We deposited the TDS late, with interest, and the Department accepted it — then launched a s.276B prosecution against the company and its directors. Can the complaint be quashed?
On this judgment, yes, where the delay is explained. The Orissa High Court quashed a s.276B read with s.278B prosecution for delays of between 15 and 394 days in FY 2019-20, holding the delay well explained by the company's insolvency resolution process and the COVID-19 restrictions, and noting that the prosecution had been launched only after the Department had received the TDS along with interest. It followed the Jharkhand High Court in Dev Multicom and its own earlier decision in D.N. Homes.
Decided by the High Court (Sibo Sankar Mishra J) on 2024-04-15, reported as CRLMC No. 1921 of 2023 (High Court of Orissa at Cuttack); heard 08.04.2024. It bears on section 276B, section 278B, section 278AA, section 279(1), section 201, section 221 of the Income Tax Act 1961, in Prosecution and TDS Defaults matters.
This is the fullest recent statement of the reasonable-cause defence to a s.276B prosecution, and it is useful because it accepts commercial causes — an admitted insolvency proceeding under s.7 of the Insolvency and Bankruptcy Code with an approved resolution plan, and the pandemic — as an explanation for delays running well beyond a year. It also records the Department's own position on the 2008 circular, that a s.276B case is to be processed for prosecution where the tax deducted is Rs.25,000 or more and is not deposited within twelve months, which is worth having when arguing that a shorter delay should not have been taken up at all. Two limits must be carried with it. The first is temporal: this concerns a period long before the proviso to s.276B said to have been inserted by the Finance (No. 2) Act 2024 with effect from 1 October 2024, and the enacted words of that proviso could not be verified on this pass, so a reader must check it directly for any period from that date. The second is that the same Judge, nine months later and after the CBDT's compounding guidelines of 17 October 2024, declined to exercise the same jurisdiction and relegated the accused to compounding.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The Commissioner of Income Tax (TDS), Bhubaneswar accorded sanction on 05.01.2023 under s.279(1) to prosecute the company and two of its officers under s.276B read with s.278B for not depositing TDS for FY 2019-20 within the statutory period, the delays ranging from 15 days to 394 days. The Additional Chief Judicial Magistrate (Spl.)-cum-Assistant Sessions Judge, Cuttack took cognizance on 22.02.2023 in 2(c) CC Case No.09 of 2023. The petitioners moved the High Court under s.482 CrPC to quash the sanction, the cognizance order and the complaint. They said the company had suffered heavy losses from the fall in iron ore prices, that a proceeding under s.7 of the Insolvency and Bankruptcy Code 2016 had been admitted on 30.01.2017 and a resolution plan approved on 07.11.2017, after which the company gradually paid its debts and statutory dues from cash flows, and that the outbreak of COVID-19 in March 2020 prevented deposit of the FY 2019-20 TDS. They relied on the departmental circular of 24.04.2008 under which a s.276B case is processed for prosecution where the tax deducted is Rs.25,000 or more and is not deposited within twelve months of deduction, on Dev Multicom Pvt. Ltd. v. State of Jharkhand, and on the Court's own decision in D.N. Homes. The Department said financial distress and the pandemic could not be an alibi for late deposit of money collected on the Government's behalf, that pandemic restrictions were imposed only in March 2020 while the delay was not limited to that period, and that the 2008 circular did not assist because the delay exceeded a year.
The petition was allowed and the entire proceeding arising out of 2(c) CC Case No.09 of 2023 and the consequential proceedings, so far as the petitioners were concerned, were quashed. The maximum delay of 394 days in depositing the TDS was well explained by the insolvency proceeding and the restrictions imposed during the COVID-19 pandemic, and those explanations ought to have been taken into consideration by the authorities; the case was directly covered by Dev Multicom and D.N. Homes because the prosecution had been initiated after the Department had received the TDS amount along with the interest.
The Court took the petitioners' explanation for the delay at face value against the sequence of events — the admitted insolvency proceeding, the approved resolution plan and the gradual clearing of statutory dues from cash flows, and the pandemic — and held that the authorities ought to have considered it. It applied the reasoning in Dev Multicom, extracted in para 6, that where the amount has already been deposited with interest and the criminal proceeding was launched after receiving that amount with interest, there is no reason for the proceeding to continue and its continuation amounts to an abuse of the process of the Court; and the reasoning in D.N. Homes, extracted in para 7, that the entire TDS with interest had by the time of consideration of the launching of prosecution gone to the exchequer so that no loss to the Revenue was standing to be viewed, and that the legislature deliberately used 'reasonable cause' in s.278AA where it used 'good and sufficient reasons' in ss.201 and 221 (paras 6, 7 and 10).
