Income Tax Appellate Tribunal - Delhi
Sudershan Auto & General Finance vs Commissioner Of Income Tax on 9 October, 1996
ORDER
B. M. Kothari, A.M.
1. This appeal by the assessee is directed against and order s. 272A(2)(f) r/w s. 274 of IT Act, 1961, dt. 19th April, 1996, passed by Shri S. K. Goyal, CIT, Delhi-VI, New Delhi, imposing a penalty of Rs. 41,28,700 for financial year 1993-94.
2. The appellant is a registered partnership firm engaged in receiving of deposits from public and financing of commercial vehicles on hire-purchase and leasing basis. The assessee received deposits from various depositors throughout the financial year 1993-94. Tax was deducted at source from the amount of interest monthly credited in the accounts of such depositors and such amount of TDS was duly deposited before the due date, i.e., 7th day of the following month in which the tax was deducted at source. However, the assessee did not deduct tax at source from the monthly interest credited in the accounts of 49 depositors as those depositors had requested the assessee not to deduct any tax at source since their income will be below the taxable limit and they will issue Form No. 15H in accordance with s. 197A (1A) of IT Act, 1961. The assessee also furnished Form No. 26A on 20th May, 1994, vide Receipt No. 01139 and Form No. 27A on 26th April, 1994, vide Receipt No. 000116.
3. Shri Pushkar Bhatnagar, the Asstt. CIT, Hqrs. VI, New Delhi, on behalf of the CIT, Delhi-VI, New Delhi, issued a show cause notice dt. 9th November, 1995, under s. 272A (2) (f) /274 r/w s. 197A of IT Act, 1961, to the assessee stating that the assessee has failed to deliver a copy of the declaration mentioned in s. 197A (2) r/w r. 29C (5) of IT Rules, 1962, within the due time, i.e., on or before 7th day of the month next following the month in which the declaration was furnished by the depositors to the assessee. It was further stated in the aid show cause notice that since the assessee appears to have, without any reasonable cause, failed to deliver in due time copy of the declaration in Form No. 15H in the cases of list enclosed with the said notice, the assessee was required to show cause why an order imposing penalty under s. 272A (2) (f) of the Act be not imposed.
4. The assessee furnished a reply to the aforesaid show cause notice, a copy whereof has been placed at pp. 4 to 7 of the paper book. In this reply it was, inter alia, mentioned that Form No. 15H received by the assessee from various depositors were filed with the ITO on being asked by him to file them with him. The non-furnishing of Form No. 15H in time is a technical requirement. There is no loss of revenue to the Government on this account. It was also pointed out that the taxation work including the work relating to submission of TDS forms. etc., was looked after by their tax consultant Shri Harish Kumar Mehra. As per an affidavit of Shri Harish Kumar Mehra filed along with the said reply he was unaware about the provisions of s. 197A and was under the impression that these Forms No. 15H were to be filed at the time of assessment, when asked for. The counsel Shri Mehra did not inform the assessee about the financial implications for such a technical default under s. 272A (2) (f). It was also submitted that the IT Department issues various advertisements in the newspapers for filing of IT returns, penalties leviable for late filing of returns, payment of advance-tax, etc., to help and educate the assessees. But, not a single advertisement about filing of Form No. 15H which entails such onerous penalties were published. The assessee also relied upon several judgments such as the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC), CIT vs. Offshore India Ltd. (1994) 209 ITR 473 (Cal), Cement Marketing India Ltd. vs. Asstt. CIT (1980) 124 ITR 15 (SC) and the judgment reported in AIR 1981 SC 1400. The assessee also submitted that the average gross profit derived by the assessee is hardly Rs. 3 lakhs. Their business is mainly run on the funds borrowed from various depositors and banks. The proposed levy of penalty under s. 272A will, by one stroke of pen, kill the hen that lays the golden eggs for the Revenue. It was prayed that the penalty proceedings should be dropped.
5. Another reply dt. 7th December, 1995, was submitted before the learned CIT in furtherance to earlier reply dt. 4th July, 1995. In this reply the judgment of Hon'ble Supreme Court in the case of CIT vs. J. H. Gotla (1985) 156 ITR 323 (SC) was cited. The assessee further submitted that there was no element of guilty intention or deliberateness on the part of the assessee in not filing the declaration in Form No. 15H. The assessee submitted the undated Forms 15H to the ITO as desired by him and then dated them as per the instructions given by the ITO. The assessee submitted that they still hold the undated counterfoils/duplicates with them. The assessee was ignorant about the requirement of furnishing these declaration forms to the CIT and they depended on their tax consultant. The tax consultant Shri H. K. Mehra has furnished an affidavit in which he confirmed his ignorance about the relevant provision of law and has also stated that he did not advise the assessee to file these forms in time as required by law. Shri S. K. Mehra in his affidavit dt. 4th December, 1995, has further confirmed that the assessee-firm Is in no way responsible for this unintended lapse on their part.
