TMI Blog1990 (11) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... ops. During that period, the company suffered losses to the tune of more than Rs. 8 lakhs. Due to the extreme financial difficulties and absence of liquidity, the tax deducted at source was deposited by the company with the Income-tax Department with some delay. The Income-tax Officer served a notice dated January 25, 1982 in respect of the years 1979-80 and 1980-81, requiring the company to show cause why penalty under section 221 of the Income-tax Act (hereinafter referred to as "the Act") should not be imposed, as the company had either failed to deduct the income-tax at the time of payment of salaries and/or after deducting had failed to pay the same within time. The company submitted a reply on February 10, 1982, inter alia, stating that on account of abnormal conditions, as a result of which the company suffered heavy losses, there was some delay in the payment of tax deducted at source. Subsequently, the Income-tax Officer sent repeated show-cause notices for the subsequent years threatening prosecution for the same default for which suitable replies were sent. The company also made representations that since they have already made payments voluntarily to the Department an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3 are wrong, unjust, unfair, arbitrary and oppressive, besides being in violation of the statutory provisions and are as such liable to be quashed. The case of the respondents as disclosed in the affidavit of Shri M. C. Pindwal, Income-tax Officer, in brief, is that the petitioner was in charge of and responsible to the company for the conduct of its business and as such has rightly been arrayed as an accused in the complaint. The amount of tax deducted at source was Government money lying in trust with the company and the company was required to deposit the same within the stipulated period. Its non-deposit in respect of each employee every month is a distinct offence. It is further alleged that even though respondent No. 2, i.e., the Commissioner of Income-tax, has been given the power to compound the offence under section 279(2) of the Act, this power is executive in nature and is, therefore, subject to the guidelines issued by the Central Board of Direct Taxes in exercise of its powers under section 119 of the Act. In order to appreciate the rival contentions of the parties, it is relevant to keep in mind section 279 of the Income-tax Act and Instruction No. 1317 of 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the launching of the prosecution, it is found, after consultation with the Ministry of Law, that chances of conviction are not good. Clause (D) of these instructions lays down that notwithstanding anything stated in (B), the Board may approve compounding in deserving and suitable cases involving hardship, with the approval of the Minister. Section 6 of these instructions reads as under: "While the above are only intended to provide broad guidelines to be followed before sending a proposal for compounding, the previous approval of the Board should always be obtained before deciding about the compounding of an offence. No assurance of any kind should be given to the assessee before obtaining the Board's approval." The abovesaid provisions of the instructions prima facie, if not completely, partially take away the powers of the Commissioner of Income-tax to use the discretion vested in him under section 279(2) of the Act to compound the offence, if any application is made before him for this purpose. Under the impugned instruction, he is required to obtain "the previous approval of the Board before deciding to compound an offence." Once the Legislature has vested in the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20(XXI-6)/55 was issued. This case, in our opinion, is quite distinguishable inasmuch as the instructions were in the nature of an explanation as to how section 12(1B) is to operate with minimum hardship to the genuine shareholders of companies. This very ratio was approved, in the case of Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC). In this case, the instructions were in the following terms (at page 918) : "The Central Board of Revenue had issued the notification dated February 10, 1942. Under that notification, instructions had been issued to the assessing authorities laying down the principles to be applied in assessing the foreign shipping companies. As regards the British shipping companies, they were directed to permit those companies to elect to be assessed on the basis of a ratio certificate granted by the U. K. authorities regarding the income or loss and the wear and tear allowance." The necessity for issuing such instructions was felt when the Board came across a letter wherein the Income-tax Officers were instructed to take into consideration the investment allowance granted by the U. K. authorities in computing the taxable income of the British shipping c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding on the tax department., the Central Board of Direct Taxes was, therefore, constrained to issue another circular on January 14, 1974, explaining the circumstances under which this provision is to be invoked. We have carefully gone through the judgments relied upon by learned counsel for the respondents but we are constrained to hold that in none of these cases, the powers of the Commissioner under section 279(2) of the Act were watered down, abrogated or restricted. The instructions in all the cases were in the nature of explaining the correct implications of particular provision to the Income-tax Officers and how the same is to be interpreted and followed. In our opinion, there is no harm in issuing such like instructions of a binding nature, as the intention was for the proper administration of the provisions of the Act or the amendments made therein. However, in exercise of its powers to issue orders and circulars under section 119 of the Act, the Board cannot take away the judicial or quasi-judicial functions of the Commissioner and vest the same to itself or put them under the overall supervision of the Minister. The Board can relax the rigour of the laws or grant reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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