Income Tax Appellate Tribunal - Madras
C.T. Ramanathan & Co. vs Income-Tax Officer on 25 April, 1989
Equivalent citations: [1990]32ITD438(MAD)
ORDER
P.K. Ammini, Judicial Member
1. All these appeals by the assessee, which is known as "M/s. C.T. Ramanathan & Co., 24-Ansari Street, Coimbatore", arise out of the orders imposing fine under Section 285A(2) of the Income-tax Act, 1961 on the assessee by the Commissioner of Income-tax, Coimbatore for non-compliance of Section 285A(1) of the Act for the assessment years 1976-77 to 1982-83. Since a common issue as to whether the Commissioner of Income-tax is justified in levying the fine on the assessee under Section 285A(2) of the Act is involved in all these appeals, they are disposed of by this common order.
2. The appellant, a registered firm, consisted of four partners, viz. (1) late C.T. Ramanathan (died on 6.9.1982) (now represented by his wife R.M. Meenal), (2) S.P. Valliammal Achi, (3) S., Ramu and (4) S. Rajendran, was a major building contractor for government, quasi-government and other agencies. Finding that the assessee failed to comply with or furnishing particulars in Form 52 under Section 285A(1) of the Act, the Commissioner issued a detailed show-cause notice on 15-11-1985 under Section 285A(2) of the Act, to which the assessee filed a reply dated 27-12-1985, stating that Shri Ramanathan, the managing partner of the firm, passed away on 6.9.1982 and he was submitting tenders for various contracts taken on behalf of the firm and concluded the said contracts signing the agreements on behalf of the firm till his death. On account of his sudden death, the other partners of the firm were left in the dark as some of the contract files were either misplaced by him after the accident which took place in Mysore contract work-spot, where concrete roofing caved in and several workers died, and were not readily available for verification of the various agreements entered into with many government, quasi-government and other private agencies for whom work was done by the firm. After a thorough search only a few papers could be traced from his personal almirah and on verification they found particulars in some cases had been furnished under Section 285A(1) in Form No. 52. The details are also given in the reply. It is further stated in the letter that their chief accountant aged about 70 years also left for his native place on account of his age and illness and poor eyesight. He used to furnish the necessary particulars in these forms and get signature of the partner and then submit them to the department as per instructions of late Ramanathan. It is further stated in the reply that omission and default, if it had taken place on their part, is only technical and due to various reasons beyond their control on account of the sudden death of the senior partner which did not warrant any levy of fine. According to them mens rea is really necessary to attract the provisions of Section 285A(2), which are regulatory in character and they have been enacted to enforce the compliance of the provisions of Section 285 A(l) but not actually to punish them. There was no omission or concealment of income on their part. The entire TDS had also been made by the principals and there is no loss to the Government on account of that. So the case of the assessee was that there was no criminal intent or contumacious conduct or deliberate intention to disregard the statutory provisions as Form No. 52 have been sent by them. In the reply it is further stated that they have been unnecessarily harassed in their assessment proceedings by probing very deep in many matters and huge additions had been made disproportionate to the contract amounts involved. On account of huge addition so made the rate of profit which worked out to abnormal rate was not comparable with that of other contractors in the field. Further, after raid in their auditor's office, their books of accounts have been unnecessarily impounded. Action under Section 133 A was taken. According to them, notice under Section 285A(2) had not been received by other contractors who are in the field even though they have not filed Form No. 52 and it is prayed that .they should not be punished by imposing fine on them.
3. Having considered the reply, the Commissioner of Income-tax observed that the delay involvedwas considerable, that the defaults were not the first default and even assuming, though not conceding, the fact that the date of filing of the returns could be considered as some sort of compliance instead of filing Form No. 52, still the delay on the part of the assessee could be termed as "considerable". Having regard to all the factors, the Commissioner of Income-tax imposed under Section 285A(2) the following fines:-
Assessment year Fine 1976-77 5,000/- 1977-78 10,000/- 1978-79 7,500/- 1979-80 5,000/- 1980-81 2,000/- 1981-82 4,000/- 1982-83 2,000/-(141-A) Hence these appeals.
