TMI Blog2007 (7) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... the court was delivered by 1 R.K. AGRAWAL J. The Income-tax Appellate Tribunal, New Delhi has the following question of law under section 256(1) of the Income 1961 (hereinafter referred to as "the Act"), for the opinion to this court: "Whether, on the facts and in the circumstances of the case, the tribunal was, in law, justified in cancelling the, penalties amounting to 67,618 and Rs.1,99,888 imposed under section 201(1)/221 for the during the financial years 1982-83 and 1983-84 ?" 2 The reference relates to the financial years 1982-83 and 1983-84 in proceedings relating to imposition of penalty under section 201(1)/221 of the Act. 3 The respondent-assesses is a development authority. During the aforesaid years, the develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 201 (1A) of the Act and, therefore, there is no justification for a penalty when the tax has already been paid. It had further held that the Income-tax Officer had adopted an ascending scale of penalty although the period of default was descending and was very nominal in respect of the last two items for which the maximum rate of penalty had been levied, which showed that the Income-tax Officer's discretion to levy penalty on the development authority had not been fairly exercised. The Tribunal had further held that the Income-tax Officer had initiated action not because the tax was not paid but because Form No. 26C was not submitted and, in its view, no penalty could be levied for default in furnishing Form No. 26C in which detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act specifically provided that the liability to any penalty under sub-section (1) of section 221 would not cease merely because the development authority had paid taxes before the levy of such penalty. According to him, the view of the ,tribunal that if the tax and interest had been paid before the issuance of the notice under section 221 of the Act, then the provisions of section 221 are not attracted, was wholly misplaced and contrary to law. He further that the Income-tax Officer had rightly exercised his discretion and levied penalty looking into the number of recurring defaults, which could not be said to be arbitrary. In support of his aforesaid pleas, he has relied upon the following decisions: (i) Laxmi and Co. v. CIT [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the perusal of Form No. 26C, so filed, the Income-tax Officer found that serious defaults have been committed with regard to the deposit of tax deducted at source during the aforesaid financial years and, therefore, a notice dated August 10, 1984, had been issued calling upon the development authority as to why penalty under section 201(1) of the Act should not be imposed. The plea taken by the development authority was that their officers were not aware about the statutory provisions regarding the deposit of tax and they were under the impression that it was to be deposited by the end of the financial year and from Oct 1982, to June, 1983, there was no accounts officer posted in the development authority and no person knowing the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under section 221(1) of the Act. 12 In the case of Laxmi and [1981] 128 ITR 259, this court has held that the levy of interest for the delay 'in fling the return under section 139 does not have the effect of absolving the assesses from the liability to pay penalty under section 271(1)(a). The levy of interest does not have the effect of automatically extending the time for filing the return. 13 In the case of Jubilee Investments and Industries Ltd. [1999] 238 ITR 648, the Calcutta High Court has held that whether the assesses had paid the interest or not is immaterial. When it is found in default in depositing the amount of the tax deducted at source within the time prescribed, it is liable to pay penalty and interest. 14 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , has held as follows : "In the present case, as the chart placed as annexure A to the penalty order would show, taxes deducted in the months of August to December, 1982, were actually paid on January 21, 1983. Taxes deducted in January-February, 1983, were paid on March 31, 1983, and taxes deducted from April, 1983, to February, 1984, were paid on March 1, 1984. According to the Income-tax Officer, the proceedings for the levy of penalty were initiated in June, 1984, when no tax was in arrears The Income-tax Officer has levied a penalty of 30 per cent. for the taxes deducted in September-October, 1982, and paid on January 21, 1983, is after a little more than 4 months. He has levied penalty at 70 per cent. For the tax that was deducted i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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