6. The assessee submitted a further reply dt. 10th January, 1996. It was pointed out in this petition that the assessee has timely and promptly complied with all the requirements of IT Act such as filing of return, paying advance-tax within time, depositing the amount of TDS before the due date every month and there was no guilty intention In not filing Form No. 15H of the 49 depositors. It was also pointed out that Form No. 27A which contains full details of such 49 depositors was duly furnished in time on 26th April, 1994. The requirement of filing Form No. 15H before the CIT was only a technical requirement about which neither the assessee nor their counsel were aware. Moreover, these 49 forms in the prescribed Form No. 15H were furnished before Shri Vadhera, ITO, pursuant to his requirement of furnishing the same. All these Form No. 15H were undated when furnished. Photocopies of the duplicate Forms 15H were also submitted with this reply to corroborate the aforesaid fact that when original were submitted, those were undared. The assessee was asked to put the date of April and May, 1993, on all these forms and the assessee mentioned those dates as stated by the ITO. However, in fact, neither some of those deposits nor the forms were received in April and May, 1993. Most of these forms were collected by the assessee only in the month of March, 1994, before the close of the year and all these forms were undated and some of them were just blank. Since these forms were undated and defective, the assessee submitted that the provisions of s. 197A could not be applicable and the assessee's case will rather be covered under s. 201 of the IT Act, i.e., failure to deduct tax at source. It was also submitted that there was absolutely no motive or vested interest or deliberate attempt to evade the responsibility under s. 197A. Form No. 27A which was filed in April, 1994, contained all the details of the depositors where no TDS was deducted. The assessee once again prayed that the penalty proceedings may be dropped.
7. A copy of the affidavit of Shri H. K. Mehra, who looked after the taxation work of the appellant-firm has been submitted at page 14 of the paper book. A copy of Form No. 27A furnished by the assessee before the prescribed date has been submitted at pages 15 to 18 of the paper book. A specimen copy of Form No. 15H given by Mr. Atul Narula, one of the 49 depositors, has also been submitted in the compilation at pages 19 and 20.
8. The learned CIT passed an order on 19th April, 1996, imposing a penalty of Rs. 41,28,700 @ Rs. 100 per day for total delay of 42,287 days computed as per details given in the Annexure 'B' of the said order.
9. The learned CIT after dealing with the submissions made on behalf of the assessee, inter alia, observed that the assessee's contention that his consultant was not aware of the provisions of s. 197A of the Act and that the assessee was not advised by his consultant is totally untenable firstly as "ignorancia juris non excusat". He, further expressed that it is very strange as to how a practising chartered accountant is not aware of the provisions of s. 197(1A) particularly when the assessee was advised to file Form No. 27A on 26th April, 1994. The CIT further held that the assessee was aware of his responsibilities and obligation to obtain Forms 15H from the depositors for non-deduction of TDS on the interest payable to them which is clear from the fact that the assessee had filed Form No. 27A to the ITO, TDS. The assessee had Forms 15H in his possession which he failed to file with the CIT. Delhi-VI, as per the requirement of law. The assessee's contention that the forms submitted during the course of proceedings before the ITO. TDS, are invalid forms because of the discrepancy between the date of acceptance/renewal of deposits and the date of verification of Form 15H by the depositor, etc.. has been refuted in para 3 at page 4 of his order received with Annexure 'A' and Annexure 'B'. The assessee's contention that they were misled by their authorised representative Shri Harish Kumar Mehra, who was not aware of the provisions of a. 197A (vide affidavit dt. 4th December, 1995 by Shri Harish Kumar Mehra) is also not tenable. He thus concluded that the assessee had no reasonable or sufficient cause for not filing of Forms 15H with the CIT, Delhi-VI, in time. The assessee has acted deliberately in defiance of law and is guilty of contumacious conduct. The various case law relied upon by the assessee are not applicable in the assessee's case owing to the distinguishable facts. The CIT thus levied a penalty of Rs. 41,28,700 @ Rs. 100 per day for 41,287 days of total delay calculated as per details given in Annexure 'B'.
10. Shri G. C. Sharma, the learned counsel for the assessee, vehemently argued that such a drastic and unconsciously penalty levied for a technical breach is highly unjustified and patently invalid. He submitted that the provisions of s. 272A (2) (f) covers only a case where there is total failure on the part of the assessee to deliver the declarations in the prescribed Form No. 15H and would not cover within its ambit case of delayed submission of Form No. 15H. He compared the language of s. 272A (2) with the language of s. 271(1) (a) in which it was clearly mentioned that where an assessee has failed to furnish the return of total income as required under s. 139(1) or as required by notice under s. 139(2) or s. 148 or has failed to furnish it within the time allowed in the manner required by s. 139(1) or by such notice, as the case may be, he will be liable to levy of penalty as prescribed in that section. The said provisions covered a case of non-furnishing of the return of income. However, s. 272A (2) only covers a case where a person fails to deliver the copy of the declaration mentioned in s. 197A. It does not specifically mention that it will also cover the cases of delayed furnishing of the Form No. 15H.