4. According to the assessee the orders of the Commissioner of Income-tax imposing the fines were illegal and were, therefore, liable to be set aside. The learned counsel sought to submit with reference to copies of orders that right from the assessment years 1976-77 to 1981-82 incomes returned were virtually eventually accepted in the assessments made and similar was the position for the assessment year 1982-83 also and, therefore, there could be no intention to default to file intimations under Section 285A in respect of all contracts. He referred to the large number of intimations which admittedly had been filed as referred to in the reply and this only showed that the assessee was anxious to comply with the provisions of law and defaults, even if they are considered to have occurred because the assessee is unable to prove the contrary for want of records due to subsequent death of the managing partner, should be considered to be excusable.
5. Another point urged was that the orders imposing fine suffered from a legal infirmity because penalties imposable were upto Rs.50 per day for specific defaults and imposition of ad hoc amounts of fine though they may not have exceeded in quantum the aggregate of the maximum imposable rendered the orders void.
6. The Departmental Representative argued that since there was proof of delay in furnishing the particulars in Form No. 52 as envisaged under Section 285A(1) the orders were perfectly in order and could be justified on the ground that in invoking Section 285 A(2) mens rea need not be established in view of the decision of the Andhra Pradesh High Court in Addl. CIT v. Khayam Constructions [1980] 123 ITR 573. The Commissioner, he stated, in each of the orders had specified the contracts in respect of which intimation had not been given and the details of the periods of default. The fines levied in each year if looked at the period of default was, it was submitted, only a token fine and there was therefore, no merit in the plea that the fines should be cancelled because in respect of each default the Commissioner of Income-tax had not fixed the per diem quantum.
7. We have considered the rival submissions. The Commissioner of Income-tax invoked Section 285 A(2) of the Act for imposing fine on the assessee on the ground that the assessee failed to comply with Section 285A(l) which reads as follows:-
285 A(l) Where any person (hereinafter referred to as the contractor) enters into a contract with another person for carrying out any work or for the supply of goods or services in connection therewith, the value of which work or supply or both exceeds fifty thousand rupees, he shall, within one month of the making of the contract, furnish to the Income-tax Officer having jurisdiction to assess the contractor such particulars relating to the contract and in such form as may be prescribed.
According to the assessee late Ramanathan, who was the managing partner of the firm, used to enter into contract on behalf of the firm and submit tenders and also he was the person who used to file return with respect to the income of the firm. They have also produced certain particulars filed in Form No. 52 as envisaged under Section 285A(1) of the Act. These details as stated in the reply, and which are not in dispute, are:-
Asst. year 1979-80:
1. Construction of building (Housing Unit) at Kurichi-Date of contract 13-1-1979 - Value Rs. 42,94,000 Form No. 52 dated 4-2-1979 sent to the ITO/I(3)/CBE.
2. Construction of P.W.D.F.C.L. Building in Jail Compound, Coimbatore - Date of contract 20-10-1978 - Value Rs. 2,40,000/-
Form No. 52 dated 26-10-1978 sent to the ITO/CBE.
Asst. year 1980-81:
1. Construction of building for Palarii Andavar College, Palani - Date of contract 5-4-1979-Value Rs. 2,24,000/-
Form No. 52 dated 17-4-1979 sent to the ITO/CBE.
2. Construction of building for Agricultural University Ladies Hostel, Coimbatore Form No. 52 dated 21-12-1979 sent to the ITO/CBE.
3. Construction of M.M.C. Building, Mysore - Date of contract 9-9-1979 - Value Rs. 1,23,35,000 Assessment year 1981-82
1. Construction of building for Government Hospital Out Patient Block, Coimbatore - Date of contract 28-5-1980 - Value Rs. 9,03,000 Form No. 52 dt. 12-6-1980 sent to ITO/CBE.
2. Construction of Commercial Complex Building at Dr. Nanjappa Road, Coimbatore Date of contract 3-4-1980 - Value Rs. 16,50,000 Form No. 52 dt. 12-4-1980 sent to the ITO/CBE.
Assessment year 1982 -83:
1. Construction of building for Samoa Mills, Coimbatore - Date of contract 15-7-1981 - Value Rs. 8,50,000/-
Form No. 52 dated 26-7-1981 sent to the ITO/I(3)/CBE.
8. The important question to be decided is whether the case put forward on behalf of {he assessee would justify the non-imposition of fine.
