya Nagarik Suraksha Sanhita 2023 to quash that order. The Department's answer was that although the specified authorities are empowered to compound an offence before or after institution of proceedings, the CBDT guidelines prescribe Form No. 1 for a compounding application, the petitioners had made no such application, and the complaint had therefore been instituted. The matter was decided on 2025-05-08 by the High Court (Anil Kumar Choudhary J). On those facts the High Court held as follows. The petition was allowed and the order dated 26 March 2021 taking cognizance in Economic Offence Case No. 43 of 2019 was quashed and set aside against the petitioners. Where the deductor had deposited the tax with the stipulated interest before the complaint was filed and the complaint came long after that deposit (the Court describes the gap as more than three years; on the dates the judgment itself records it is one year and ten months), continuation of the criminal proceeding amounted to an abuse of the process of law.
The Court read s.276B together with s.279(2). Section 279(2) vests the power to compound in the Principal Chief Commissioner, Chief Commissioner, Principal Director General or Director General, and does so in terms that permit compounding either before or after institution of the proceedings. The purpose of s.276B is to create a deterrence against failure to deposit tax deducted at source within the stipulated period; but the very purpose of conferring the compounding power on senior officers is that where the defaulting person deposits the amount before institution of the complaint, the offence should be compounded rather than a complaint instituted, which merely harasses a person who has already paid with interest and wastes the time of the court and of the officers of the Department (paragraph 6). The Court then held that the words of s.279(2) make it clear that those authorities may also exercise the compounding power suo motu, and that instructions issued to subordinate authorities under s.119, though intended for the proper administration of the Act and though they prescribe a form for an application by a person desiring compounding, nowhere debar the specified authorities from exercising that power of their own motion — the more so where the amount has been deposited with the stipulated interest before the complaint was filed (paragraph 7). Applying that, the Court noted that the complainant had filed the complaint neither before the deposit nor immediately after it, but long after the defaulted amount had been deposited with interest (the Court describes the gap as more than three years; on the dates the judgment itself records it is one year and ten months), perhaps in ignorance that it had been deposited, and concluded that continuation of the proceeding would be an abuse of process (paragraph 8). In the words reproduced by the source cited on this page: "the very purpose of vesting the power of compounding the offence upon the senior officers of the Income Tax Department, as already indicated above in this judgment, is that in case the defaulting person deposits the amount before institution of the complaint, the offence is required to be compounded; instead of instituting a complaint and thereby harassing the person who has deposited the amount with stipulated interest before filing of the complaint and wasting the precious time of the court as well as the officers concerned of the Income Tax Department." The decision followed or applied M/s Dev Multicom Private Ltd. v. State of Jharkhand (Cr.M.P. No. 2941 of 2018, decided 28 February 2022) — cited by counsel; not analysed by the Court and not read for this entry; Sonali Autos (P) Ltd. v. State of Bihar (Patna High Court, Criminal Miscellaneous No. 16498 of 2014, decided 2 August 2017) — cited by counsel; only the header and concluding paragraphs were read.
It was decided by the High Court on 2025-05-08 and is reported as Cr.M.P. No. 1079 of 2025; neutral citation 2025:JHHC:13952 (Jharkhand High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 276B, section 278B, section 279(2), section 119, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The petition was allowed and the order dated 26 March 2021 taking cognizance in Economic Offence Case No. 43 of 2019 was quashed and set aside against the petitioners. Where the deductor had deposited the tax with the stipulated interest before the complaint was filed and the complaint came long after that deposit (the Court describes the gap as more than three years; on the dates the judgment itself records it is one year and ten months), continuation of the criminal proceeding amounted to an abuse of the process of law. It arises in Prosecution and TDS Defaults matters, on section 276B, section 278B, section 279(2), section 119 of the Income Tax Act 1961, and was decided by Anil Kumar Choudhary J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For any default on or after 1 October 2024, check the proviso to s.276B inserted by the Finance (No. 2) Act 2024 first — if the payment was made before the time prescribed for filing the quarterly statement under s.200(3), prosecution is barred by statute and no discretionary relief is needed. Put the length of the department's own delay in launching the complaint at the front of the petition; the Court treated the gap between deposit and complaint as central. Take the gap from your own dates, not from this judgment's description of its own — see the editor note. Invoke s.279(2) expressly and argue the suo motu limb — do not let the absence of a Form No. 1 application be treated as an answer. Move under s.528 of the Bharatiya Nagarik Suraksha Sanhita 2023 (the successor to s.482 CrPC) against the order taking cognizance, not merely against the complaint. If you are before a High Court that follows the Delhi line, prepare the reasonable-cause defence under s.278AA as trial evidence as well, because you may not be quashed out of the case. Consider a compounding application in any event, under the Guidelines for Compounding of Offences dated 17 October 2024, which superseded the 2019 guidelines and expressly allow compounding of an offence under s.276B; the guidelines set no monetary threshold for eligibility, and fix the charge at 1.5 per cent per month of the tax in default, capped at the amount of TDS in default.