11. Mr. Sharma, the learned counsel, then submitted that provisions of s. 197A (1A) prescribes that no deduction of tax at source under s. 194A shall be made if such person (the recipient of interest) furnished to the person responsible for paying any income of the nature referred to in s. 194A, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total Income will be nil. The said provision does not prescribe any time-limit by which the declarant payee is required to furnish such a declaration in Form No. 15H to the payer.
12. Mr. Sharma further stated that s. 194A requires the person responsible for paying interest to deduct tax at source at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier. In the present case, the interest was credited every month in the account of these depositors and the Form No. 15H to be filed in accordance with the provisions of s. 194A r/w s. 197A ought to have been received every month from the amount of interest so credited. Since the assessee did not receive such declaration forms in the prescribed Form No. 15H from these 49 depositors every month, the forms so submitted before the ITO, TDS cannot be regarded as valid Form No. 15H. The worst consequence of such a lapse on the part of the assessee is that it is a case of non-deduction of tax at source where interest under s. 201 and penalty under s. 221 can be charged and not penalty under s. 272A (2) (f).
13. The learned counsel then invited our attention towards the order passed by the learned CIT. He invited our attention particularly towards Annexure 'B' of the said order. Column (6) of the said Annexure 'B' indicates that the CIT has presumed date of receipt of Form No. 15H to be after two weeks of the date of verification by the depositor on their respective declaration in Form No. 15H. The learned counsel submitted that the law does not authorise the CIT to presume the date of receipt of Form No. 15H by the assessee. The assessee submitted that these Form No. 15H were undated when those were submitted to the AO. The date of verification on the form by the depositors were mentioned by the assessee at the instance of the ITO as a date in the month of April/May, 1993. Such a date is apparently not correct in view of the contents of various Forms No. 15H. For instance it was pointed out that the declaration given in Form No. 15H by Shri Atul Kumar Narula bears the date of verification by the depositor as 20th May, 1993. The said form, inter alia, includes the various deposits received from the said depositor in the month of June, 1993, and February, 1994. The date of verification by the depositor in the Form No. 15H cannot precede the date of various deposits mentioned in that declaration. He submitted that all the Forms No. 15H which were undated when it was furnished and some of those were even blank and therefore, those forms cannot be regarded as valid Form No. 15H. It is, therefore, a case of non-deduction of tax at source and not a case of non-furnishing of a copy of valid declaration in prescribed Form No. 15H. The learned counsel thus submitted that the penalty imposed upon the appellant should be cancelled on this ground also.
14. The learned counsel then invited our attention towards s. 272A(3)(b) which provides that a penalty imposable under s. 272A(2)(f) shall be imposed by the Chief CIT or CIT. In the present case, the show cause notice has been issued by the Asstt. CIT, Hqrs., on behalf of the CIT, Delhi-VI, New Delhi. The penalty proceedings ought to have been initiated by the CIT himself and he could not validly delegate the power to initiate penalty proceedings to his subordinate authorities. The satisfaction about the initiation of penalty under the aforesaid section has to be recorded by the AO himself and he cannot levy the penalty on the basis of borrowed satisfaction made by the Asstt. CIT, Hqrs. It is a statutory function, which could be validly done by the CIT and not by any of his subordinate authorities.
15. Mr. Sharma further submitted that the assessee was ignorant about the relevant provisions requiring the assessee to submit a copy of Form No. 15H to the CIT before the prescribed date. His consultant Shri Harish Kumar Mehra was also ignorant about the relevant provisions of law. Shri Harish Kumar Mehra, the learned chartered accountant who was looking after the taxation work of the appellant-firm has given an affidavit to confirm all these facts. The assessee did not derive any advantage or benefit by not filing these declarations in Form No. 15H before the CIT. The alleged defaulter has not derived any gain as a result of such delay. There was no motive on the part of the assessee. There is no loss to the Revenue on account of such delay or default. The assessee had duly furnished Form No. 27A which virtually gives complete details which are contained in such Form No. 15H. The ignorance on the part of the assessee of the relevant provisions of law, the ignorance and mistake on the part of the chartered accountant who looked after the taxation work of the assessee-firm coupled with the fact that the assessee did not derive any gain or benefit and the Revenue did not suffer any loss, constitute a good and sufficient cause as contemplated in s. 273B. On this ground also no penalty should be levied for a technical or venial breach. He relied upon the judgment of Hon'ble Supreme Court in the case of Hindustan Steels Ltd. vs. State of Orissa (supra) and the decision of the Tribunal reported in Mahavir Agency vs. ITO (1996) 58 ITD 386 (Ahd). Shri Sharma thus strongly urged that penalty levied in the present case deserves to be quashed.
