Income Tax Appellate Tribunal - Delhi
Escorts Employees Ancillaries Ltd. vs Commissioner Of Income Tax on 29 February, 2000
ORDER
Miss Moksh Mahajan, A.M.
1. In an appeal filed against the order of CIT(A), Rohtak, under s. 272A(2)(f) of the Act, it is contended that a penalty of Rs. 38,30,400 for alleged default for a period of 133 days in respect of each of 288 Forms No. 15H as furnished is wholly unjustified. Shri Pradeep Dinodia who appeared on behalf of the assessee submitted that as per the provisions of s. 194A(1), the assessee was required to deduct tax on the interest exceeding Rs. 2,500 paid to the depositor ? As per the provisions of s. 197A, no deduction of tax is required to be made in case the assessee on whose behalf tax is to be deducted furnishes declaration in writing in duplicate in the prescribed form and verified in the prescribed manner that the tax on his total income of the previous year in which such income is to be included would be nil. The assessee is a public limited company which collects the FD from public shareholders through the broker. The broker is assigned the job of collection of FD as well furnishing of declarations in Form No. 15H where they are so required. In the year under appeal, the assessee was required to furnish 288 Forms 15H in respect of the parties on whose income the tax payable was nil. Shri R. C. Singh, the broker apprised the company that the necessary forms would be submitted in time. Since these were not given, they could not be submitted in time to the Department. The broker gave the aforesaid certificates on 12th August, 1988, and they in turn were submitted on 13th August, to CIT, the default occurred at the end of the broker who admitted it as per the affidavit given (p. 15 of the paper book). Neither in the earlier assessment year nor in subsequent assessment year the assessee committed such a default. It only occurred in the year under consideration. Nevertheless, the CIT(A) while levying the default ignored the proviso to s. 272A(1) which states that amount of penalty for failure in relation to a declaration mentioned in s. 197A shall not exceed the amount of tax deductible or collectible as the case may be. Thus, this could not have exceeded an amount of Rs. 1,74,032. Furthermore, there was one default on the part of the assessee and not the multiplicity of the defaults for which the penalty was to be imposed for each such default. This would not have been the intention of the legislature. There was a delay of 133 days in submissions of the form for which penalty @ Rs. 100 per day would work out to Rs. 13,300 only. Reliance was placed on the decision of Pune Bench of Tribunal in the case of Executive Engineer vs. Dy. CIT (1994) 48 TTJ (Pune) 47 : (1994) 48 ITD 414 (Pune). It was clearly held therein that the reading of s. 272A(2)(g) indicates that the imposition of penalty has been prescribed for the total default. The default cannot be considered in respect of each employee separately. There could only be one default. There could be a case against the assessee under s. 201 of the Act but on facts as available in the case of the assessee, it is not so. The assessee has come into existence for the welfare of its employees and the entirety of the circumstances have to be kept in view while considering the imposition of penalty. There existed a reasonable cause for late furnishing of the declaration by the assessee. This was on account of the belated furnishing of forms by the broker who was assigned with the job. In similar circumstances, the Tribunal Delhi Bench in case of Sudharshan Auto & Gen. Finance vs. CIT (1998) 60 TTJ (Del) 567 : (1997) 60 ITD 177 (Del) held that the ignorance on the part of the assessee as well as on part of tax consultant, there would be a reasonable cause and the penalty levied deserves to be cancelled. In the case of the assessee, the default lay on the part of the broker for which the assessee could not furnish the declaration in time. Relying on the various decisions of Tribunal as under, it was submitted that no penalty should be levied :
(1) Bansal Bros. vs. Dy. CIT (1998) 64 ITD 129 (Del);
(2) Mahendra Prakash Sharaf vs. Dy. CIT (1998) 60 TTJ (Del) 542 : (1998) 64 ITD 382 (Del); and (3) Mahabir Agency vs. ITO (1996) 58 ITD 386 (Ahd).
2. In the alternative, it was submitted that at best, the penalty could have been levied at Rs. 13,300.
3. Learned Departmental Representative on the other hand vehemently argued that the assessee clearly committed a default for which it was liable to be penalised. The reading of the section clearly shows that it is for each default that the assessee has to be proceeded against separately. Provisions of section have been brought on the statute to enforce the provisions relating to tax deduction at source and to counter the same. In case a lenient view is adopted the purpose for which the provisions are brought on the statute would fall. As regards proviso referred to by the learned authorised representative, the same is not retrospective in effect and as such cannot be invoked for restricting the penalty. Responding to the arguments of the learned Departmental Representative Shri Dinodia submitted that while he is supported in his contention by the various decisions of the Benches of the Tribunal in regard to the proviso being of clarificatory in nature, there are number of judgments to the effect as under :
(1) Mfg. Impex (P) Ltd. vs. Dy. CIT (1994-95) 26 BCAJ 961 (Bom);
(2) Superintending Engineer vs. ITO (1996) 54 TTJ (Jp) 608;
(3) Motisagar Estate (P) Ltd. vs. Dy. CIT (1993) 47 ITD 72 (Pune);
(4) CIT vs. Poddar Cement (P) Ltd. (1997) 226 ITR 625 (SC) (5) Allied Motors (P) Ltd. vs. CIT (1997) 224 ITR 677 (SC)
