No Prosecution for Delayed TDS Deposit Without Contumacious Conduct: Rajasthan High Court Shields Employee of Company Under CIRP

Hemant Paliwal was Vice-President (Finance and Accounts) at Binani Cement Limited, which deposited tax deducted at source for 2017-18 late; the earliest due date was 15 July 2017 (paras 3-4, 12). On 25 July 2017 the NCLT admitted a Section 7 IBC petition against Binani and appointed an Interim Resolution Professional (para 5). The TDS was paid with interest by 18 July 2018 (para 6). In 2025 the Deputy Commissioner (TDS) treated him as Principal Officer under Section 2(35) of the Income Tax Act, and the Commissioner (TDS), by an order of 28 March 2025 under Sections 279(1), 276B and 278B, directed that prosecution be initiated (paras 8-9). The Department said Binani had kept the deducted tax (para 14).

The Bench noted that from the admission order of 25 July 2017 the IRP was in charge of Binani: under Section 17 of the IBC management vested in the IRP, who became responsible for complying with every law on the company's behalf. At most, the petitioner could be treated as the person responsible for the ten days after the first default on 15 July 2017 (para 6). Prosecution cannot follow a venial breach of the Act unless the person responsible was guilty of contumacious or dishonest conduct (para 15). An order to commence prosecution results from quasi-judicial proceedings; the authority must exercise its discretion judicially on all relevant circumstances and is justified in refusing to prosecute a technical or venial breach (para 16). On the facts, only the two instalments due on 15 July 2017 could be in question; the petitioner was only an employee; Binani was under financial stress; the tax had been deducted, and the entire amount was deposited voluntarily with interest before any show cause notice; and his explanation was neither doubted nor rejected (para 17). Hindustan Steel Ltd. v. State of Orissa and a coordinate Bench decision in Future Infovision supported this view (para 18).