16. The learned Departmental Representative submitted that the scheme of tax deduction at source has been introduced by inserting various provisions with a view to put a curb on evasion of tax and find out new assessees. The various provisions contained In the Act cast an obligation upon the assessee to deduct tax at source out of various income credited or paid by them to various persons. Sec. 197A (1A) gives a benefit for non-deduction of tax at source on the fulfilment of certain conditions. The said section provides that if the recipient of such interest income furnishes a declaration in Form No. 15H to the payer, the payer may credit or pay the interest without deduction of tax at source. However, the person responsible for making payment of such income is required to submit a copy of the said declaration before the 7th day of the succeeding month in which such a declaration was received by the assessee from the payee. The assessee has not furnished such Form No. 15H of the 49 depositors within the prescribed time. It has offered no reasonable or sufficient reasons to justify such a long delay. He submitted that by not submitting Form No. 15H to the CIT, the assessee has given the undue benefit of secrecy about the interest income and the deposits made by these depositors with the assessee. Such action of giving benefit of secrecy to the depositors enables the assessee to get maximum deposits from the public. It is well known that various foreign banks, who provide the benefit of secrecy to their clients receive substantial deposits from the persons belonging to different countries. Such a benefit has been derived by the assessee by not timely furnishing Form No. 15H. The learned Departmental Representative also placed reliance on the judgments reported in Aggrawal Chamber of Commerce Ltd. vs. Ganpat Rai Hiralal (1958) 33 ITR 245 (SC) and Rishikesh Balkrishandas & Ors. vs. I. D. Manchanda, ITO (1987) 167 ITR 49 (Del). He also relied upon the elaborate reasons mentioned in the order of the CIT. The learned Departmental Representative further submitted that the affidavit given by Shri Harish Kumar Mehra, chartered accountant, who looked after the taxation work of the firm is like a self-serving document and cannot in any manner help the assessee. He further submitted that ignorance of law is not a valid excuse. The learned Departmental Representative, thus strongly supported the order of the CIT.
17. We have carefully considered the submissions made by the learned representatives of the parties and have also carefully gone through the orders of the learned Departmental authorities. We have also gone through the various decisions cited by the learned representatives of the parties. We have given a very deep and thoughtful consideration to the entire submissions and the decisions cited by the learned representatives.
18. It will be worthwhile to reproduce the relevant provisions in order to appreciate the facts and submissions made by the learned representative in correct perspective.
Sec. 194A (1) reads as under :
"Any person, not being an individual or an HUF, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force."
Sec. 197A (1A) and (2) reads as under :
"No deduction to be made in certain cases Sec. 197A (1A) : Notwithstanding anything contained in s. 194A or s. 194K, no deduction of tax shall be made under either of the said sections in the case of a person (not being a company or a firm), if such person furnishes to the person responsible for paying any income of the nature referred to in s. 194A or s. 194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.
Sec. 197A (2) : The person responsible for paying any income of the nature referred to in sub-s. (1) or sub-s. (1A) shall deliver or cause to be delivered to the Chief CIT or CIT, one copy of the declaration referred to in sub-s. (1) or subs. (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him."
Sec. 272A (2) (f) reads as under :
"If any person fails -
(a) ........
......
(f) to deliver or cause to be delivered in due time a copy of the declaration mentioned in s. 197A; or ...
he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees, for every day during which the failure continues :
Sec. 272A (3) (b) reads as under :
Any penalty imposable under sub-s. (1) or sub-s. (2) shall be imposed -
(b) in a case falling under cl. (f) of sub-s. (2), by the Chief CIT or CIT; and"
Sec. 273B reads as under :
"Penalty not to be imposed in certain cases Notwithstanding anything contained in provisions of cl. (b) of sub-s. (1) of s. 271, s. 271A, s. 271B, s. 271BB, s. 271C, s. 271D, s. 271E, cl. (c) or cl. (d) of subs. (1) or sub-s. (2) of s. 272A, sub-s. (i) of s. 272A or sub-s. (1) of s. 272BB or cl. (b) of sub-s. (1) or cl. (b) or cl. (c) of sub-s. (2) of s. 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure."
It is an undisputed fact, that interest was credited in the account of the 49 depositors in question every month but only one Form No. 15H of each of these depositors were obtained and furnished to the CIT under the circumstances narrated hereinbefore. The specimen Form No. 15H given by Mr. Atul Narula a copy of which has been submitted at pages 19 and 20 of the compilation is also reproduced hereunder :
"FORM NO. 15H [See rule 29C(3)] Declaration under s. 197A(1) of the IT Act, 1961 to be made by an individual claiming receipt of interests other than "interest on securities"
without deduction of tax.
I, Mr. Atul Narula son/daughter/wife of .........................
resident of D-23, Marg-13, Saket, New Delhi do hereby declare.
1. that the sums, particulars of which are given below, stand in my name and beneficially belong to me and the interest in respect of such sums is not includible in the total income of any other person under ss. 60 to 64 of the IT Act, 1961:
Name and address of the person Sudarshan Auto & General to whom the sums are given on Finance, 2, Commissioner's interest. Lane, Civil Lines, Delhi-54
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Amount of such Date(s) on which Period for which Rate of interest
sums such sums were such sums were
given on interest
interest
----------------------------------------------------------------------
25,000 23-11-1992 3 years 17%
25,000 05-02-1993 3 years 17%
20,000 03-06-1993 3 years 17%
7,000 03-06-1993 3 years 17%
25,000 24-02-1994 3 years 17%
----------------------------------------------------------------------
2. that my present occupation is service.
