Delhi High Court
Wings Wear (P.) Ltd. vs Income-Tax Officer. on 30 January, 1990
Equivalent citations: 1990 33 ITD 41 Delhi
ORDER
1. The Commissioner of Income-tax, Delhi-II, New Delhi noticed that the assessed had entered into the following four contracts exceeding Rs. 50,000 for stitching for Maruti Udyog Ltd. for which the particulars relating to the contract in the prescribed Form No. 52 had not been furnished within one month of the making of those contract :-
Date of Contract
Amount of Contract
3-10-1983
Rs. 62,500
15-11-1983
Rs. 56,250
3-12-1983
Rs. 65,625
4-11-1984
Rs. 50,000
The learned Commissioner therefore, issued a notice under section 285A (2) to the assessed asking it to show cause why fine as envisaged in section 285A (2) be not imposed on it. After considering the reply dated 11-5-1987 of the assessed the learned Commissioner took the view that the assessed had committed the default. The particulars were filed by the assessed in Form No. 52 on 14-5-1987. He levied a fine of Rs. 5,000 on the assessed under the aforesaid provision.
2. On behalf of the assessed the contentions raised in the reply dated 11-5-1987 were reiterated and additionally reliance was placed on the following decisions :-
(1) Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC);
(2) Vallabhdas Manjibhai Dholakia v. CIT [1975] 98 ITR 403 (Guj.);
(3) Addl. CIT v. Khayam Constructions [1980] 123 ITR 573 (AP); and
(4) Kaushal Diwan v. ITO [1983] 3 ITD 432 (Delhi) (TM).
He submitted that substantial compliance had been made by the assessed and that the default if any, was merely technical for which no fine needed to be imposed in exercise of judicial discretion. Lastly he submitted that the provisions of section 285A were deleted with effect from 1-4-1988 by the Finance Act, 1988 for the reason the section 195C was already there. On the other hand, the learned Departmental Representative submitted that the assessed was not a new contractor and as such the default made by the assessed was not excusable. Secondly it was said that the purpose of section 194C was different and that so long as section 285A was on the Statute Book, the default committed had to be punished.
3. The rival submissions as also the decisions referred to above have been duly considered. The first thing which requires to be noticed is that so far as the fourth contract is concerned, its value did not exceed Rs. 50,000 and therefore, it could not be taken into consideration at all for the purposes of levy of penalty under section 285A. Secondly as held in the case of Vallabhdas Manjibhai Dholakia (supra), by the Gujarat High Court, the information is required to be furnished to a taxing authority in Form No. 52 with a view to plug the evasion of tax. This provision was omitted by Finance Act, 1988 with effect from 1-4-1988 and while explaining the origin of clause 50 of the Finance Bill, 1988 it was mentioned in the Memorandum explaining the provisions of the said Bill [vide [1988] 170 ITR 197 Statute Section] as follows :-
"In view of the provisions of section 194C of the Income-tax Act, providing for deduction of tax at source by a person making payment to a contractor, the requirement of obtaining information under section 285A of the Act is no longer considered to be necessary.
Therefore, as a measure of rationalisation it proposed to delete section 285A of the Income-tax Act.
This amendment will take effect from 1st April, 1988".
It appears that there is a Form No. 26C prescribed with reference to section 194C. A comparison of Form No. 19C and Form No. 52 shows that they both require the date of the contract, total value of the contract, nature of the contract and date by which contract, work would be completed. In other words, though the forms are not exactly identical, the information required there under was substantially the same. The assessed had explained in its reply dated 11-5-1987 that information in Form No. 26C was already in possession of the department and therefore was no possibility of any leakage of revenue in the present case and substantial compliance with the provisions of section 285 could be deemed to have been already made. It was thus a case of technical default. In the case of Hindustan Steel Ltd. (supra) the Supreme Court laid down that penalty would not be imposed merely because it is lawful to do so and that whether penalty should be imposed for violation to perform a statutory obligation was a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances and further that when there is a technical or venial breach or where the breach flows from the bona fide belief that the offender is not liable to act in the manner prescribed by the statute, no penalty would be imposable. In the case of Khayam Construction (supra) the Andhra Pradesh High Court held that the provision of section 285A for imposition of fine was not mandatory but directory and that the power of the Commissioner to levy fine under section 285A had to be exercised by him judicially, fairly and not arbitrarily and whimsically. There is no decision contrary to the same, pointed out on behalf of the department. Further views to the same effect were also expressed in the Third Member decision of Delhi Bench A in the case of Kaushal Diwan (supra). In that case also the assessed had failed to furnish particulars under section 285A (1) in time but had filed them when called for there also the same views were expressed by the Appellate Tribunal. It has already been seen that the Legislature while deleting the provision of section 285A was on considering the fact that section 194C which was already on the statute book, sufficed in order to plug evasion. I am therefore, of the considered view that the fine imposed by the learned Commissioner cannot be upheld in the facts and circumstances of the present case. The same is accordingly deleted.
4. The appeal is accordingly allowed.
