TMI Blog2018 (12) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ally in cases where the revenue may not be even aware of the default or its cure on self-act of the assessee as in the instant case. On the question of interpretation, the imposition of penalty under section 34(8) of the Act as also quantification of the penalty amount (where that penalty may be found imposable), is found to be directory and not mandatory. Only the enforcement of the penalty order is found to be mandatory. In the present case, undisputedly the assessee rectified the default committed by it (during A.Y. 2010-11) together with interest before the end of the calendar year 2011 i.e. during A.Y. 2011-12. The revenue on the other hand did not realize the existence of that default or its rectification made by the assessee, till as late as 09.09.2014. This undisputed fact mitigates against the levy of penalty as the assessee was not caught having committed the default and it had made good the loss to the revenue before issuance of any notice of demand with respect to the defaulted amount etc. - There survived no further legal justification to penalize such an assessee. Revision allowed - decided in favor of the assessee and against the revenue. - Sales/Trade Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of default, by his order dated 18.09.2015. The assessee carried the matter in appeal, that was dismissed. The penalty was sustained. Upon further appeal, the Tribunal has also rejected the appeal. Hence this revision. 5. Sri Piyush Agrawal, learned counsel for the applicant-assessee submits the penalty under Section 34(8) of the Act is not mandatory, rather it is discretionary. Relying on the language of the Section 34(8) of the Act, it has been submitted that there is nothing to the language to suggest that each and every default committed by the assessee in depositing the T.D.S. is liable to be penalized as a matter of principle or rule or mandate of the legislature. In this regard, Section 34(8) of the Act may be taken note of, which reads as under: Section 34. Tax Deduction at source- (1).................... ........................ ........................ (8) If any person referred to in sub-section (1) fails to make the deduction or after making deduction fails to deposit the amount so deducted as required by sub section (6), the assessing authority may , after giving to such person an opportunity of being heard, by order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions were independent where under the liability had to be determined 'to the extent permitted by law' . It was only for the purpose of quantification of the penalty amount, the Court held, extenuating circumstances may be considered to determine the quantum of penalty. 8. Having considered the arguments so advanced by learned counsel for the parties, in the first place, it may be noted neither decision cited by either side has directly interpreted the statutory language and decided whether the penalty under Section 34(8) of the Act is mandatory or discretionary. Still the decision in the case of C.C.T. Vs. Bareilly Highways Projects Limited (supra) does hold, for the purpose of imposition of penalty, it may not be a material consideration that the assessee had already paid the defaulted amount of tax along with interest. In fact, in that decision itself, the court clarified, the imposition of penalty would remain a distinct provision where penalty may be imposed to the extent permissible in law . However, it has not been clarified or elaborated as to the pre-conditions when penalty may be imposable as may lead to a logical inference that penalty would beco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory or discretionary may be determined on an interpretation of the statutory provision providing for penalty and not on a general principle of law or administrative convenience or even the facts of each case. From a plain reading of section 34(8) of the Act it appears, penalty 'may' be imposed by the assessing officer, if after considering the reply of the assessee, the assessing officer considers imposition of the penalty to be warranted. In contrast, the word 'shall' appears in the later part of the sub-section to indicate once such order imposing a penalty is passed, the assessee would be obligated to pay that amount of penalty as may be specified in the penalty order. Again, the assessing officer 'may' impose the quantum of penalty as per his discretion. Thus, he 'may' impose any penalty not exceeding twice the amount of the tax deductible at source. 13. The words 'may' and 'shall' having been used in two parts of the same sub-section providing for levy of penalty, it appears natural and logical to assign the normal grammatical meaning to those two words so as to preserve the essential and inherent difference in their gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that case it may have been urged with success that the word may though indicates existence of a discretion, it has to be read as obligatory, otherwise it would lead to absurd results by leaving it optional to the defaulter to comply with the penalty order passed against him. 16. Another reason to hold the penalty under section 34(8) of the Act discretionary and not mandatory arises from the indisputable position that there exists discretion with the assessing officer to impose such quantum of penalty as may not exceed twice the amount of defaulted amount. However, there is no prescription of a minimum penalty. Once such discretion exists, it has to be conceded that the assessing officer has to apply his mind to relevant facts such as the nature (admitted or disputed) of default; extent of default; the conduct of the defaulting assessee etc. to determine the quantum of penalty that may be justified. 17. In absence of any amount or rate or quantum being specified by the legislature by way of minimum penalty imposable, necessarily a minimum penalty of say one Rupee or such amount would have to be imposed in every case of default, even in cases where the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore it was noticed by the revenue. Third, the earlier view taken by this Court in favour of deleting the penalty in cases where the entire default together with interest stood removed by the assessee (before its detection by the revenue), was not brought to its notice and was therefore not considered. Read in that manner, the judgment in the case of C.C.T. Vs. Bareilly Highways Projects Limited (supra) is clearly distinguishable and in any case not binding. It has to be confined to the facts of that case. Thus there does not exist any real conflict between that judgment and the earlier consistent view of this Court. 21. In the present case, undisputedly the assessee rectified the default committed by it (during A.Y. 2010-11) together with interest before the end of the calendar year 2011 i.e. during A.Y. 2011-12. The revenue on the other hand did not realize the existence of that default or its rectification made by the assessee, till as late as 09.09.2014. This undisputed fact mitigates against the levy of penalty as the assessee was not caught having committed the default and it had made good the loss to the revenue before issuance of any notice of demand with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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