Facts of the Case

  • The petitioner, Brahmaputra Infrastructure Limited, faced prosecution for failure to deposit TDS for Financial Years 2013–14 to 2018–19.
  • Total compounding charges payable: ₹5,16,62,737.
  • The petitioner had already deposited approximately ₹1.35 crore in installments.
  • The petitioner claimed a refund of around ₹9.34 crore (approx. ₹9.44 crore as per pleadings) due from the Income Tax Department.
  • Multiple extensions were granted to deposit compounding charges, with the latest deadline extending to February 2024.

Issues Involved

  1. Whether the petitioner can seek adjustment or release of tax refund for payment of compounding charges.
  2. Whether such adjustment would facilitate closure of prosecution proceedings under TDS default.
  3. Whether the Revenue is obligated to release refund not otherwise adjustable against dues.

Petitioner’s Arguments

  • The petitioner submitted that:
    • A substantial refund is pending with the department.
    • The balance compounding charges should be adjusted against such refund.
    • Release of refund would enable compliance and closure of prosecution proceedings.

Respondent’s Arguments

  • The Revenue:
    • Relied on existing records and did not file a counter affidavit.
    • Maintained that closure of prosecution is conditional upon full payment of compounding charges.

Court’s Findings

  • The Court observed:
    • Prosecution can be closed only after full payment of compounding charges.
    • Refund, if due and not required for adjustment against other liabilities, should be released.
    • Such release would facilitate payment of compounding charges.

Court Order / Final Decision

  • The Court directed:
    • Refund amount (if payable and not adjustable elsewhere) shall be released to the petitioner.
    • The petitioner shall utilize the refund to pay remaining compounding charges.
    • Undertaking by petitioner to pay balance amount was taken on record.
    • Existing obligations for installment payments remain unaffected.
  • Writ petition disposed accordingly.

Important Clarification

  • The Court clarified:
    • Release of refund does not absolve the petitioner from complying with ongoing installment obligations.
    • Compounding remains conditional upon complete payment of dues.

 Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS31072023CW100132023_114956.pdf

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