High Courts differ on this point. The Jharkhand High Court quashes a s.276B prosecution where the tax and interest were paid before the complaint. A Patna decision to similar effect, Sonali Autos (P) Ltd v State of Bihar (Cr. Misc. No. 16498 of 2014, 2 August 2017, reported (2017) 396 ITR 636), was cited by counsel and its concluding paragraphs show the proceeding was quashed, but its reasoning was not read and its ground of decision is not stated here; note that where that decision is discussed elsewhere in this library it is treated as an authority on reasonable cause under s.278AA, which is a different route from the one taken in this judgment. By contrast the Delhi High Court in Indo Arya Central Transport Ltd. v. CIT (TDS), W.P.(C) 3964/2017 decided 12 March 2018 (read in full for this pass), declined to interfere with the sanction on comparable facts and held that payment, financial crunch and pending refunds are factual defences of reasonable cause under s.278AA to be established at trial. The sanction order reproduced in that judgment relies on Rishikesh Balkishandas v. I.D. Manchanda, ITO [1987] 167 ITR 49 (Delhi) for the proposition that deposit before the filing of the complaint does not absolve the deductor; that decision was not read in this pass and is recorded here only as it appears quoted in the Delhi judgment. Later treatment of this 8 May 2025 judgment was not checked, and no appeal position is known. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The Court delivered a materially identical judgment for the same petitioners eight days earlier: Cr.M.P. No. 847 of 2025 (2025:JHHC:12531), decided 28 April 2025, on TDS of Rs 37,64,667 due 30 April 2015 and deposited 26 September 2015, quashing cognizance in Economic Offence Case No. 15 of 2018. Both were read. The judgment records Dev Multicom Pvt. Ltd. v. State of Jharkhand (Cr.M.P. No. 2941 of 2018, decided 28 February 2022) and Sonali Autos (P) Ltd. v. State of Bihar (Patna High Court, Criminal Miscellaneous No. 16498 of 2014, decided 2 August 2017) only as authorities cited by counsel; the Court does not itself analyse them. I could not read Dev Multicom's final judgment — the only Dev Multicom document on indiankanoon for that case number is an interim order of 20 January 2022 — and of Sonali Autos I could read only the header and the two concluding paragraphs, which confirm that the criminal proceeding was quashed. Their holdings are therefore not stated here. The proviso to s.276B was established for this pass from primary sources and the text in this entry may be relied on. It was inserted by the Finance (No. 2) Act, 2024 (Bill No. 55 of 2024, clause 84) with effect from 1 October 2024 and reads: 'Provided that the provisions of this section shall not apply if the payment referred to in clause (a) has been made to the credit of the Central Government at any time on or before the time prescribed for filing the statement for such payment under sub-section (3) of section 200.' It is reproduced, together with the words of the amending provision and its commencement, in M/s Kashish Developers Ltd v Union of India (Jharkhand High Court, Sanjay Kumar Dwivedi J, W.P.(Cr.) No. 639 of 2024 and allied, 21 November 2024), and the amended section is set out with the proviso in Ramesh Surapaneni v Income Tax Office (Additional Sessions Judge-03, Central District, Delhi, Crl. Rev. 206/2024, 30 June 2025). Note that the department's own section pages are stale for s.276B: four suffixes — /w/section-276b, -1, -21 and -22 — all serve the 1997-substituted text with no proviso and with the Finance Act 1997 as their last recorded amendment. Do not source s.276B from incometaxindia.gov.in/w/. Note also that the Jharkhand High Court's own judgment calls the amending Act the 'Finance Act, 2024'; that is loose — the interim Finance Act 2024 of February 2024 did not touch s.276B, and the citation used in this entry, the Finance (No. 2) Act 2024, is the correct one. The judgment is internally inconsistent about its own arithmetic and this must be flagged to any reader. It records the due date as 30.04.2016 and the deposit as 22.06.2016, but describes that as 'a delay of less than five months'; and it records the complaint as instituted on 13.04.2018, but describes it as filed 'after a period of more than three years of the deposit'. Both descriptions appear to be carried over from a sibling petition — this is a template order. The operative reasoning (payment with interest before the complaint, and s.279(2) suo motu compounding) does not depend on either figure. There is a third judgment of the same judge on the same day in the same matter that the earlier note does not record: Cr.M.P. No. 1074 of 2025, neutral citation 2025:JHHC:13954 (indiankanoon /doc/47593264/), quashing cognizance of 10.08.2022 in Economic Offence Case No. 14 of 2018, in materially identical terms. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was allowed and the order dated 26 March 2021 taking cognizance in Economic Offence Case No. 43 of 2019 was quashed and set aside against the petitioners. Where the deductor had deposited the tax with the stipulated interest before the complaint was filed and the complaint came long after that deposit (the Court describes the gap as more than three years; on the dates the judgment itself records it is one year and ten months), continuation of the criminal proceeding amounted to an abuse of the process of law.
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