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Section 276B of the Income-tax Act, 1961 - Offence and Prosecution - Failure to pay tax on distributed profits of domestic companies/deducted at source - Assessment years 1984-85 and 1985-86 - Whether change in section 276B with effect from 1-4-1989 amounts to 'omission' and not 'repeal' and, therefore, section 6 of General Clauses Act cannot save prosecution under section 276B initiated after 1-4-1989 - Held, yes - Whether since change in section 276B amounts to an 'omission', all actions under omitted part should stop at point where omission finds them and, hence, prosecution initiated under section 276B after 1-4-1989 is not maintainable - Held, yes FACTS During the assessment years 1984-85 and 1985-86, the applicant-firm made certain interest payments to various parties but failed to deduct tax at source. The department launched prosecution under section 276B on 28-2-1990. The applicants filed discharge application, contending, inter alia, that in view of the change in the law with effect from 1-4-1989, the prosecution was not maintainable. Said discharge application was rejected by the impugned order. On revision : HELD The amended provisions of section 276B clearly state that with effect from 1-4-1989, failure to deduct tax is no longer an offence. In fact, penalty provision under section 271C has been inserted with effect from April, 1989, for failure to deduct tax. [Para 12] The change in section 276B with effect from 1-4-1989 amounts to 'omission' and, hence, section 6 of the General Clauses Act cannot save the prosecution. The prosecution in the instant case, was, admittedly, launched on 28-2-1990, when failure to deduct tax was no longer an offence. [Para 18] Since the change in section 276B amounts to an 'omission', all actions under the omitted part should stop at the point where the omission finds them and, hence, the prosecution in the instant case was not maintainable. [Para 19] In the circumstances, the impugned order passed by the Magistrate on the discharge application was liable to be quashed and set aside. [Para 20] CASES REFERRED TO P.V. Mohammad Barmay Sons v. Director of Enforcement [1993] 76 Comp. Cas. 27 (SC) [Para 10], ITO v. Anil…

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