TMI Blog1999 (4) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax that ought to have been deducted at source under section 194A of the Act on the interest paid by the petitioner to various other persons who have made certain amount of fixed deposits with the petitioner. The case of the petitioner is that the petitioner did not deduct the tax on the ground that the persons on whose behalf the deduction ought to have been made had filed declarations in Form No. 15H requesting that no tax need be deducted on the interest paid to them. However, the first respondent found that declarations were defective in various respects and consequently held that the declarations were not valid in law and in this view of the matter, the first respondent besides imposing the tax also levied a penalty of Rs. 3,991 by way of interest under section 201(1A) of the Act and the total amount payable by the petitioner came to Rs. 33,020. The writ petition has been filed on the ground that the defects found in the declarations in Form No. 15H are very minor in nature and can be easily rectified. The case of the petitioner is that an opportunity should have been granted to the petitioner to rectify the defects and the first respondent had failed to inform the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the petitioner has contravened the provisions of section 197A(1A) of the Act without any reasonable cause as the petitioner had admitted the defective nature of the declarations and there was no explanation at all as to why before making payment of interest to various depositors, the petitioner has not verified the declarations in Form No. 15H filed by the depositors and deducted the tax on that basis. It is also stated that the acceptance of the claim of the petitioner that the defective declarations should be returned to the petitioner for rectification would result in the action under section 201 not being applicable to any case and, hence, the said section would become otiose and a dead letter as every assessee would claim that the defective forms filed by it should be returned for rectification. Learned counsel for the parties reiterated the submissions made in the affidavit as well as in the counter affidavit. I have carefully considered the submissions of learned counsel for the petitioner and learned senior counsel for the respondents. The assessment year involved is 1994-95. It is now necessary to notice the relevant Provisions of the Act and the Income-tax Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the declarations are furnished are not filled in. 2. The verification part has not been properly filled in and signed by the depositors. 3. The date of verification is not available. 4. The columns that should be filled in by the person responsible for paying interest are not filled up. 5. The person responsible for paying interest has not signed the declarations. The Income-tax Officer in the said letter also requested the petitioner to ignore the declarations in Form No. 15H under section 197A(1A) furnished by the depositors and deduct the tax under section 194A of the Act. Then, the petitioner sent a letter stating that due to oversight, some details were not filled up by the staff of the petitioner. The petitioner, therefore, requested the Income-tax Officer to give an opportunity to fill up the details in Form No. 15H declarations. However, the said request of the petitioner was turned down by the Income-tax Officer and the petitioner was treated as "assessee in default" and the petitioner was directed to pay income-tax of Rs. 29,029 and interest of Rs. 3,991 under section 201(1A) of the Act. In my view, though the Income-tax Officer may be correct in his view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreted in a reasonable and fair manner so that the liability of tax is not imposed on the person paying interest for filing defective declarations. I also hold that it is well-settled that unless the provisions of the statute warrant or there is a necessary implication on reading of the section that the principles of natural justice are excluded, the provisions of the section should be construed in a manner incorporating the principles of natural justice and if declarations in Form No. 15H are found to be defective, the Income-tax Officer in conformity with the provisions of the principles of natural justice, should give an opportunity to the petitioner for rectification of the defects in the declarations. The case of the Department that if such an opportunity is given to the petitioner, there will be no case of liability under section 194A being imposed is not a ground to hold that an opportunity need not be given to rectify the defective nature of the declarations. As already held by me, the section is not intended to impose the liability for filing defective declaration forms, but the liability is sought to be imposed for the failure to deduct income-tax. Further, the liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence' to it, so as to achieve the obvious intention of the Legislature and produce a rational construction : Vide Like v. IRC [1963] AC 557 ; [1964] 54 ITR 692 (HL/). The Court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision." The above observation of the Supreme Court is relevant for the construction of section 194A of the Act and to avoid hardship and unjust result that may flow against the person filing the declaration, the requirement of granting an opportunity to the said person for rectification of defects in the declaration should be afforded to make it reasonable and justifiable in the eye of law. In this connection, it is relevant to notice a Full Bench decision of the Andhra Pradesh High Court in the case of CIT v. Hyderabad stone Depot [1977] 109 ITR 686. The case before the Andhra Pradesh High Court was a case dealing with registration of a firm and the registration of the firm was refused on the ground that the application for registration filed was defective and the Andhra Pradesh High Court held, that an opportunity should be gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the declarations. The Bombay High Court in the case of Dattatraya Gopal Shette v. CIT [1984] 150 ITR 460, has also taken the same view. The Bombay High Court was dealing with a case where an application for renewal of registration was not signed by one of the partners and it was rejected on the ground that the application was defective. The question arose whether the action of the Income-tax Officer was justified and whether the Income-tax Officer was required to give an opportunity to the assessee to rectify the defects in the application filed for renewal of registration of the firm. Sujatha V. Manohar J. (as her Lordship then was) speaking for the Bench of the Bombay High Court referred to a circular issued by the Central Board of Revenue dated April 11, 1955 (Circular No. 14 (XL-35) of 1955) and held as under : "It is now well-settled that even if the contents of a circular may amount to a deviation on a point of law, a circular of the Central Board of Revenue which confers some benefit on the assessee is binding on all officers concerned with the execution of the Income-tax Act ; and they must carry out their duties in the light of the circular. In the present case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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