1995 (9) TMI 91 - AT - Income Tax

Summary

Issues Involved:

1. Sustenance of penalty for delay in depositing tax deducted at source (TDS).
2. Applicability of mens rea for imposition of penalty.
3. Interpretation of sections 201(1), 201(1A), and 221(1) of the Income-tax Act.
4. Assessment of good and sufficient reasons for delay.
5. Quantum of penalty.

Detailed Analysis:

1. Sustenance of Penalty for Delay in Depositing TDS:

The assessee, a subsidiary of the State Bank of India, was penalized Rs. 7,24,381 for delays in depositing TDS into the Government Treasury. The delay involved six cases out of 349 payees, with amounts ranging from Rs. 2,300 to Rs. 6,61,644. The assessee argued that the delay was due to clerical oversight and had already paid interest for the delay without appealing those orders. The CIT(A) confirmed part of the penalty, relying on the Supreme Court decision in Gujarat Travancore Agency v. CIT, which held that mens rea was not required for penalty imposition.

2. Applicability of Mens Rea for Imposition of Penalty:

The assessee contended that the provisions of section 221 were different from section 271(1)(a), which was considered by the Supreme Court in Gujarat Travancore Agency. The assessee's default was under section 221, read with section 201(1). The argument was that penalty under section 201(1) could only be levied if the Assessing Officer proved the default. The CIT(A) wrongly confirmed part of the penalty by relying solely on section 221.

3. Interpretation of Sections 201(1), 201(1A), and 221(1) of the Income-tax Act:

The Tribunal examined the relevant provisions:
- Section 200 mandates timely payment of deducted tax to the Central Government.
- Section 201(1) deems a person who fails to deduct or pay tax as an assessee in default.
- Section 201(1A) imposes interest for delay in payment.
- Section 221(1) allows for penalty in addition to arrears and interest, provided the default was without good and sufficient reasons.

The Tribunal noted that the proviso to section 201(1) places the burden on the Assessing Officer to prove the default was without good and sufficient reasons, while the second proviso to section 221(1) requires the assessee to prove the default was for good and sufficient reasons.

4. Assessment of Good and Sufficient Reasons for Delay:

The Tribunal found the assessee's reasons for delay-clerical oversight and preoccupation with other matters-insufficient. Negligence was not considered a good and sufficient reason for default in statutory obligations. The Tribunal referenced the Supreme Court's observation in Gujarat Travancore Agency that proving default in compliance with the statute is generally sufficient unless the statute indicates the need to establish mens rea.

5. Quantum of Penalty:

The Tribunal agreed with the CIT(A) that the default was not for good and sufficient reasons. However, considering the circumstances, the Tribunal reduced the penalty from Rs. 3,00,000 to Rs. 1,50,000.

Conclusion:

The Tribunal upheld the imposition of penalty under section 221 of the Income-tax Act but reduced the penalty amount to Rs. 1,50,000, providing partial relief to the assessee. The appeal was partly allowed.