TMI Blog1995 (9) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ,300 to Rs. 37,416 and in four of those cases the due date was 7-11-1991 but the amounts were deposited on 7-4-1992. In one case, the due date was 7-2-1992 but the amount was deposited on 30-8-1992. Only in one case, where the tax was deducted on 26-2-1992 and the due date for payment was 7-3-1992 the tax was deposited on 7-5-1992. This amount was of course Rs. 6,61,644. The learned counsel argued that the learned D.C. had imposed the penalty on the assumption that imposition of penalty was automatic on a default being committed. He submitted that in these cases the assessee had already paid interest for the delay in payment of TDS and the assessee had not even filed an appeal against those orders. He emphasised that the delay was on account of purely clerical oversight and in this context explained the procedure of the working of the assessee which has been mentioned in the order of the learned CIT(A) also. He further clarified that it was not the department which had detected the default but it had discovered it only from the statements submitted by the assessee to the department. He argued that the learned CIT(A) had relied on the decision of the Hon'ble Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll stronger because the assessee was only a deemed defaulter. He further referred to the decision in the case of CIT v. Chembara Peak Estates Ltd. [1990] 183 ITR 471 (Ker.) where it had been held that the ratio of decision of the Supreme Court in the case of Hindustan Steel Ltd. applies to such cases. He explained that assessee's conduct was not contumacious nor did the assessee have any vested interest in not paying the tax in time. He referred to the decision of the Hon'ble Patna High Court in the case of CIT v. Sriram Agrawal [1986] 161 ITR 302 where it had been held that in view of the Board's circular to the effect that if the demand had been paid before issue of notice of penalty, no penalty need be imposed. In these circumstances, the learned counsel prayed that the penalty of Rs. 3,00,000 sustained by the learned CIT(A) be cancelled. 4. The learned departmental representative supported the orders of the Assessing Officer and the CIT(A). 5. We have carefully considered the rival submissions and have taken into account the material on record and the case law cited on behalf of both the parties. While, we admire the valiant effort put in by Shri Gupta to retrieve his clien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult, such further amount or amounts as the Assessing Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears. " " Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard : " " Provided further that where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section. " Explanation : For the removal of doubt, it is hereby declared that an assessee shall not cease to be liable to any penalty under this sub-section, merely by reason of the fact that before the levy of such penalty he has paid the tax. 7. The amendment to which Shri Gupta referred is in second proviso to section 221(1). Prior to its substitution with effect from 10-9-1986, the second proviso stood as under : " Provided further that where the Income-tax Officer is satisfied that the default was for good and sufficient reasons, no penalty shall be levied under this section. " 8. According to Shri Gupta, the proviso to section 201(1) continues to remain to the effect that no pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subjective satisfaction of the Assessing Officer which may be based on the material on record without hearing the assessee, whereby he may or may not initiate the penalty proceedings, the second proviso to section 221(1) comes into play after the assessee has been given a statutory opportunity of being heard and of proving to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons. In other words, the good and sufficient reasons contemplated in the second proviso to section 221(1) are those which are in the specific knowledge of the defaulter and unless the defaulter discharges his burden to the satisfaction of the Assessing Officer, the penalty becomes leviable on the defaulter as contemplated in section 221(1) of the Act. In such a scheme we do not think it is for the Assessing Officer to prove that the default was not for good and sufficient reasons. For imposition of penalty he has only to indicate, and indicate judiciously and not arbitrarily, that the assessee has failed to prove that the default was for good and sufficient reasons. Since in the instant case before us the only explanation given by the assessee was that the default was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght financial position and heavy liabilities towards agricultural income-tax, bonus payments and arrears of wages. Paucity of funds was considered to be a good and sufficient reason for not imposing penalty under section 221. In the case before us, there is no question of paucity of funds. On the other hand, in the instant case, the assessee was in possession of the amounts which it had deducted from the payments made or payments to be made to other parties and hence, the ratio of that decision would not help the assessee. Similarly, in the case of Raunaq Co. (P.) Ltd. it was accepted even by the CIT that the financial position of the assessee was unsound and hence, it was held that levy of penalty was not justified. We may clarify that we should not be taken to lay down that the imposition of penalty under any provision is automatic, yet atleast when the question of imposition of penalty for failure to deduct tax at source or for failure to pay it to the Government account after such deduction comes up, in our view, it is the obligation of the defaulter to prove to the satisfaction of the Assessing Officer that it was for good and sufficient reasons and not merely telling that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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