TMI Blog1996 (10) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... rce from the monthly interest credited in the accounts of 49 depositors as those depositors had requested the assessee not to deduct any tax at source since their income will be below the taxable limit and they will issue Form No. 15H in accordance with section 197A(1A) of Income-tax Act, 1961. The assessee also furnished Form No. 26A on 20th May, 1994 vide Receipt No. 01139 and Form No. 27A on26th April, 1994vide Receipt No. 000116. 3. Shri Pushkar Bhatnagar, the ACIT, Hqrs. VI, New Delhi on behalf of the CIT, Delhi-VI, New Delhi issued a show-cause notice dated 9-11-1995 under section 272A(2)(f)/274 read with section 197A of Income-tax Act, 1961 to the assessee stating that the assessee has failed to deliver a copy of the declaration mentioned in section 197A(2) read with rule 29C(5) of Income-tax Rules, 1962 within the due time, i.e., on or before 7th day of the month next following the month in which the declaration was furnished by the depositors to the assessee. It was further stated in the said show-cause notice that since the assessee appears to have, without any reasonable cause, failed to deliver in due time copy of the declaration in Form No. 15H in the cases of list e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply the judgment of Hon'ble Supreme Court in the case of CIT v. J. H. Gotla [1985] 23 Taxman 14J was cited. The assessee further submitted that there was no element of guilty intention or deliberateness on the part of the assessee in not filing the declarations in Form No. 15H. The assessee submitted the undated forms 15H to the ITO as desired by him and then dated them as per the instructions given by the ITO. The assessee submitted that they still hold the undated counterfoils/duplicates with them. The assessee was ignorant about the requirement of furnishing these declaration forms to the CIT and they depended on their Tax Consultant. The Tax Consultant Shri H.K. Mehra has furnished an affidavit in which he confirmed his ignorance about the relevant provision of law and has also stated that he did not advise the assessee to file these forms in time as required by law. Shri H.K. Mehra in his affidavit dated4th December, 1995has further confirmed that the assessee-firm is in no way responsible for this unintended lapse on their part. 6. The assessee submitted a further reply dated10-1-1996. It was pointed out in this petition that the assessee has timely and promptly complied w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril, 1996 imposing a penalty of Rs. 41,28,700 @ Rs. 100 per day for total delay of 42,287 days computed as per details given in the Annexure 'B' of the said order. 9. The learned CIT after dealing with the submission made on behalf of the assessee, inter alia, observed that the assessee's contention that his consultant was not aware of the provisions of section 197A of the Act and that the assessee was not advised by his consultant is totally untenable firstly as "ignorancia juris non-excusat". He further expressed that it is very strange as to how a practising Chartered Accountant is not aware of the provisions of section 197A(1A) particularly when the assessee was advised to file Form No. 27A on26th April, 1994. The CIT further held that the assessee was aware of his responsibilities and obligation to obtain 15H forms from the depositors for non-deduction of TDS on the interest payable to them which is clear from the fact that the assessee had filed Form No. 27A to the Income-tax Officer, TDS. The assessee had 15H forms in his possession which he failed to file with the CIT, Delhi-VI as per the requirement of law. The assessee's contention that the forms submitted during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that provisions of section 197A(1A) prescribes that no deduction of tax at source under section 194A shall be made if such person (the recipient of interest) furnishes to the person responsible for paying any income of the nature referred to in section 194A, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. The said provision does not prescribe any time limit by which the declarant payee is required to furnish such a declaration in Form No. 15H to the payer. 12. Mr. Sharma further stated that section 194A requires the person responsible for paying interest to deduct tax at source at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier. In the present case, the interest was credited every month in the account of these depositors and the Form No. 15H to be filled in accordance with the provisions of section 194A read with section 197A ought to have been received every month from the amount of interest so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Chief Commissioner or Commissioner. In the present case, the show-cause notice has been issued by the ACIT, Hqrs. on behalf of the Commissioner of Income-tax, Delhi-VI,New Delhi. The penalty proceedings ought to have been initiated by the CIT himself and he could not validly delegate the power to initiate penalty proceedings to his subordinate authorities. The satisfaction about the initiation of penalty under the aforesaid section has to be recorded by the Assessing Officer himself and he cannot levy the penalty on the basis of borrowed satisfaction made by the ACIT, Hqrs. It is a statutory function, which could be validly done by the CIT and not by any of his subordinate authorities. 