4. As the matter relates to the procedure, the same has to be interpreted being retrospective in nature.
5. We have carefully considered the rival submissions and have also gone through the decisions referred to by the learned authorised representative. Admittedly, the assessee has furnished declarations late i.e., on 17th August, 1998. It is also undisputed that there is a delay of 133 days. The same is in respect of 288 15H Forms. The question whether for each default, party has to be proceeded against separately or the same have to be treated as one default has been considered by the Tribunal, Pune Bench in case of Executive Engineer vs. Dy. CIT (supra). In the aforesaid case, there were 162 employees to whom separate TDS certificates in Form No. 16 were not issued by the assessee. After considering the provisions of s. 272A(2)(g) of the IT Act, it was held that the same indicates "that the imposition of penalty has been prescribed for the total default. In other words, if the assessee has failed to furnish the certificate as required by s. 203 or s. 206C he is liable to be penalised under the said section". In the case of the assessee, he was required to furnish Form No. 15H in respect of 288 persons. In essence the provision of both the clauses are same. Since, no contrary decision has been cited by the learned Departmental Representative, we are in agreement with the view expressed by the Pune Bench of the Tribunal that the default has to be considered only one and each valuation has not to be considered separately. In this connection, it would be relevant to point out that the assessee did submit Form No. 15H though late. It was not the case where the tax came to be deducted from the persons for which there could have been postponement of tax. No material has also been brought before us to show that though the tax was payable by these parties, the certificates issued were not correct. Thus, there was only a technical or venial breach of the provisions of the Act. Coming to the reasonable cause for furnishing belated 15H Form as per the affidavit of Shri R. C. Singh, the same were delivered to the company on 12th August, 1998. Nowhere in his affidavit the reasons for having furnished certificates late to the assessee were given. This apart it was the duty of the assessee to have collected the aforesaid 15H Forms from Shri R. C. Singh who was merely his agent. The circumstances in which the assessee could not collect the certificates in time and the difficulty if any fell in collection of the same have not been detailed before us. The decisions relied upon by the assessee are distinguishable on the facts. Before us, it has not been pleaded that the assessee or its broker was ignorant about the provisions of law. On the other hand, the very fact that in the earlier as well in the subsequent assessment years, the assessee has complied with the provisions of law show that being fully aware of the provisions, the delay occurred at its hand. Accordingly, the decision rendered in the case of Sudharshan Auto & General Finance (supra) does not help the assessee. So would be the decision in the case of Bansal Bros. (supra) where it was shown that there was a bona fide belief on the part of the assessee that no obligation to file return under s. 206 of the Act existed. Similarly, the facts available in the case of Mahendra Sharaf (supra) are different from that of the assessee. In the aforesaid case, the late deposit of return under s. 206 was on account of late receipt of TDS book. In the circumstances, since the assessee could not furnish the reasonable cause on its part. The minimum penalty does become imposable. This would, however, work out to Rs. 13,300. This also would be in fitness with the default committed by the assessee. As regards the proviso to s. 272A(2) inserted w.e.f. 1st October, 1991, we agree with the assessee's counsel that this is merely clarificatory in nature and has retrospective effect. In this proposition, we are fully supported by the decisions as cited supra by the learned authorised representative. Incidentally, it may be mentioned that their Lordships of Supreme Court in the case of Allied Motors (P) Ltd. (supra) and Poddar Cements (P) Ltd. (supra) have held that the proviso which are clarificatory and procedural in law are to be applied retrospectively. The provisions of the section under consideration relate to the procedure and as such they have to be treated as such.
6. In the result, we would hold the penalty to the extent of Rs. 13,300 as against Rs. 38,30,400. Appeal allowed in part.
U. B. S. Bedi, J.M.
7. I have gone through the proposed order of learned Accountant Member in this case but despite my best efforts and great persuasion to myself I have not been able to agree with the findings or conclusions as arrived at by her and my reasons for being so are incorporated in the present order of mine which is as under.