I am of the considered view that the maximum delay of 394 days for depositing the TDS amount to the revenue account have been well explained by the petitioners
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Handle my notice → Ask a CA on WhatsAppOn this judgment, yes, where the delay is explained. The Orissa High Court quashed a s.276B read with s.278B prosecution for delays of between 15 and 394 days in FY 2019-20, holding the delay well explained by the company's insolvency resolution process and the COVID-19 restrictions, and noting that the prosecution had been launched only after the Department had received the TDS along with interest. It followed the Jharkhand High Court in Dev Multicom and its own earlier decision in D.N. Homes. This was decided by the High Court (Sibo Sankar Mishra J) and bears on section 276B, section 278B, section 278AA, section 279(1), section 201, section 221 of the Income Tax Act 1961. It is reported as CRLMC No. 1921 of 2023 (High Court of Orissa at Cuttack); heard 08.04.2024. This is the fullest recent statement of the reasonable-cause defence to a s.276B prosecution, and it is useful because it accepts commercial causes — an admitted insolvency proceeding under s.7 of the Insolvency and Bankruptcy Code with an approved resolution plan, and the pandemic — as an explanation for delays running well beyond a year. It also records the Department's own position on the 2008 circular, that a s.276B case is to be processed for prosecution where the tax deducted is Rs.25,000 or more and is not deposited within twelve months, which is worth having when arguing that a shorter delay should not have been taken up at all. Two limits must be carried with it. The first is temporal: this concerns a period long before the proviso to s.276B said to have been inserted by the Finance (No. 2) Act 2024 with effect from 1 October 2024, and the enacted words of that proviso could not be verified on this pass, so a reader must check it directly for any period from that date. The second is that the same Judge, nine months later and after the CBDT's compounding guidelines of 17 October 2024, declined to exercise the same jurisdiction and relegated the accused to compounding. If it applies to you, the first step is this: Build the reasonable-cause case on documents: the order admitting the insolvency petition, the approved resolution plan, the cash-flow position, and the dates of each delayed deposit with the interest paid.
The Commissioner of Income Tax (TDS), Bhubaneswar accorded sanction on 05.01.2023 under s.279(1) to prosecute the company and two of its officers under s.276B read with s.278B for not depositing TDS for FY 2019-20 within the statutory period, the delays ranging from 15 days to 394 days. The Additional Chief Judicial Magistrate (Spl.)-cum-Assistant Sessions Judge, Cuttack took cognizance on 22.02.2023 in 2(c) CC Case No.09 of 2023. The petitioners moved the High Court under s.482 CrPC to quash the sanction, the cognizance order and the complaint. They said the company had suffered heavy losses from the fall in iron ore prices, that a proceeding under s.7 of the Insolvency and Bankruptcy Code 2016 had been admitted on 30.01.2017 and a resolution plan approved on 07.11.2017, after which the company gradually paid its debts and statutory dues from cash flows, and that the outbreak of COVID-19 in March 2020 prevented deposit of the FY 2019-20 TDS. They relied on the departmental circular of 24.04.2008 under which a s.276B case is processed for prosecution where the tax deducted is Rs.25,000 or more and is not deposited within twelve months of deduction, on Dev Multicom Pvt. Ltd. v. State of Jharkhand, and on the Court's own decision in D.N. Homes. The Department said financial distress and the pandemic could not be an alibi for late deposit of money collected on the Government's behalf, that pandemic restrictions were imposed only in March 2020 while the delay was not limited to that period, and that the 2008 circular did not assist because the delay exceeded a year. The matter was decided on 2024-04-15 by the High Court (Sibo Sankar Mishra J). On those facts the High Court held as follows. The petition was allowed and the entire proceeding arising out of 2(c) CC Case No.09 of 2023 and the consequential proceedings, so far as the petitioners were concerned, were quashed. The maximum delay of 394 days in depositing the TDS was well explained by the insolvency proceeding and the restrictions imposed during the COVID-19 pandemic, and those explanations ought to have been taken into consideration by the authorities; the case was directly covered by Dev Multicom and D.N. Homes because the prosecution had been initiated after the Department had received the TDS amount along with the interest.
The Court took the petitioners' explanation for the delay at face value against the sequence of events — the admitted insolvency proceeding, the approved resolution plan and the gradual clearing of statutory dues from cash flows, and the pandemic — and held that the authorities ought to have considered it. It applied the reasoning in Dev Multicom, extracted in para 6, that where the amount has already been deposited with interest and the criminal proceeding was launched after receiving that amount with interest, there is no reason for the proceeding to continue and its continuation amounts to an abuse of the process of the Court; and the reasoning in D.N. Homes, extracted in para 7, that the entire TDS with interest had by the time of consideration of the launching of prosecution gone to the exchequer so that no loss to the Revenue was standing to be viewed, and that the legislature deliberately used 'reasonable cause' in s.278AA where it used 'good and sufficient reasons' in ss.201 and 221 (paras 6, 7 and 10). In the words reproduced by the source cited on this page: "I am of the considered view that the maximum delay of 394 days for depositing the TDS amount to the revenue account have been well explained by the petitioners" The decision followed or applied Dev Multicom Pvt. Ltd. and another v. State of Jharkhand and another, 2023 454 ITR 48 (Jharkhand) — followed; M/s D.N. Homes Pvt. Ltd., Khurda and another v. Union of India, CRLREV No.408 of 2023 (Orissa) — followed.
