TMI Blog1983 (7) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of its income, according to which the tax liability of the company was increased by a sum of Rs. 19,476, but the company also failed to make payment of the amount of enhanced tax liability within a period of 30 days from the date of filing of the return. As a matter of fact, the said amount of Rs. 19,476 was not paid by the company towards its tax liability until a provisional assessment was made by the ITO under s. 141 of the Act on January 29, 1969. After a notice was issued to the company under s. 140A(3) of the Act, calling upon it to show cause why penalty should not be imposed on it for non-compliance with the provisions of s. 140A(1), the ITO proceeded to impose a penalty of Rs. 5,000 upon the company for not depositing the amount of tax payable by it on self-assessment. The AAC, on appeal, upheld the imposition of penalty, but reduced the amount thereof from Rs. 5,000 Rs. 4,000. On further appeal to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter called "the Tribunal"), the company advanced a plea that when the revised return was filed, the company was under the control of the State Government and was managed by an administrator appointed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 140A(3) of the Act, without even considering the case set up by the company for non-payment of the amount of tax on self-assessment within the time limited under s. 140A(1) of the Act. Although the provisions of article 19(1)(f) of the Constitution of India relating to right to property have been deleted with effect from June 20, 1979, by the Constitution (Forty-fourth Amendment) Act, 1978, yet the subsequent deletion of the right to property from the array of fundamental rights would not deprive the petitioner company of such rights as were available to it prior to the coming into force of the 44th Amendment Act. As this writ petition was filed in the year 1974, and at that time the provisions of article 19(1)(f) were available to the petitioner company, shall proceed to consider the question of validity of the provisions of s. 140A(3) of the Act. Section 140A was inserted in the I.T. Act, 1961, by the Finance Act of 1964, and the provisions thereof, as they existed at the relevant date, when the company was alleged to have incurred the liability for imposition of penalty under s. 140A(3), ran as under: " 140A. Self-assessment.-(1) Where a return has been furnished under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the duration of delay or the wilful or other nature of the violation or the inability to pay tax. The learned judges of the Madras High Court observed as under (p. 134): " To sum up: Tax due and payable under section 140A(1) of the Act is a civil debt. Any provision in the Act for enforcing payment of that debt would be valid. This provision for enforcing payment and recovery of the tax payable may include or impose anything compensatory for delayed payment or retention of the tax. It is not the nomenclature, which the legislature has used in the provision, that decides the issue as to whether the provision is compensatory or penal, but the substance of the provision. A power to levy penalty which is not compensatory is neither incidental nor ancillary to the power of recovery, and it is not inherent in the power to recover the tax payable. The levy of penalty could be sustained only in cases of concealment or evasion of taxes. Penalty for concealment or evasion is a punishment and intended as deterrent against repetition of the same which is criminal or quasi-criminal in nature. Concealment of income or evasion of tax and non-payment of a tax ascertained or determined and pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in situations may arise where the assessee may not be able to pay the taxes within 30 days as required by section 140A. But in such cases, if he properly explains the circumstances to the satisfaction of the Income-tax Officer, he would not levy the penalty. We further find ourselves unable to agree with the statement of the learned judges that 'the levy of penalty could be sustained only in cases of concealment or evasion of taxes'. With respect, we see no warrant for such a statement. As pointed out by us above, Chapter 22 provides for criminal prosecutions in case of several matters and not only for concealment and evasion of taxes. Penalties are also provided by Chapter 21 in the case of failure to furnish information regarding securities, etc., failure to furnish returns or to comply with notices, failure to give notice of discontinuance as required by section 176(3), for filing a false estimate or failure to pay advance tax, etc. We equally fail to understand as to how the said provision could be held to be confiscatory. What is due towards tax cannot be said to be the I property of the assessee, since it is a debt due to the State towards tax, even as per his own return. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonings of the Division Bench of the Madras High Court. In the view I have taken, the aforesaid provision is not confiscatory in nature. " In CIT v. Vrajlal Manilal Co. [1981] 127 ITR 512, a Bench of the Madhya Pradesh High Court presided over by G. P. Singh, Chief justice, also dissented from the view taken by the Madras High Court in Sali Maricar's case [1973] 90 ITR 116 and agreed with the view taken by the Andhra Pradesh High Court in Kashiram's case [1977] 107 ITR 825 (AP) and by the Calcutta High Court in Gunny Exporters' case [1976] Tax LR 603 (Cal) and observed as under (p. 517): " Having regard to the discretion conferred upon the Income-tax Officer, which has to be reasonably exercised, the provision of penalty under section 140A(3) cannot be held to be confiscatory and unreasonable. The penalty is in the nature of additional tax for securing compliance that the tax is paid within the time allowed under section 140A(1). The assessee's income is, no doubt, his property but the assessee can retain that property only subject to the right of the State to recover taxes and a reasonable provision made to secure payment of tax on due date cannot be held to be infringemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminal prosecution only relate to prosecution and punishment and are intended to vindicate public justice by punishing the offender; while the object of imposing penalty is to render evasion unprofitable and to secure to the State the compensation for delay in payment of taxes or attempted evasions. Moreover, as held by the Andhra Pradesh and Calcutta High Courts, the ITO has a discretion in the matter of imposing penalty and in each and every case of non-payment of tax within 30 days of the submission of the return, the ITO is not bound to impose penalty under s. 140(3). Further, if penalty is imposed, the quantum thereof has to be determined by the ITO not only in relation to the amount of tax which remained unpaid as also the period for which such tax was not paid by the assessee. The ITO is expected to exercise his discretion in respect of the imposition of penalty under s. 140A(3) of the Act reasonably after considering the circumstances of each case. The order passed by the ITO is subject to appeal and then to a second appeal to the Tribunal. The provisions relating to self-assessment are based upon the principle that payment of tax is similarly a civil duty which should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court that an order imposing penalty for failure to carry out a statutory obligation is in the nature of quasi-criminal proceeding, and penalty cannot ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. The ITO is required to consider all the circumstances of the case before proceeding with the imposition of penalty. Their Lordships of the Supreme Court observed in the aforesaid case as under (p. 29): " An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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