3. that my estimated total income, including the interest on the sums referred to in paragraph 1 above, computed in accordance with the provisions of the IT Act, 1961 for the previous year ending on 31st March, 1994 relevant to the asst. yr. 1994-95 will be less than the minimum liable to income-tax.
4. that I have not been assessed to income-tax at any time in the past but I fail within the jurisdiction of the CIT ..............
OR that I was last assessed to income-tax for the asst. yr. 19.......
19........ by the ITO ................... Circle/Ward/District and the permanent account number allotted to me is .....................;
5. that I am resident in India within the meaning of s. 6 of the IT Act, 1961.
Sd/ Signature of the declarant VERIFICATION I, Mr. Atul Narula, do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated.
Verified today, the 20th day of May, 1993.
Place : New Delhi Sd/
Signature of the declarant
Notes :
1. Give complete postal address.
2. The declaration should be furnished in duplicate.
3. Delete whichever is not applicable.,
4. Before signing the verification, the declarant should satisfy
himself that the information furnished in the declaration is true,
correct and complete in all respects.
5. Any person making a false statement in the declaration shall be
liable to prosecution under s. 277 of the IT Act, 1961 and on
conviction be punishable :
(i) in a case where tax sought to be evaded
exceeds one lakh rupees, with rigorous imprisonment which shall not be
less than six months but which may extend to seven years and with
fine;
(ii) in any other case, with rigorous imprisonment which shall not be
less than three months but which may extend to three years and with
fine.
(FOR USE BY THE PERSON TO WHOM THE DECLARATION IS FURNISHED)
1. Name and address of the person Sudarshan Auto & General Finance,
responsible for paying interest on 2, Commissioner's Lane, Civil
sums mentioned in paragraph 1 of Lanes, Delhi - 110 054.
the declaration
2. Date on which the declaration was furnished by the declarant
3. Period for which interest is 1st April, 1993 to 31st March,
credited/paid 1994
4. Amount of interest Rs. 12,691
5. Rate on which interest is 17 per cent
credited/paid
Forwarded to the CIT ........................................
For Sudarshan Auto &
General Finance
Sd/-
Place : Delhi Authorised Signatory
Date : 21st April, 1994 (Signature of the person
responsible for paying interest
other than "interest on
securities")
The prescribed Form No. 27A in which the complete details relating to these 49 depositors as required by the said form were duly furnished before the due date is as under :
"FORM NO. 27A [See Rule 37AA] Annual return under s. 206A of the IT Act, 1961, of interest other than "Interest on Securities" credited/paid during the financial year
19......... 19......... without deduction of tax.
............
Name & Address of the person responsible for paying the income ..................................
----------------------------------------------------------------------
S. Name & address of the Amount of interest Date(s) of credit
No. person to whom the credited to the or payment
interest was credited/ account of, or
paid without deduction paid to, the
during the financial person mentioned
year on his furnishing in column 2 during
a declaration under the financial year
sub-s. (1A) of S. 197A
----------------------------------------------------------------------1 2 3 4
----------------------------------------------------------------------
I certify that -
(i) the above statement contains a complete list of every person to whose account interest other than interest on securities was credited or to whom such interest was paid during the financial year 19 ....... 19 ........ without deduction of tax on his furnishing a declaration under sub-s. (1A) of s. 197A;
(ii) all the particulars furnished above are correct and complete.
Place .............. ......................................
Date .............. Signature of the person by whom the
return is delivered"
The assessee in the various replies submitted before the CIT repeatedly submitted that a copy of Form No. 15H of all the 49 depositors in question were submitted before the ITO Shri Vadhera and those were undated when furnished before him. Photocopy of the duplicate Form No. 15H which were undated were also furnished. It was also categorically stated time and again that the dates of April and May, 1993, at the column of verification by the depositor were filled up as directed by the ITO but most of these forms were collected from the respective depositors in the month of March, 1994, before the close of the year and all those forms were undated and some of them were just blank. The exact date when the recipient 49 depositors furnished such declaration in Form No. 15H to the assessee-firm is not verifiable from the records. In the prescribed Form No. 15H one of the column "for use by the person to whom the declaration is furnished" requires mention of the date on which the declaration was furnished by the declarant to the person responsible for paying such Interest. This date was not mentioned in the said Form No. 15H. The CIT, therefore, presumed that the date of receipt of such 15H Forms by the assessee from the respective depositors should be deemed to be after two weeks of the date of verification by the concerning depositor. He has levied the penalty by presuming such deemed date of receipt of 15H Forms by the assessee and not on the basis of actual date of receipt of such declaration in Form No. 15H by the assessee from the respective depositors. In the light of the aforestated facts, we will first like to deal with the assessee's contention that the Form No. 15H received by the assessee from the various depositors were not valid and were not in conformity with the provisions of s. 197A r/w s. 194A.
