MUMBAI: A city sessions court has dismissed appeals and confirmed four convictions for non-deposit of TDS amount within the stipulated time; a ruling that the income-tax department prosecutor says is uncommon in Mumbai’s legal circles for such an offence.
Ichibaan Automobiles Pvt Ltd and GMS Motors Pvt Ltd, along with GMS directors G M Singh and Parveen Nindrajog, had filed criminal appeals in July 2019 against an order of a metropolitan magistrate convicting them for defaulting on payment of tax deducted at source on time.
A Rs 5,000 fine each was imposed on both the companies and Nindrajog, while 3 months’ RI was awarded to Singh, a director in both companies.
TDS: Cos, directors cite financial issues for late payment
The companies and directors, through their lawyers Sujay Kantawalla and Ashish Chavan, argued that they had deducted tax of Rs 7.5 lakh in March 2010 in the case of Ichibaan and Rs 42 lakh in the case of GMS, but were prosecuted for not having deposited it within the legal deadline. They contended that the charge against them was “vague” and no admissible evidence was produced.
They said the sanction to prosecute was granted without any application of mind by the I-T commissioner when their plea to settle the dues was pending. They had paid the TDS later with interest voluntarily and the default was unintentional and due to financial difficulties, they contended, adding that it was a “reasonable cause” with no loss to the government.
The sessions court, however, held that even if a financial crisis is presumed, it makes no difference for payment of deducted taxes and hence the reason is not sufficient.
“The entire TDS with interest was paid before showcause notice was issued. The sanction order did not even record our CA’s explanation,” they argued. Both the directors are senior citizens in their 70s and in “precarious health”, Kantawalla informed the court.
But special public prosecutor Amit Munde, for the I-T department, said the I-T Act clearly requires TDS to be deposited in government treasury by the 7th of the next month and the accused cannot plead ignorance of law. Munde also said mere filing of an application to settle the dispute or dues does not absolve anyone of liability nor does it bar the department from initiating legal proceedings.
On December 16, sessions judge Chitra Hankare held that the magistrate was right in convicting them. She said the I-T department had issued a showcause to the company and its director separately, and also held that the charge had no misleading errors. The court also found that the prosecution sanction was valid and said “it is not necessary that each and every fact in detail should be mentioned in sanction.” The court held, “In the sanction order, it is clearly mentioned that the accused failed to deposit the amount without reasonable cause, and that the sanctioning authority has applied its mind to the excuse given by the accused for not depositing it.”
The sessions court said, “Even if it is presumed that the TDS was credited to the government at a belated stage, it is necessary to see whether it will absolve penal liability of accused.” In its order against Singh, the court noted that the I-T department prosecutor had submitted that the accused is “a habitual offender and that there are 70 to 72 defaults and other cases pending against him.” “Confirmation of conviction for default in TDS payment is rare and landmark in Mumbai,” said Munde. The court also rejected the plea for a stay on the judgment and directed issuance of non-bailable warrant against the two accused as they were not present.
