Prosecution can be ordered in the case of late payment of TDS

Whether on company’s default to deposit TDS within the prescribed time, prosecution can be ordered against such company even though a company is not a natural person?


Facts of the case: - the assessee-company deducted an amount as TDS but deposited this amount with interest to the credit of the central government after the prescribed time limit. Thereafter, show-cause notice was issued to the company and its director, being the principal officer of the company, for the prosecution under section 276B and Section 278B of income tax act. The company contends that TDS has already been deposited, there was no default and no prosecution can be ordered.

Held: - once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period. If the payment is not made within that period, there is default and an appropriate action can be taken under the act. Interpretation canvassed by the appellant would make the provision relating to prosecution nugatory. It is true that the act provides for imposition of penalty for non-payment of tax. That however, does not take away the power to prosecute accused person if an offence has been committed by them.

Company is liable to prosecution even though, it is not a natural person but legal or juristic person. Principal Officer of the company could be prosecuted if no reasonable cause was shown by him for late payment or non-payment. [Madhumilan Syntex Ltd. Vs. Union of India (2007) 160 taxman 71(SC)].
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