The Jharkhand High Court has quashed the criminal proceedings against a petitioner who had been facing charges under Sections 276B and 278B of the Income Tax Act, 1961. The petitioner's firm had allegedly failed to deposit the Tax Deducted at Source (TDS) amount with the Income Tax Department in accordance with the provisions of the Income Tax Act.

The petitioner had filed a plea seeking the quashing of the criminal proceedings, contending that his firm had been unaware of the TDS requirement for the last quarter of the fiscal year. It was argued by the petitioner's legal counsel that upon discovering the TDS provision, the petitioner promptly engaged a chartered accountant to address the matter. Moreover, the petitioner maintained that the TDS amount along with interest had already been deposited, rendering the prosecution case unnecessary.

Opposing this stance, the respondent's legal representative contended that the failure to fulfill statutory obligations justified the initiation of the case by the Income Tax Department. It was emphasized that the subsequent deposit of the TDS amount with interest did not affect the merits of the prosecution.

Upon careful consideration of the arguments, the court noted that the delay in depositing the TDS amount had indeed occurred before the initiation of the prosecution, and the petitioner had adequately substantiated reasons for the lapse. Additionally, the court highlighted that the petitioner had already rectified the situation by depositing the TDS amount along with the interest, obviating the need for further action under section 276(B) of the Income Tax Act.

Citing a precedent from the case of K.C. Builders and Another v. Assistant Commissioner of Income Tax, the court emphasized that in the current scenario, penalty proceedings had not even been initiated against the petitioner. It concluded that continuing the proceedings against the petitioner would amount to an abuse of legal process.

In light of these considerations, the court ruled in favor of the petitioner and quashed the entire criminal proceedings, along with the order taking cognizance of the case.

Case Title: M/s A.M. Enterprises and Anr. vs. State of Jharkhand and Anr.

Case Citation: 2023 LiveLaw (Jha) 33

Case No.: W.P.(Cr.) No. 577 of 2022

Advocate for the Applicant: Mr. Parth Jalan and Ms. Shivani Jaluka

Advocate for the Respondent: Mr. R.N Sahay and Mr. Gaurav Raj

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