Rajasthan HC Quashes Prosecution Sanction Against E-Commerce Company For Delay In Depositing TDS Due To Late Submission Of Bills By Amazon, E-Bay

Rajasthan High Court set aside prosecution under Income Tax Act, 1961 (“the Act”), against the petitioner-company whose business activity related to e-commerce transactions, and owing to delay on part of the companies like Amazon, Naaptol, Ebay, etc. in submitting the bills, the petitioner got delayed by almost 10 months in submitting the deducted TDS.

The division bench of Justice Maneesh Sharma and Justice Avneesh Jhingan held that since the TDS was deposited voluntarily by the petitioner, that too along with interest for delay, no case was made out against the petitioner-company.

The Court opined that it was a settled proposition that penal proceedings could not be initiated merely because it was lawful to do so unless the conduct of the assessee was malicious.

For the assessment year 2014-15, the petitioner was liable to deposit the TDS, deducted from the payments made to the other companies. However, being related to e-commerce transactions, and owing to delay by e-commerce companies in submitting the bills, the petitioner got delayed in fulfilling this obligation.

However, after a delay of almost 10 months, the TDS was deposited by the petitioner along with an interest at the rate of 18%.

Despite this, the petitioner was issued with a notice, in 2018, under Section 279(1) of the Act followed by the sanction being granted by the Commissioner to prosecute the petitioner and its directors for failing to comply with the procedures in the statute. Hence, the petition was filed.

After hearing the contentions, the Court held that,

“…the explanation given by the petitioners was neither doubted nor rejected. The case in hand is not of TDS not being deducted and deposited. It is undisputed that before issuance of show cause notice, the T.D.S. was deposited voluntarily by the petitioner-company along with the interest. The delayed compliance of provision of deducting and depositing TDS stand alone shall not suffice for grant of prosecution sanction.”

Accordingly, the petition was allowed, setting aside the order of the Commissioner that granted sanction to prosecute the petitioner and its directors.

Title: M/s Fortune Infovision Pvt. Ltd. & Ors. v Commissioner of Income Tax

Citation: 2025 LiveLaw (Raj) 125

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