TMI Blog1977 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... , Dibrugarh Circle, Dibrugarh, passed an order under section 221 of the Act as follows : " M/s. Shyam Sundar Tea Co. (P.) Ltd., whose registered office is at Rohabari, Dibrugarh, declared dividends for the accounting years ending on 31-12-1959 to 31-12-1964, out of which tax amounting in aggregate to Rs. 72,400 was deducted. Details of gross dividend declared, date of declaration and tax deducted are as follows : Year Gross Date of Tax dividend declaration deducted Rs. Rs. 1959 60,000 29-12-1960 18,000 1960 60,000 14-8-1961 18,000 1961 20,000 29-6-1962 6,000 1962 60,000 20-12-1962 18,000 1963 20,000 29-6-1963 4,400 1964 40,000 20-12-1964 8,000 ---------------- ---------------- 2,60,000 72,400 ---------------- ---------------- It is detected that the entire tax deducted from dividend has not been paid to the Government account till now although certificates of tax deducted at source in terms of rule 31 of the Income-tax Rules, 1962, have duly been granted. In accordance with sub-rule (3) of rule 30 of the Income-tax Rules, 1962, payment should have been made as follows : a Tax Date of declaration Date within which payment deducted of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax deducted for the years 1959 to 1964 came to Rs. 72,400. The plain fact of the matter was that the assessee-company had retained the said amount to itself without depositing the same in the Treasury as required. Shri D. Wangdi observed that even considering the bank rate of interest on this amount for all these years of default, the penalty imposed by the Income-tax Officer in the sum of Rs. 14,480 was not more than the bank rate of interest. The appeal was dismissed. The assessee preferred a further appeal to the Appellate Tribunal, Gauhati Bench, which set aside the order of penalty relating to the assessment years 1960-61, 1961-62, 1962-63, 1963-64, 1964-65 and 1965-66, in the view that amounts, as assessed, were not recoverable under the provisions of the Indian Income-tax Act, but that they could be recovered only by a suit in civil court ; as such no penalty can be imposed either under section 46(7) of the Act of 1922, or under section 231 of the Income-tax Act, 1961. It is the correctness of this view that falls for consideration now. It is necessary to notice the relevant provisions of the Act to appreciate the above question. Chapter XVII of the Act (1961) relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reasons failed to deduct and pay the tax ........... " Section 203 of the Act prescribes that every person deducting tax in accordance with the provisions of sections 192 to 194, etc., shall at the time of credit or payment of the sum or issue of cheque or warrant for payment of any dividend to a shareholder, furnish to the person to whose account such credit is given or to whom such payment is made or the cheque or warrant is issued, a certificate to the effect that tax has been deducted, and specifying the amount so deducted, the rate at which the tax has been deducted and such other particulars as may be prescribed. Section 221 of the Act, which specifies when penalty is payable (when tax is in default),reads as follows : " 221. Penalty payable when tax in default.--(1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, and in the case of a continuing default, such further amount or amounts as the Income-tax Officer may, fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for recovery of the said amount by way of suit or under any other law not being affected by section 231, reads as follows : " 232. Recovery by suit or under other law not affected.--The several modes of recovery specified in this Chapter shall not affect in any way-- (a) any other law for the time being in force relating to the recovery of debts due to Government ; or (b) the right of the Government to institute a suit for the recovery of the arrears due from the assessee ; and it shall be lawful for the Income-tax Officer or the Government, as the case may be, to have recourse to any such law or suit, notwithstanding that the tax due is being recovered from the assessee by any mode specified in this Chapter. " The question of limitation of time for recovery of income-tax arrears by way of civil suit fell for consideration by a single judge of the Madras High Court in Nagappa Chettiar v. Union of India [1969] 72 ITR 255. In that case, the suit, which had been filed by the Commissioner of Income-tax against the assessee in the year 1960 for recovery of arrear of tax due for the year 1941-42, was resisted on the ground that it was barred by section 67 of the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il court ; in other words, the point decided in the above-said manner by the Madras High Court was not disputed by the Tribunal. But having held that a suit had to be filed for recovering the amount of the assessment, it jumped to the conclusion that no penalty could be imposed in respect of the said assessment year. The Tribunal has not given any specific reason in support of this view. It seems to us that the Tribunal has made such an assumption without there being any warrant for it. Turning to section 231, as quoted above, it is only seen that no proceedings for the recovery of any sum payable under the Act could be commenced under section 231, after the expiry of one year from the last date of the financial year in which the demand is made. It does not seem to follow, for this reason, that no penalty can be imposed if proceedings under section 231 are barred. The assessee-firm is a " deemed assessee in default " because the above-said sum of tax deducted, namely, Rs. 72,400, had not been paid into the Treasury. Section 232 makes it clear that the several modes of recovery specified in this Chapter (namely, Chapter 17 of which sections 231 and 232 are part) shall not in any way ..... X X X X Extracts X X X X X X X X Extracts X X X X
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