The Rajasthan High Court has quashed the prosecution sanction against an e-commerce company that faced legal action for delaying the deposit of Tax Deducted at Source (TDS). The delay occurred due to late bill submissions by e-commerce platforms like Amazon, Naaptol, and Ebay. Despite the delay, the company voluntarily deposited the TDS along with 18% interest. The Court ruled that the prosecution was unjustified, as penal proceedings cannot be initiated unless there is malicious intent.
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Case Background
- The case involved M/s Fortune Infovision Pvt. Ltd., a Jaipur-based company engaged in e-commerce transactions.
- The company was required to deposit TDS for the Assessment Year 2014-15 on payments made to other companies.
- Due to delays from e-commerce platforms in submitting bills, the company was unable to deposit the TDS on time.
- After 10 months, the company deposited the due amount along with 18% interest.
- Despite this, in 2018, a notice under Section 279(1) of the Income Tax Act, 1961, was issued to the company.
- The Commissioner of Income Tax (TDS), Jaipur, later sanctioned prosecution against the company and its directors.
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The case was heard by a Division Bench comprising Justice Avneesh Jhingan and Justice Maneesh Sharma. The Court made the following observations:
- No Malicious Intent: “Penal proceedings cannot be initiated merely because it is lawful to do so unless the conduct of the assessee is malicious.”
- TDS Was Deposited Voluntarily: “It is undisputed that before the issuance of a show-cause notice, the TDS was deposited voluntarily along with interest.”
- Delay Was Due to External Factors:
The Court acknowledged that the delay was due to the late submission of bills by e-commerce platforms, which impacted the company's ability to calculate and deposit TDS on time. - Reference to Supreme Court Judgments:
The Court cited the Supreme Court’s rulings in:- Madhumilan Syntex Ltd. & Ors. v. Union of India & Ors. [(2007) 11 SCC 297] – which states that legal actions can be taken for non-compliance with statutory procedures.
- Hindustan Steel Ltd. v. State of Orissa [(1969) 2 SCC 627] – which holds that penalties should not be imposed unless the violation is intentional or malicious.
- Final Verdict:
The Court ruled that delayed compliance alone does not justify prosecution and set aside the Commissioner’s sanction order.
“The delayed compliance of the provision of deducting and depositing TDS alone shall not suffice for grant of prosecution sanction.”
