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Informist, Monday, Aug. 24, 2026

NEW DELHI – Reinforcing the revenue department's policy, the Court of Additional Chief Judicial Magistrate, Special Acts, Central District, Delhi Wednesday passed an order against Naftogaz India Pvt. Ltd. that delayed deposit of tax deducted at source is a "serious offence warranting effective penal consequences", a senior finance ministry official said Monday. The judgment clarifies that the liquidation of a company will not negate its criminal liability for tax deducted at source defaults, the official said.

"Thus, the order reinforces the Revenue's prosecution policy by emphasising that the delayed deposit of TDS is a serious offence warranting effective penal consequences," the official said.

The issue traces back to 2012, from a survey carried out by the Chief Commissioner of Income Tax in Delhi at the premises of the company, wherein it was found that Naftogaz India had deducted tax at source aggregating to INR 176.86 million for 2009-10 (Apr-Mar) and had wilfully failed to deposit it within the prescribed time as mandated by Section 200 of the Income-tax Act, 1961. As on the date of survey, the cumulative tax deducted at source payable for both FY10 and FY11 was admitted at INR 212.19 million, the official said. "It was admitted that all TDS returns for FY 2009-2010 and FY 2010-11 were filed late, and FY 2011-12 returns had not been filed at all," the official said. 

The lower court ruled that non-deposit of tax deducted at source "constitutes a complete offence upon failure to remit the deducted tax within the statutory period." The subsequent liquidation of the company "does not extinguish criminal liability, nor does it absolve the director responsible for the affairs of the company of his liability under Section 278B of the Income-tax Act, 1961," the court said. The court clarified the deterrent purpose of prosecution under the Income-tax Act and further observed that failure to deposit tax deducted at source with the government is a serious fiscal offence, the finance ministry official said. 

The court has levied a fine of INR 1 million on the company, to be paid by the official liquidator from the assets or funds of the company. The court also sentenced the director of the company, Mahdoom Bava, to imprisonment for one year and 10 months along with a fine of INR 1 million. Failure to pay the fine will attract an additional simple imprisonment for three months, the official said. However, the default amount shall remain recoverable as per law, and the sentence will not absolve the director from the recovery, the official added.

Following an application, the court has suspended the sentence for 30 days and has released Bava on bail. The matter has been listed for further hearing on Tuesday. Naftogaz India was a private engineering and construction company founded in 2005 and headquartered in Noida focused on oil and gas infrastructure. The company went into provisional liquidation in 2012.  End

Reported by Priyasmita Dutta

Edited by Pankaj Aher

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