19. The provisions of s. 194A requires the persons responsible for paying to a resident any income by way of interest to deduct tax at source at the rates in force at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier. Interest in the present case was credited every month in the account of the payee. Therefore, declaration in the prescribed Form No. 15H ought to have been received on or before credit of such interest in the account of the respective payees during each month and only on the basis of such a declaration in Form No. 15H, the assessee could credit the entire amount of monthly interest in the account of the respective depositor without deduction of tax at source. In case, the assessee did not receive such declaration in Form No. 15H before or at the time of credit or payment of interest, whichever is earlier, the assessee was under an obligation to deduct tax at source and he could not take the benefit of non-deduction of tax at source under s. 197A (1A). The receipt of declaration in Form No. 15H should necessarily precede the date of credit or payment of interest without deduction of tax at source. The exact date when the assessee received such declaration in Form No. 15H from the respective depositors has not been ascertained. Neither the assessee has furnished the exact date on which the declaration was furnished by the declarant to them nor the CIT has made any effort to verify as to when such declaration in prescribed Form No. 15H were really received by the assessee from the respective depositors. The assessee repeatedly submitted to the CIT in the various letter submitted before him that all those Form No. 15H were received towards the end of the accounting year in the month of March, 1994, and the date of April and May, 1993, mentioned in the verification part of such declaration form were mentioned at the instance of the ITO, though those Form No. 15H when submitted before the ITO were undated. The column requiring the mention of specific date of receipt on which such declaration was furnished by the declarant to the assessee is blank in the Form No. 15H. In such a situation after submission of Form No. 15H before the CIT and after submission of such facts in the various letters submitted on behalf of the assessee before him, the CIT ought to have examined the partners of the assessee-firm as well as all those payees for ascertaining the exact date of furnishing such declarations by the depositors to the assessee. Unless the specific date on which these declarations were furnished by the respective depositors to the assessee is ascertained, the question as to whether the assessee was liable to deduct tax at source at the time of crediting the interest every month or he could credit such interest without deduction of interest at source in conformity with s. 197A (1A) could not be validly decided by the CIT. If Form No. 15H were not received before crediting the monthly interest in the account of the respective payees, the assessee was not entitled to credit such interest without deduction of tax at source and he ought to have deducted tax at source at the time of crediting such interest income in the account of the respective payees every month. The CIT has levied the penalty without ascertaining and without deciding the crucial point as to whether the assessee was liable to deduct tax at source out of interest credited in the account of these 49 depositors in question or the assessee had already received Form No. 15H from the respective depositors before the interest was credited monthly in their respective accounts and thereby the assessee could credit the interest income in their respective accounts without deduction of tax at source. The CIT could require the assessee to mention a specific date on which such declaration was received by him from each of the 49 declarants. In the event of failure on the part of the assessee to furnish the specific and precise date on which the declaration was received by the assessee from the 49 depositors, the least which the CIT should have done is to examine all those 49 declarants for finding out the truth and the relevant facts about the exact date on which the said declarations were furnished by them to the assessee. Such an enquiry and further investigation by the learned CIT before imposing such a drastic and huge penalty was necessary in view of the glaring instances of mistakes pointed out in some of the declarations given in Form No. 15H. The assessee has submitted in the statement of facts certain instances of such glaring defects in the various Form No. 15H submitted to the ITO, TDS, which are reproduced hereunder :
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S. Name of the Deposit Date on which Date of
No. depositor amount the deposit verification
reed/renewed
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1. Ms. Sarla Mongia 15,000 19.06.1993 10.05.1993
2. Baby Kirtika 15,000 18.09.1993 25.05.1993
3. Mr. C. M. Narula No entry No entry 07.05.1993
4. Mrs. Paramjit Kaur 25,000) 13.01.1993 25,000) 07.02.1994 29.05.1993 25,000) 26.02.1994
5. Mr. Atul Narula 20,000) 03.06.1993 7,000) 03.06.1993 20.05.1993 25,000) 24.02.1994
6. Ms. Anita Verma 5,000 09.07.1993 25.05.1993
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These facts and details given in the statement of facts submitted along with the appeal have not been controverted or its correctness has not been disputed by the learned Departmental Representative. A specimen copy of Form No. 15H from Mr. Atul Narula has been reproduced hereinbefore. That specimen copy of Form No. 15H clearly shows under the head 'verification' signed by Atul Narula, the date has been mentioned as 20th May, 1993. The details of deposits mentioned in the said Form No. 15H includes deposit made on 3rd June, 1993, and 24th February, 1994. The date of verification could not precede the date of deposits made on subsequent dates. How a person signing the verification on 20th May, 1993, could state in the said declaration that he has made deposits on 3rd June, 1993, and 24th February, 1994. The assessee also produced before the CIT photocopy of the duplicate Form No. 15H received from these depositors which shows that they are undated Form No. 15H. The assessee categorically submitted before the CIT in their various letters that undated Form No. 15H had been submitted to the ITO, Hqrs., and the date of verification of April, 1993, and May, 1993, was mentioned by the assessee at the instance of the ITO. These facts have not been rebutted by the CIT either by recording the Statement Of the partners of the assessee-firm, recording the statement of the various depositors who submitted such Form No. 15H nor by seeking factual clarification from the concerned ITO, TDS. He has levied penalty by presuming a deemed date of receipt of Form No. 15H from the various depositors by taking a date after two weeks from such date of verification mentioned in the respective declaration in Form No. 15H. The deemed date of furnishing the declaration by the respective depositors in Form No. 15H to the assessee-firm cannot, therefore, be treated as the correct date of furnishing of such declaration by the recipient of interest to the assessee and levy of penalty on the basis of such deemed date without making any further efforts to ascertain the truth cannot be sustained. In case the assessee had not received the declaration in the prescribed Form No. 15H before crediting the monthly interest in the account of the respective payees, the assessee may be liable for interest and penalty under different provisions of IT Act such as under ss. 201 and 221 for non-deduction of tax at source but the assessee in such a circumstance cannot be fastened with a penalty under s. 272A(2)(f) for delay in furnishing of Form No. 15H to the CIT. It was, therefore, incumbent upon the learned CIT to first ascertain the specific nature of default committed by the assessee before initiating and imposing the penalty in question.