9. The decision of the Andhra Pradesh High Court in Khayam Constructions' case (supra) is authority for the proposition that mens rea was not necessary to attract the provisions of Section 285A(2). Hence we agree with the learned Departmental Representative that it is not necessary for the Revenue to establish mens rea. However, the following observations of the Court lay down the broad guidelines for approach in a case like the present one:-
The Commissioner is empowered to levy fine under this provision for the default committed by any contractor under Section 285 A(l) on a consideration of the facts and circumstances of each case. We also make it clear that the power of the Commissioner to levy fine is not mandatory, but only directory. But this being a statutory discretion, the Commissioner has to apply his mind judiciously in each and every case taking into consideration the facts and circumstances of each case. Where the Commissioner finds that the omission or default on the part of the assessee is only technical or due to any reason beyond his control, he may consider it just and proper not to levy any fine. Even otherwise, he may be liberal in imposing some nominal fine depending on the circumstances of the case. However, it is open to him to impose fine in cases where the omission or default was deliberate or mala fide. With regard to the quantum of the fine, the Commissioner has to exercise his discretionary power fairly, reasonably and judiciously.
10. In the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 the Supreme Court had also occasion to consider in -what cases it would be appropriate to desist from imposing a fine. The observations at page 29 are as under:-
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 penalty is prescribed; the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
The reply of the assessee shows that though the Commissioner of Income-tax had specified in the show-cause notice the particular contracts in respect of which intimation had not been furnished for each of the assessment years, the assessee was handicapped in stating definitely whether such intimations were sent or not because the managing partner had passed away suddenly on 6-9-1982. The Accountant of the assessee had also left services. We have set out from the reply particulars given by the assessee of instances where they had sent requisite intimations. These instances, no doubt, start only from the assessment year 1979-80 onwards. However, the intimations sent have been in respect of substantial contracts. The assessee had filed before us copies of assessment orders from the year 1976-77 onwards. The particulars are:-
Assessment Date of assess- Income Income year ment order returned assessed 1976-77 1.5.1976 Rs. 49,135/- Rs. 54,135/- 1977-78 20.5.1977 Rs. 86,290/- Rs. 89,080/- 1978-79 28.8.1978 Rs. 94,510/- Rs. 94,510/- 1979-80 30.7.1979 Rs. 95,560/- Rs. 95,560/- 1980-81 24.2.1981 Rs. 55,400/- Rs. 55.400/- 1981-82 7.10.1983 Loss Rs. 1,03,101/- accepted. 1982-83 25.5.1982 Rs. 1,14,092/- accented.
It will be seen from the above details that incomes returned have virtually been accepted in all the years and the returns of income have also been filed in time. This coupled with the fact that the assessee had also established that in some instances at least intimations as required under Section 285 A had been sent would all go to show that the assessee's intention was to strictly comply with all the requirements of law. The assessee, no doubt, has not established that intimations have been sent in all the cases. The plea put forward is that because one of the partners had expired, full details could not be had. Even assuming that there were certain omissions on the part of the assessee in sending intimations, the question that survives is whether the facts warrant imposition of a fine. Here what we have to consider is whether the default is only technical or venial. We may even hold that the default is not technical. So the question remains whether the default is venial. The word "venial" has the meaning pardonable, that is even if the default has occurred, the point for decision is whether it was necessary to impose the fine. The decision of the Supreme Court in the case of Hindustan Steel Ltd. (supra) is authority for the proposition that a fine will not be imposed merely because it is lawful to do so and that even if a minimum fine is prescribed, the authority competent to impose the same would be justified in refusing to impose the fine where the breach is venial. The observations of the Andhra Pradesh High Court in the case of Khayam Constructions (supra) are virtually to the same effect
11. In the present case if all the facts as a whole are taken, the impresssion being one of an assessee who has been trying to comply with the requirement of law, we are of the view that the defaults which have occurred, assuming that they have occurred are to be considered to be venial, that is pardonable. It may be lawful to impose a fine, but looking to all the facts we do not think that a fine should be imposed merely because it is lawful to do so. We accordingly cancel the fine as imposed for each of the assessment years under consideration.
12. On the view that we have taken, we do not propose to dwell further on the contention of the assessee that the Commissioner should have spelt out with reference to each default the quantum per day of fine which he was seeking to impose. Adverting to the argument of the learned Departmental Representative that the fines levied were only token fines, we would only state that from the angle of the contract value the penalties may appear to be insignificant, but considering that the fines were all imposed at the same time in respect of defaults communicated to the assessee by a single show-cause notice, the fines aggregating to Rs. 35,000 cannot be considered to be just a nominal fine.
13. In the result, the fines imposed are cancelled and the appeals are allowed.