Law: Income Tax Ordinance, 1979

Section: 194A,200,201(1A),276,278B279

Income-tax----Offences and prosecution---Tax deducted at source but not deposited with Central Government within prescribed time---Interest/penalty proceedings and prosecution are separate and independent---Existence or absence of one no bar to the others---Charging of interest under S.201(1-A), Indian Income Tax Act, 1961 does not obliterate prosecution----Non-initiation of penalty proceedings does not lead to presumption that default was for good and sufficient reasons---No statutory requirement that assessee to be served with notice before initiating criminal proceedings against him---Indian Income-Tax Act, 1961, Ss.194-A, 200, 201(1-A), 276, 278-B & 279---Indian Income Tax Rules, 1962, R.30(1)(b)(i)---Indian Criminal Procedure Code, 1973, S.482. In the Income Tax Act, 1961, there are separate provisions for levy of interest, penalty and criminal prosecution. The charging of interest has a different purpose: to compensate the Department for depriving it of the use of the money during the period the payment was withheld. Criminal proceedings have nothing to do either with the levy of interest or penalty. In the absence of these proceedings also, criminal prosecution can be launched if the ingredients of the offence under section 276-B of the Income Tax Act, 1961, namely, failure to pay the tax deducted at source to the credit of the Central Government within the prescribed time, are made out. The assessee can be charged with interest and also punished by prosecution. The legal position can be summarised as follows: (i) The scope and purport of interest/penalty proceedings and prosecution under the Income-tax Act are separate and independent. The existence or the absence of the one or the other is no bar to any one of them: (ii) Simply charging of interest by the Department under section 201(1-A) of the Act, for the delay in the payment of the amount to the Central Government, does not obliterate the prosecution; (iii) The non-initiation of penalty proceedings does not lead to a presumption that the default in payment was for good and sufficient reasons or that the assessee was not obliged to establish that there were good and sufficient reasons for the…

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