20. The learned counsel for the assessee had raised various technical and legal objections about the invalidity of initiation of penalty proceedings by the Asstt. CIT, Hqrs. on behalf of the CIT, the comparison of the provisions of s. 272A (2) (f) with corresponding s. 271(1) (a), etc. But before dealing with those submissions, it would be imperative to deal with the main arguments advanced by the assessee that the default and delay in furnishing of the copy of the declaration in Form No. 15H had occurred on account of reasonable, sufficient and good cause and, therefore, no penalty is leviable in view of s. 273B. In case, we accept this submission of the assessee, it may then not be necessary to travel into other technical legal objections raised on behalf of the assessee.
21. It was submitted on behalf of the assessee in the various letters submitted to the learned CIT that the assessee was ignorant about the relevant provisions of IT Act, 1961, requiring the submission of a copy of the various Form No. 15H received by the assessee from the various depositors to the learned CIT within the prescribed time. The assessee also submitted that they solely depended on the advise of their tax consultant Shri Harish Kumar Mehra and submitted his affidavit of declaration (sic). It will be worthwhile to reproduce the affidavit of Shri Harish Kumar Mehra submitted before the CIT :
"AFFIDAVIT I, Harish Kumar Mehra Prop. of Harish K. Mehra & Co., Chartered Accountants of 1417, Galitelian, Tilak Bazar, Delhi do hereby solemnly affirm and declare as under :
1. That I am a practising Chartered Accountant who looks after the tax affairs of Sudarshan Auto & General Finance.
2. That until recently I was not aware of the provisions of ss. 197A of IT Act regarding filing of Form No. 15H with the CIT and was under the impression that these forms are to be filed at the time of assessment.
3. That accordingly I did not advise Sudarshan Auto & General Finance to file these forms in time as required by law.
4. That the above firm is in no way responsible for this unintended lapse on their part.
Sd/-
DEPONENT VERIFICATION I hereby confirm that the contents of the above statement made by me are true to my knowledge belief and nothing has been concealed therefrom.
Signed this 2nd day of December, 1995, at New Delhi.
ATTESTED Sd/-
Sd/- DEPONENT"
NOTARY
4th December, 1994
It is apparent from a plain reading of the said affidavit of Shri Harish Kumar Mehra that he has confirmed the fact that he was looking after the tax affairs of the appellant-firm. He was not aware about the provisions of s. 197A regarding filing of Form No. 15H with the CIT and was under the impression that these forms are to be filed at the time of assessment. He did not advise the appellant firm to file these forms in time as required by law. Mr. Mehra has further accepted the entire responsibility and has categorically stated that the assessee-firm is in no way responsible for this unintended lapse on their part. 22. The learned CIT and the learned Departmental Representative has brushed aside this affidavit merely on the ground that it is a self-serving statement. It is indeed strange as to how an affidavit given by a chartered accountant who is looking after the taxation matter of the firm admitting his default and ignorance can be said to be a self-serving statement of the assessee. In fact, Shri Harish Kumar Mehra by giving such an affidavit has exposed himself to a great liability and legal action against him, in case the assessee decides to initiate such action against their tax consultant for failure on his part to give proper advise to his client. In case the CIT did not want to believe the contents of the affidavit of Shri Harish Kumar Mehra, chartered accountant he should have summoned Mr. Mehra and ought to have recorded his statement. Mr. Mehra must be having many other clients. It could have been easily ascertained by interrogating Mr. Mehra as to whether copies of Form No. 15H has been submitted through his office in the cases of his other clients or not. No effort has been made by the CIT to controvert the facts so stated by Shri Harish Kumar Mehra in the affidavit submitted before him. In the absence of any material brought on record in rebuttal of facts stated in the affidavit of Shri Harish Kumar Mehra, the facts and contents of the affidavit will have to be treated as true and correct and the same would be binding on the Departmental authorities in view of the judgment of Hon'ble Supreme Court in the case of Mehta Parikh & Co. vs. CIT (1956) 30 ITR 181 (SC).
