TMI Blog1999 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee, a Senior Accounts Officer in B-Thermal Power Project of U.P. State Electricity Board, Anpara, was a person responsible for deduction of tax at source under s. 194-C of the Act from payments made to contractors and sub-contractors. During the financial years 1989-90 and 1990-91 and 1991-92, payments of Rs. 1,68,80,000 and Rs. 3,91,65,000 were made to M/s Indian Railway Construction Co. (IRCON in short). On scrutiny of the returns in Form No. 26C filed by the aforesaid person, the ITO (TDS) noticed that deduction of the prescribed amount of tax, which worked out to Rs. 3,64,608 and Rs. 8,77,296 for the asst. yrs. 1990-91 and 1991-92 respectively had not been made. He, therefore, issued a show-cause notice under s. 271C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dy. CIT it was submitted that the payments to M/s IRCON were made right from the year 1980 but the person responsible for making the payment was held to be in default only for asst. yrs. 1990-91 and 1991-92. It was also pointed out that by order under s. 201 demand was created for the tax to be deducted at source but in appeal it was vacated. The learned CIT(A) did not find merit in assessee's plea and by observing as under, he upheld the imposition of penalty. "9. I do not agree with the contention of the appellant that M/s IRCON was not a contractor. The terms of the agreement were referred by the Dy. CIT. He also referred to the fact that M/s ERCON considering itself as a contractor deducted tax at source @1 per cent from payment to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt because M/s IRCON had duly shown the receipts in their own case. 3.1. The submission of the learned Departmental Representative was that no case has been made out to prove that the failure to deduct; tax at source was attributable to any reasonable cause. The Patna High Court (FB) decision in the case of CWT vs. Shri Jagdish Prasad Choudhary (1995) 125 CTR (Pat)(FB) 277 : (1995) 211 ITR 472 (Pat) (FB) was referred to and while admitting that the decision in this case was on facts against the Department, the learned Departmental Representative, submitted that the said decision laid down a proposition that "reasonable cause" means a cause which was beyond the control of the assessee and which prevented a reasonable man of ordinary pruden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee the burden of proving the existence and reasonability of the cause is on the assessee. When the assessee offered some explanation, it is the duty of the authorities concerned, to consider it objectively and to find out as a fact whether the particular cause stated by the assessee could operate upon his mind to prevent him from acting in the manner prescribed by the statute. Normally, the explanation is expected to be furnished before the authority imposing the penalty but if, by inadvertence or mistake, it could not be offered before the said authority, it could be offered before the first appellate authority who has co-terminus power with the authority imposing the penalty. 4.1. Advertising to the facts of the present case, from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC) penalty will not 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 concerned to be exercised judiciously and on a consideration of all the relevant circumstances. 4.2. On a careful consideration of the facts and circumstances of the case in its entirety and in view of the foregoing, we are of the considered opinion that the failure of the assessee in this case to deduct tax at source from the payments made to M/s IRCON could not be said to be without any reasonable cause. Therefore, no penalty is exigible under s. 271C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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