Delhi High Court

District Excise Officer vs Income Tax Officer on 20 December, 1999

Equivalent citations: (2001) 69 TTJ Del 312

ORDER

Keshav Prasad, A.M.

The appeals have been filed by the assessee against the order of the Commissioner (Appeals), dated 29-7-1998, against imposition of penalty under section 272A(2)(c) of the Act pertaining to assessment years 1995-96 and 1996-97. As the issue is common in both the appeals, these are being disposed of by a common order for the sake of convenience.

2. The assessee is the part of Excise Department, Government of U.P. As per the provisions of section 206C of the Act a person being seller of alcoholic liquor, forest produce, scrap, etc., has to collect tax from the receipt of amount from the buyer. The authority collecting the tax has to deposit the same to the Government exchequer within the time prescribed. It has also to prepare half-yearly return for the period ending 30th September and 31st March, in each financial year and submit the same to the Income Tax Authorities within such time as may be prescribed. The assessee collected tax and deposited the same in time. It also issued a certificate to the buyer to this effect. However, the half-yearly return as prescribed was submitted late. The assessing officer, therefore, initiated penalty proceedings under section 272A(2)(c) of the Act. In response to initiation of penalty proceedings the assessee submitted that it has already collected the tax and deposited the same in time but the half-yearly return was not filed in time because it was under bona fide belief that nothing further was to be done. There was no wilful default on the part of the assessee and there was no loss to the revenue also. The assessing officer considered the submissions of the assessee but held that it has deliberately and wilfully failed to furnish the half-yearly return in prescribed form in due time and was exigible to penalty under section 272A(2)(c) of the Act. He, therefore, imposed a penalty of Rs. 1,50,000 for assessment year 1995-96 and Rs. 66,000 for assessment year 1996-97. Aggrieved by the order of the assessing officer an appeal was filed, The same plea was taken before the Commissioner (Appeals). It was further claimed that once the tax has been collected in time and has been deposited in time non-filing of half-yearly return was only technical default based on bona fide belief and does not attract any penalty. Reliance was placed on the decisions in Hindustan Steels Ltd. v. State of Orissa (1972) 83 ITR 26 (SC), Rajasthan Tribal Area Dev. Co-operative Federation Ltd. v. Income Tax Officer (1998) 4 DTC 150 (Jp-Trib): (1998) 60 TTJ (Jp-Trib) 427, Mahendra Prakash Saraf v. Dy. CIT (1998) 3 DTC 687 (Del-Trib) : (1998) 64 ITD 382 (Del-Trib), Sudershan Auto & General Finance v. CIT (1997) 60 ITD 177 (Del-Trib) and Tribunal order in the case of Agarwal Trading Co. ITA No. 5853 (Del) 91 and Apsara Cinema ITA No. 5465 (Del) 93. It was also claimed that the appellant was not assisted by the legal experts and it was a case of venial breach not motivated by any element of mens rea. Reliance was placed on the decision of the Hon'ble Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. & Ors. (1979) 118 ITR 326 (SC) for the proposition that there is no presumption that every person knows the law.

3. The Commissioner (Appeals) considered the submissions of the assessee and observed that admittedly the default was committed by the assessee. The purpose for calling upon the half-yearly statement was to know and ascertain the details of liquor contractors who have been awarded contracts and whether they are assessed to income-tax or not. The liquor contractors normally form the firms for an year or so and after expiry of the contract such firms are dissolved and a new firm is formed. Form No. 27EA (half-yearly return) was an important instrument for the department to keep track of such parties. He also held that provisions relating to filing of half-yearly returns are on the statute since Ist June, 1983, and therefore, it was not new to the assessee. Even the assessee has been dealing with such auctions since long and, therefore, the ignorance of the knowledge of the provisions of section 206C of the Act was only an eyewash. While relying on the decisions in Shah Traders v. Dy. CIT (1996) 56 lTD 33 (Pat-Trib) and Shri Dadar (W.Rly) Sikhachakra Vardhman Tap Ayambil Khata v. Dy. Director (Inv.) (1996) 59 lTD 253 (Bom-Trib) the Commissioner (Appeals) held that it was a fit case of imposition of penalty. He accordingly confirmed the imposition of penalty in principle but reduced the quantum of penalty. Aggrieved by the said order of the Commissioner (Appeals) the assessee is in appeal before us.