15. Shri Sharma further submitted that the assessee was ignorant about the relevant, provisions requiring the assessee to submit a copy of Form No. 15H to the CIT before the prescribed date. His consultant Shri Harish Kumar Mehra was also ignorant about the relevant provisions of law. Shri Harish Kumar Mehra, the learned Chartered Accountant, who was looking after the taxation work of the appellant-firm has given an affidavit to confirm all these facts. The assessee did not derive any ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by these depositors with the assessee. Such action of giving benefit of secrecy to the depositiors enables the assessee to get maximum deposits from the public. It is well known that various foreign banks, who provide the benefit of secrecy to their clients receive substantial deposits from the persons belonging to different countries. Such a benefit has been derived by the assessee by not timely furnishing Form No. 15H. The learned D.R. also placed reliance on the judgments in Aggarwal Chamber of Commerce Ltd. v. Ganpat Rai Hira Lal [1958] 33 ITR 245 (SC) and Rishikesh Balkishandas v. I. D. Manchanda, ITO [1987] 167 ITR 49/34 Taxman 305 (Delhi). He also relied upon the elaborate reasons mentioned in the order of the CIT. The learned D.R. further submitted that the affidavit given by Shri Harish Kumar Mehra, Chartered Accountant, who looked after the taxation work of the firm is like a self-serving document and cannot in any manner help the assessee. He further submitted that ignorance of law is not a valid excuse. The learned D.R. thus strongly supported the order of the CIT. 17. We have carefully considered the submissions made by the learned representatives of the parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .......................... (f) to deliver or cause to be delivered in due time a copy of the declaration mentioned in section 197A; or .......................................................................................................... ........................... he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees, for every day during which the failure continues : " Section 272A(3)(b) reads as under : " Any penalty imposable under sub-section (1) or sub-section (2) shall be imposed--- (b) in a case falling under clause (f) of sub-section (2), by the Chief Commissioner or Commissioner; and " Section 273B reads as under : " Penalty not to be imposed in certain cases Notwithstanding anything contained in provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271B, section 271BB, section 271C, section 271D, section 271E, clause (c) or clause (a) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or sub-section (1) of section 272BB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the provisions of the Income-tax Act, 1961 for the previous year ending on 31-3-1994 relevant to the assessment year 1994-95 will be less than the minimum liable to income-tax. 4. that I have not been assessed to income-tax at any time in the past but I fall within the jurisdiction of the Commissioner of Income-tax .......................... OR that I was last assessed to income-tax for the asst. year 19............... 19................... by the Income-tax Officer........................ Circle/Ward/District and the permanent account number allotted to me is ..................... 5. that I am resident inIndiawithin the meaning of section 6 of the Income-tax Act, 1961. Sd/-- Signature of the declarant Verification I, Mr. Atul Narula, do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated. Verified today, the 20th day of May, 1993. Place:New Delhi. Sd/-- Signature of the declarant Notes : 1. Give complete postal address. 2. The declaration should be furnished in duplicate. 3. Delete whichever is not applicable. 4. Before signing the verification, the declarant should satisfy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1A) of the person section 197A mentioned in column 2 during the financial year --------------------------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 --------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------- I certify that---- (i) the above statement contains a complete list of every person to whose account interest other than interest on securities was credited or to whom such interest was paid during the financial year 19............. 19............... without deduction of tax on his furnishing a declaration under sub-section (1A) of section 197A; (ii) all the particulars furnished above are correct and complete. Place:........................ ................................................... Date:...................... Signature of the person by whom the return is delivered " The assessee in the various replies submitted before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15H, the assessee could credit the entire amount of monthly interest in the account of the respective depositor without deduction of tax at source. In case, the assessee did not receive such declaration in Form No. 15H before or at the time of credit of payment of interest, whichever is earlier, the assessee was under an obligation to deduct tax at source and he could not take the benefit of non-deduction of tax at source under section 197A(1A). The receipt of declaration in Form No. 15H should necessarily precede the date of credit or payment of interest without deduction of tax at source. The exact date when the assessee received such declaration in Form No. 15H from the respective depositors has not ascertained. Neither the assessee has furnished the exact date on which the declaration was furnished by the declarant to them nor the CIT has made any effort to verify as to when such declaration in prescribed Form No. 15H were really received by the assessee from the respective depositors. The assessee repeatedly submitted to the CIT in the various letters submitted before him that all those Forms No. 15H were received towards the end of the accounting year in the month of March 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding out the truth and the relevant facts about the exact date on which the said declarations were furnished by them to the assessee. Such an enquiry and further investigation by the learned CIT before imposing such a drastic and huge penalty was necessary in view of the glaring instances of mistakes pointed out in some of the declarations given in Forms No. 15H. The assessee has submitted in the statement of facts certain instances of such glaring defects in the various Forms No. 15H submitted to the ITO, TDS, which are reproduced hereunder : --------------------------------------------------------------------------------------------------------------------------------------------------- S.No. Name of the depositor Deposit amt. Date on Date of deposit recd/renewed which the verification --------------------------------------------------------------------------------------------------------------------------------------------------- 1. Ms. Sarla Mongia 15,00019-6-199310-5-1993 2. Baby Kirtika 15,00018-9-199325-5-1993 3. Mr. C.M. Narula No entry No entry7-5-1993 4. Mrs. Paramjit Kaur 25,00013-1-199325,0007-2-199429-5-199325,00026-2-1994 5. Mr. Atul Narula 20,0003- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act such as under sections 201 and 221 for non-deduction of tax at source but the assessee in such a circumstance cannot be fastened with a penalty under section 272A(2)(f) for delay in furnishing of Form No. 15H to the CIT. It was, therefore, incumbent upon the learned CIT to first ascertain the specific nature of default committed by the assessee before initiating and imposing the penalty in question. 20. The learned counsel for the assessee had raised various technical and legal objections about the invalidity of initiation of penalty proceedings by the ACIT, Hqrs. on behalf of the Commissioner, the comparison of the provisions of section 272A(2)(f) with corresponding section 271(1)(a) etc. But before dealing with those submissions, it would be imperative to deal with the main arguments advanced by the assessee that the default and delay in furnishing of the copy of the declaration in Form No. 15H had occurred on account of reasonable, sufficient and good cause and therefore, no penalty is leviable in view of section 273B. In case, we accept this submission of the assessee, it may then not be necessary to travel into other technical legal objections raised on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is a self-serving statement. It is indeed strange as to how an affidavit given by a Chartered Accountant who is looking after the taxation matter of the firm admitting his default and ignorance can be said to be a self-serving statement of the assessee. In fact Shri Harish Kumar Mehra by giving such an affidavit has exposed himself to a great liability and legal action against him, in case the assessee decides to initiate such action against their tax consultant for failure on his part to give proper advice to his client. In case the CIT did not want to believe the contents of the affidavit of Shri Harish Kumar Mehra, Chartered Accountant, he should have summoned Mr. Mehra and ought to have recorded his statement. Mr. Mehra must be having many other clients. It could have been easily ascertained by interrogating Mr. Mehra as to whether copies of Form No. 15H has been submitted through his office in the cases of his other clients or not. No effort has been made by the CIT to controvert the facts so stated by Shri Harish Kumar Mehra in the affidavit submitted before him. In the absence of any material brought on record in rebuttal of facts stated in the affidavit of Shri Harish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the law may or may not constitute a valid excuse for justifying non-compliance with a provision of statute. It will depend upon the nature of the default. If it is merely a technical or venial breach, no penalty would be imposable because the levy of penalty under any statutory provision necessarily implies existence of some guilty intention on the part of the defaulter or the offender. In order to determine the existence or absence of any guilty intention on the part of the assessee, one will have to consider all the surrounding facts and circumstances. Whether by committing any default of non-compliance with a statutory provision of law, an assessee has derived any benefit, gain or advantage or whether by such a default or non-compliance the assessee has defrauded the revenue or has caused any loss to the revenue. These are some of the factors which will have to be seriously considered before considering the fact as to whether the ignorance on the part of the assessee and his consultant can constitute a valid excuse or a reasonable cause for the purposes of section 273B in relation to the alleged default specified in section 272A(2)(f). In the present case, the assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. 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. " The ratio of the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. is fully applicable on the facts of the present case. 26. The learned counsel for the assessee had also placed reliance on the judgment of Hon'ble Supreme Court in Rafiqs case and had quoted the following extracts from the aforesaid judgment in his petition submitted before the CIT : ". . . a party should not suffer for inaction, deliberate omission or misdemeanour of his counsel when he has selected his counsel, briefed him and paid his fee and was assured that his interest will be looked after. .." There are several other decisions in which it has been held that bona fide omissions on the part of the counsel would constitute reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