It was decided by the High Court on 2024-04-15 and is reported as CRLMC No. 1921 of 2023 (High Court of Orissa at Cuttack); heard 08.04.2024. 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 278AA, section 279(1), section 201, section 221, 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 entire proceeding arising out of 2(c) CC Case No.09 of 2023 and the consequential proceedings, so far as the petitioners were concerned, were quashed. The maximum delay of 394 days in depositing the TDS was well explained by the insolvency proceeding and the restrictions imposed during the COVID-19 pandemic, and those explanations ought to have been taken into consideration by the authorities; the case was directly covered by Dev Multicom and D.N. Homes because the prosecution had been initiated after the Department had received the TDS amount along with the interest. It arises in Prosecution and TDS Defaults matters, on section 276B, section 278B, section 278AA, section 279(1), section 201, section 221 of the Income Tax Act 1961, and was decided by Sibo Sankar Mishra 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. Establish the sequence — that the entire TDS with interest was received and accepted by the Department before the complaint was filed — and put the dates in a table. Check the delay against the twelve-month benchmark in the departmental circular of 24.04.2008 and against the Rs.25 lakh and 60-day criteria in Circular No.24/2019, and say which limb the Department is relying on. Take the point that the sanction under s.279(1) was accorded without considering the explanation offered, and put the explanation on record at the show-cause stage so that there is something to point to. For any default on or after 1 October 2024, check the text of the proviso to s.276B from a current statutory source before advising, and check whether the period falls under the Income-tax Act 1961 or its successor — the corresponding provisions of the later Act (ss.476 and 477) carry an express bar where the tax is paid on or before the time prescribed for filing the quarterly statement; neither text is stated here because neither could be taken from a primary source on these passes. Be prepared for the Department to answer a quashing petition by pointing to the compounding route under the guidelines of 17 October 2024, as it successfully did before the same Judge in a later matter.
Validity check could not be completed. Validity check could not be completed, and two qualifications must be carried with this judgment. First, the same Judge in Binod Pattanayak v. Union of India, CRLMC No.3284 of 2023, decided 07.01.2025, and in Jaswant Singh v. Union of India, CRLMC No.236 of 2022, decided 23.12.2024 — both read on this pass — declined to quash s.276B prosecutions and instead relegated the accused to compounding under the CBDT guidelines dated 17.10.2024, in each case where this judgment had been cited as directly covering the matter. It was not distinguished or disapproved, but the practical approach in that High Court has changed. Second, this case concerns FY 2019-20. The Finance (No. 2) Act 2024 is understood to have inserted a proviso to s.276B with effect from 1 October 2024 barring prosecution where the tax deducted is paid before the time prescribed for filing the quarterly statement for that quarter; the enacted words and commencement of that proviso could NOT be verified from a current primary source on this pass, so nothing is stated about it and the label 'superseded by amendment' has not been applied. A later pass must verify the proviso and revisit this label. No search for an appeal against this judgment was carried out. On the verification pass a further datum was established, though not from a source this project will state statutory text from: the successor provision, s.476 of the Income-tax Act 2025, carries in its sub-section (2) an express bar in the same terms — the section does not apply if the payment has been made to the credit of the Central Government on or before the time prescribed for filing the statement under s.397(3)(b) — and s.477(2) carries the parallel bar for tax collected at source. That corroborates the substance of the 2024 proviso to s.276B and answers the open question whether a parallel bar exists for s.276BB, but the enacted words of the 1961 Act proviso and its commencement still require a primary source. 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 judgment reproduces an extract of the departmental circular F.No.285/90/2008-IT(Inv-I)/05 dated 24.04.2008 in para 5, and extracts of Dev Multicom Pvt. Ltd. v. State of Jharkhand, 2023 454 ITR 48 (Jharkhand) in para 6 and of the Orissa High Court's decision in M/s D.N. Homes Pvt. Ltd., Khurda v. Union of India, CRLREV No.408 of 2023, at its paras 20 and 22 in para 7. Those extracts are the Court's record of the circular and the earlier decisions and were not independently verified on this pass. Para 10 contains a transcription slip, 'the TDs amount', and para 4 'mense rea'. The distinction the D.N. Homes extract draws — that ss.201 and 221 speak of 'good and sufficient reasons' while s.278AA speaks of 'reasonable cause', and that the legislature used the different expressions deliberately — is worth noting but is quoted from that decision, which was not read on this pass. 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 entire proceeding arising out of 2(c) CC Case No.09 of 2023 and the consequential proceedings, so far as the petitioners were concerned, were quashed. The maximum delay of 394 days in depositing the TDS was well explained by the insolvency proceeding and the restrictions imposed during the COVID-19 pandemic, and those explanations ought to have been taken into consideration by the authorities; the case was directly covered by Dev Multicom and D.N. Homes because the prosecution had been initiated after the Department had received the TDS amount along with the interest.
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