Introduction
In a significant development in the realm of tax litigation, the Hon’ble High Court of Allahabad has granted interim relief to two applicants in a case concerning delayed deposit of Tax Deducted at Source (TDS). The decision is noteworthy for its interpretation of Section 276B of the Income Tax Act, especially in situations where tax liabilities, although paid late, are regularized with interest and penalty.
This case highlights a growing judicial inclination to distinguish between deliberate tax evasion and procedural lapses that are later rectified. It brings much-needed clarity and relief to taxpayers and directors who may face prosecution for technical defaults.
Background of the Case
The matter pertains to the Financial Year 2018–19, during which the applicants, including Mr. Geetamber Anand (Director), were alleged to have defaulted in depositing TDS within the prescribed time. However, the tax dues were eventually paid along with interest and penalty, which, according to the applicants, removes the element of “wilful failure” to pay tax as required under Section 276B of the Income Tax Act, 1961.
The prosecution was initiated based on a show cause notice dated 29th March 2024, which culminated in a summoning order by the trial court on 18th September 2024.
Arguments and Legal Position
The applicants, represented by Mr. Vivek Sarin, argued that the mere delay in depositing TDS—when subsequently regularized—should not trigger prosecution under Section 276B. They emphasized that the legislative intent behind the provision is to penalize wilful and deliberate non-payment of tax, not cases where there is no intent to evade.
In support of their contention, the applicants placed reliance on the decision of the Bombay High Court in Hemant Mahipatray Shah & Anr. v. Anand Upadhyay & Anr., 2024 SCC OnLine Bom 2618, where similar facts led the court to conclude that no prima facie case for prosecution existed.
Court’s Observation and Interim Relief
Taking note of the submissions, the Hon’ble Allahabad High Court issued notice to the Union of India, represented by Mr. Ashish Agrawal, who sought time to file a counter affidavit. The matter is now listed for further hearing on 9th July 2025.
Importantly, the Court has stayed the ongoing proceedings before the trial court in the interim, offering much-needed relief to the applicants and setting a persuasive precedent for similar matters.
Conclusion
The Allahabad High Court’s interim relief is a welcome move that brings clarity to how technical non-compliance with TDS timelines should be treated, especially when accompanied by subsequent corrective measures. It reflects a judicious approach that balances enforcement with fairness and is likely to influence similar cases going forward.