TMI Blog2005 (1) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... is not wilful and tax has been ultimately deposited in the Treasury?" 2.. While framing assessment in the case of M/s. National Hydro Electric Power Corporation Ltd., which is now known as Power Grid Corporation of India Ltd., (hereinafter described as "the assessee") for the year 1989-90, the Assessing Officer took note of the fact that the assessee had failed to fulfil its obligation to deduct 2 per cent lump sum tax in terms of section 25-B of the Haryana General Sales Tax Act, 1973 (for short, "the 1973 Act") read with notification dated March 24, 1989 issued by the State Government from the amount payable to M/s. K.E.C. International Ltd., (hereinafter described as "the contractor") for executing works contract of erecting Moga-Bhiw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals filed by the assessee against the penalty orders were dismissed by the Joint Excise and Taxation Commissioner (Appeals), Hisar [for short, "JETC(A)"] vide his order dated April 16, 1998. However in the further appeals preferred by the assessee, the Tribunal vide its order dated January 21, 2000 substantially reduced the penalty imposed by the Assessing Officer by making the following observations: "Penalty is leviable if the tax is not deducted at source. An amount equal to the tax involved in this case was deposited by contractor. It deposited the amount involved with the State as soon as it became aware of the fault and no loss was caused to the State. There can be either penalty or the deposit of the tax collected at source. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Provided that no deduction shall be made under this section where the amount or the aggregate of the amounts paid or credited or likely to be paid or credited during the year by such person to a contractor does not or is not likely to exceed one lakh rupees in a case. (2) Any tax deducted under sub-section (1) shall be paid to the State Government in such manner and within such time as may be prescribed. (3) The person making any deduction of tax under sub-section (1) and paying it to the State Government shall issue a certificate of tax deduction to the payee in such form as may be prescribed. (4) Any tax deducted under sub-section (1), and paid to the State Government shall be provisional and shall, on production of the certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st him can impose penalty if it is found that the person, who is obliged to deduct tax at source, has acted in contravention of sub-section (1) or (2) or (3) of section 25-B. The use of the word "may" in sub-section (5) shows that the Legislature did not want to make levy of penalty obligatory in each and every case and the competent authority has been vested with the discretion in the matter of imposition of penalty. In other words, the competent authority may not impose penalty if it is satisfied with the explanation given by the contractee. 7.. In I.T.R. No. 61 of 1995 Commissioner of Income-tax, Haryana, Rohtak v. Ashoka Dairy, Nilokheri decided on January 7, 2005, a division Bench of this Court, of which one of us (G.S. Singhvi, J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation given by the assessee for not getting its account of previous year audited by an accountant before the specified date and/or filing thereof along with the return." 8.. In K.C. Builders v. Assistant Commissioner of Income-tax [2004] 265 ITR 562; (2004) 2 SCC 731, the Supreme Court interpreted the provisions of sections 271(1)(c), 276-C(2), 277 and 278-B of the 1961 Act and held that in view of the finding recorded by the Tribunal that there was no concealment of income warranting levy of penalty, the assessee could not have been subjected to criminal liability under section 420 of the Indian Penal Code. The relevant extracts of that judgment are reproduced below: "The appellants cannot be made to suffer and face the rigours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000 and Rs. 8,00,000 for the assessment years 1989-90 and 1990-91 respectively. The JETC (A) confirmed the penalty order, but the Tribunal reduced the quantum of penalty to Rs. 2 lacs and Rs. 1 lac respectively by observing that the default was of a technical nature. 10.. In our opinion, the finding recorded by the Tribunal about the nature of default committed by the assessee completely rules out the element of deliberateness or mens rea on the assessee's part in the matter of deducting lump sum tax from the amount payable to M/s K.E.C. International Ltd. As a matter of fact, this finding is amply supported from the fact that the assessee had not deducted tax in view of the pending litigation and the fluid legal position. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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