4. The learned counsel reiterated his arguments which were made before the Commissioner (Appeals). On the other hand, the learned Departmental Representative stated that all the decisions relied on by the learned counsel based their finding on the decision of the Hon'ble Supreme Court in the case reported in (1972) 83 ITR 26 (SC) (supra). It was argued that the said decision was given under the Sales Tax Act wherein it was held that penal provisions were quasi judicial proceedings and, therefore, mens rea was very important factor. But subsequently the Hon'ble Supreme Court in the case of Addl. CIT v. I. M. Patel & Co. (1992) 196 ITR 297 (SC) has held that mens rea need not be proved by the department in penalty proceedings. Hence, the ratio laid down in the case reported in (1972) 83 ITR 26 (SC) (supra) was not applicable in the instant case. It was also argued that there was no reasonable cause for the failure of the assessee and hence the assessee was not entitled to the benefits of section 273B of the Act. Reliance was placed on the cases Superintending Engineer v. Income Tax Officer (1996) 54 TTJ (Jp-Trib) 608 and Dasrat Lal C. Shah v. Income Tax Officer (1988) 26 ITD 33 (Ahd-Trib). It was argued that on the basis of above facts the order of the Commissioner (Appeals) deserves to be confirmed. In his counter reply the learned counsel stated that the issue is covered by various decisions of Delhi Bench of the Tribunal and, therefore, the penalty confirmed by the Commissioner (Appeals) deserves to be deleted.

5. We have considered the rival submissions. As per provisions of section 206C of the Act a person being seller of alcoholic liquor, etc. has to collect tax from the receipt of amount from the buyer. He has to also deposit the same to the Government Exchequer within the prescribed time and a certificate to this effect has also to be given to the buyer. The section also provides that in addition to the above the seller has also to prepare the half-yearly return for the period ending 30th September and 31st March in each financial year and submit the same to the Income Tax Authority within the prescribed time. If there is any violation of each of the provisions mentioned above the same was punishable. Section 206C(7) provides that if the seller does not collect tax or after collecting it fails to pay within the stipulated time it will be liable to simple interest @', 2 per cent per month or part thereof during the period of default. But section 272A(2)(c) provides that if the seller fails to furnish half-yearly return as mentioned above as prescribed under section 206C he will be liable to penalty @ Rs 100 for every day during which failure continues. As in the instant case there was failure to file its monthly returns the assessing officer imposed penalty which was also confirmed by the Commissioner (Appeals) except certain modifications in quantum of penalty.

6. There is no dispute that the default is committed by the appellant. But every default does not necessarily attract penalty. Section 273B has provided that penalty under section 272A was not attracted if the assessee proves that the said failure was due to reasonable cause. We find that the imposition of penalty under section 272A(2)(c) was considered by Delhi Bench in the case of Agarwal Trading Co. (supra) wherein it was held as under :

"There is no dispute that the assessee deducted and paid the tax within the time permissible, while there is default in furnishing the prescribed return. We note that the default is only venial in nature and the judgment of Hon'ble Supreme Court in the case of Hindustan Steels Ltd. v. State of Orissa (1972) 83 ITR 26 (SC) is squarely applicable to the facts and circumstances of the case."

7. Similarly, the Jaipur Bench of the Tribunal in the case of Rajasthan Tribal Area Development Co-operative Federation Ltd. (supra) held as under ..

"We have noticed that there is no default on the part of the appellant either in deducting the tax at source or in depositing the same into Government account. The only default is in furnishing statement of tax deduction at source in Form No. 26 which in view of appellant's explanation is only a technical default for which we are of the opinion that such a penal action is not justified."

8. In this case also the Tribunal has relied on the decision of Hon'ble Supreme Court in (1972) 83 ITR 26 (SC) (supra).

9. Under the similar circumstances the Delhi Bench of the Tribunal in the case of Mahendra Prakash Saraf (supra) has held as under :

"I find that the assessee had no intention to violate the law. Due amount of tax was deducted. It was paid to the credit of the Government in time. Only Form No. 26A was not filed. Having regard to the facts of the case in my opinion it is not a circumstance under which penalty can be sustained There existed a bona fide belief in not furnishing Form No. 26A. "

10. In Sudarshan Auto & General Finance (supra) also the Delhi Bench of the Tribunal supported the same view.

11. The above decisions will make it clear that while coming to a particular decision various Benches of the Tribunal have relied on the decision of the Hon'ble Supreme Court in the case of Hindustan Steel (supra). Though an argument has been raised by the learned Departmental Representative that the Hon'ble Supreme Court in the case of Hindustan Steel deleted the penalty merely on the ground that there was no deliberate or wilful defiance of law, but since then enough water has flown and the reliance was placed on the decision of Hon'ble Supreme Court in (1992) 196 ITR 297 (SC) (supra), We find that the decision of Hon'ble Supreme Court in the case of Hindustan Steels Ltd. was not based merely on this assumption. The Hon'ble Supreme Court in its order has observed as under :

"Even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute."

12. From the facts mentioned above it is clear that the default committed by the assessee was of a venial nature and in view of the decision of the Hon'ble Supreme Court in the case of Hindustan Steels Ltd. v. State of Orissa (1972) 83 ITR 26 (SC) and direct decisions of various Benches of the Tribunal mentioned above we are of the view that Commissioner (Appeals) was not justified in confirming the penalty imposed by the assessing officer. We accordingly cancel the penalty for both the years imposed by the assessing officer and confirmed by the Commissioner (Appeals).

13. In the result, the appeals are allowed.