23. It will be worthwhile to reproduce the relevant findings given by the Hon'ble Supreme Court at page 187 :
"The appellants took it that the affidavits of these parties were enough and neither the AAC, nor the ITO, who was present at the hearing of the appeal before the AAC considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits."
24. The contention of the Revenue that ignorance of law is not a valid excuse is also not valid. The learned Departmental Representative was confronted with the judgment of the Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Ltd. vs. State of Uttar Pradesh (1979) 118 ITR 326 (SC). He could not give any valid explanation in support of his contention that everybody is supposed to know the law after going through the said judgment. The Hon'ble Supreme Court in the aforesaid case has, inter alia, held as under at page 339 :
"Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that everyone is presumed to know the law, but that is not a correct statement : there is no such maxim known to the law. Over a hundred and thirty years age, Maula, J. pointed out in Martindale vs. Falkner (1846) 2 CB 706 : "There is no presumption in this country that every person knows the law : it would be contrary to commonsense and reason if it were so". Scrutton, L.J. also once said : "It is impossible to know all the statutory law, and not very possible to know all the common law". But, it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans V. Bartlam (1937) AC 473 : "... the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application."
The ignorance of the law may or may not constitute a valid excuse for justifying non-compliance with a provision of statute. It will depend upon the nature of the default. If it is merely a technical or venial breach, no penalty would be imposable because the levy of penalty under any statutory provision necessarily implies existence of some guilty intention on the part of the defaulter or the offender. In order to determine the existence or absence of any guilty intention on the part of the assessee, one will have to consider all the surrounding facts and circumstances. Whether by committing any default of non-compliance with a statutory provision of law, an assessee has derived any benefit, gain or advantage whether by such a default or noncompliance the assessee has defrauded the Revenue or has caused any loss to the Revenue. These are some of the factors which will have to be seriously considered before considering the fact as to whether the ignorance on the part of the assessee and his consultant can constitute a valid excuse or a reasonable cause for the purposes of s. 273B in relation to the alleged default specified in s. 272A(2)(f). In the present case, the assessee has not derived any gain, benefit or advantage by delayed submission of Forms No. 15H. The Revenue has also not suffered any loss. The guilty intention on the part of the assessee is totally absent because the assessee has furnished complete details relating to all those 49 depositors in the prescribed Form No. 27A which was duly furnished within the time prescribed under the relevant provisions of law. The Revenue has brought no material on record to prove that the assessee had delayed the furnishing of the copy of their declaration in Form No. 15H with any ulterior motive such as to keep the information relating to their deposit, their interest income secret from the Department or that those 49 depositors in collusion with the assessee evaded payment of tax on their interest income. The CIT has not even examined few of those 49 depositors to bring any such material on record. On the other hand, the assessee has furnished the complete details relating to name and full addresses of those persons to whom interest was credited/paid without deduction of tax at source, the amount of interest credited to their account during the financial year 1993-94 and the date of credit or payment as required in the prescribed Form No. 27A. The Department could make necessary enquiries against those depositors on the basis of such adequate information given in the Form No. 27A. The details and facts stated in Form No. 27A virtually contain all the details which are contained in Form No. 15H. It is an undisputed fact that the assessee had furnished such a Form No. 27A for the relevant year within the time prescribed under the relevant rule and the provision of IT Act, 1961. This fact proves total absence of any guilty intention on the part of the assessee.
25. It will be worthwhile to make a useful reference to the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (supra) :
"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 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 bone fide belief that the offender is not liable to act in the manner prescribed by the statute."
The ratio of the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. (supra) is fully applicable on the facts of the present case.
26. The learned counsel for the assessee had also placed reliance on the judgment of Hon'ble Supreme Court reported in AIR 1980 SC 1400 and had quoted the following extracts from the aforesaid judgment in his petition submitted before the CIT :
"... a party should not suffer for inaction, deliberate omission or misdemeanour of his counsel when he has selected his counsel, briefed him and paid his fee and was assured that his interest will be looked after ..."
There are several other decisions in which it has been held that bone fide omissions on the part of the counsel would constitute reasonable and sufficient cause justifying cancellation of penalty under different provisions of IT Act.
27. In view of the aforesaid facts, discussions and the above referred judgments, we are of the considered opinion that the innocent omission on the part of the assessee to furnish the copies of declaration in prescribed Form No. 15H due to bone fide ignorance on their part and due to bona fide ignorance on the part of their tax consultant as admitted in the affidavit furnished before the CIT would, on the facts and circumstances of the present case, constitute a reasonable cause for the failure contemplated in s. 272A (2) (f) within the meaning of s. 273B. In our view, the assessee was prevented by reasonable and sufficient cause from complying with the requirement of s. 197A (2) of IT Act, 1961. The penalty imposed upon the appellant by the learned CIT, therefore, deserves to be cancelled. We accordingly cancel the said penalty.
28. In the result, appeal is allowed.