8. In this case challenge is against the order of CIT, Rohtak, whereby he imposed penalty of Rs. 38,30,400 under s. 272A(2)(f) of the IT Act, 1961 (hereinafter called as Act) and this amount of penalty has been worked out with respect to each of 288 Forms 15H for default of 133 days. It was contended by learned counsel for the assessee Shri Pradeep Dinodia that a penalty of Rs. 38,30,000 for alleged default for a period of 133 days in respect of each of 288 Form No. 15H as furnished late is wholly unjustified. It was further submitted that as per provisions of s. 194A(1), the assessee was required to deduct tax on the interest exceeding Rs. 2,500 paid to the depositors and as per the provisions of s. 197A, no deduction of tax is required to be made in case the assessee on whose behalf tax is to be deducted furnishes declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that tax on his total income of previous year in which such income is to be included works out to be nil. The assessee is a public limited company which collects the fixed deposits from public shareholders through the broker. For this job broker is engaged who is assigned the job of collection of amount of fixed deposit as well as furnishing a declaration in Form No. 15H where they are so required. In the year under consideration, the assessee was required to furnish 288 Forms No. 15H in respect of parties on whose income the tax payable was nil. The company engaged the services of one Shri R. C. Singh, the broker, who arranged FDs assured the assessee-company that the necessary forms would be submitted in time. But he could not do so and as these forms were not given by the said broker so the assessee-company could not submit these forms to IT Department within the prescribed time. However, the broker gave these Forms No. 15H on 12th August, 1988 and they were submitted on 14th August, 1988, to CIT, Rohtak, who is the concerned CIT and default occurred at the end of the broker, who admitted it as per his affidavit which was filed in penalty proceedings before CIT and copy placed at p. 15 of the paper book. It was also submitted by learned counsel for the assessee that neither in the earlier assessment year nor in the subsequent assessment years, the assessee committed any such default and it only occurred in the year under consideration for which there was a reasonable cause which was shown to learned CIT in response to show-cause notice. It was further contended that while taking action for default of the assessee, CIT ignored the proviso to s. 272A(2) which states that amount of penalty for failure is relation to the declaration mentioned in s. 197A shall not exceed the amount of tax deductible or collectible, as the case may be, which was nil, in the case as depositors declared in application forms for investing in FD's that they are not liable to pay tax and shall furnish Form 15H and assessee had furnished required information in return filed in Form 26A so there was no loss to the Revenue and it is not the case of Revenue that either declaration filed are wrong or any information was withheld by the assessee from the Department, therefore, penalty is not exigible in this case and same liable to be set aside and furthermore at the most though not admitted and for argument's sake there could be one default on the part of the assessee and not the multiplicity of defaults for which the penalty was to be imposed for each such default. This would not have been the intention of the legislature and at the most since there was delay of 133 days in submission of forms for which penalty @ Rs. 100 per day works out to Rs. 13,300 only. Reliance was placed on the decision of Pune Bench of Tribunal in the case of Executive Engineer vs. Dy. CIT in ITA 344/Pune/93 asst. yr. 1989-90 (supra) wherein it was clearly held that reading of s. 272A(2)(g) indicates that the imposition of penalty has been prescribed for the total default. A default cannot be considered in respect of each employee separately and there could only be one default. There could be, it was pleaded, a case against the assessee under s. 201 of the IT Act but on facts as available in the case of assessee, it is not so. The assessee has come into existence for the welfare of its employees and the entirety of the circumstances have to be kept in view while considering the imposition of penalty. In this case, there existed a reasonable cause for late furnishing of Form No. 15H by the assessee. This was on account of belated furnishing of forms by the broker which was assigned with the job and this broker has duly been paid commission for fetching FD's for the assessee which is verifiable from record and under similar circumstances the Tribunal Delhi Bench in the case of Sudharshan Auto General Finance vs. CIT held that the ignorance on the part of the assessee as well as on part of tax consultant, there would be a reasonable cause and the penalty levied deserves to be cancelled. In the case of assessee, the default if at all was there that lay on the part of the broker for which the assessee could not furnish Form No. 15H in time. Further, assessee's counsel relied upon various decisions of Tribunal as in Bansal Bros. vs. Dy. CIT, Mahendra Sharaf vs. Dy. CIT (supra) and Mahavir Agency vs. ITO. It was also submitted that there is absolutely no motive or vested interest and deliberate attempt to evade the responsibilities under s. 197A. The learned counsel further submitted that 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. It was also submitted that provisions of s. 197A(1) prescribed that no deduction of tax at source under s. 194A shall be made if such person (the recipient of the interest) furnishes 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 is estimated on 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 for which the declarant payee has required to file Form No. 15H to the payer. It was also vehemently argued that assessee did not derive any benefit by not filing the declaration in Form No. 15H before the CIT. Since the alleged defaulter has not derived any gain as a result of such delay, thus, there was no motive which could be attributed on him and as such there is no loss to the Revenue on account of such delay or default. The assessee had duly furnished the required Form in 15H as and when these were received by the assessee-company from the broker, who collected the amounts of FDs, though delayed. The delay caused by the broker coupled with the fact that assessee did not derive any gain or benefit and Revenue did not suffer any loss constitute a good and sufficient cause as contemplated under s. 273B. On this ground also no penalty could be levied because it could at the most be termed as a technical or venial breach for which too, penalty can't be imposed and to support this reliance was placed on Hon'ble Supreme Court decision in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC) and decision of Tribunal in Mahavir Agencies (supra) and it was strongly pleaded that penalty levied in the present case deserves to be quashed.
9. Without prejudice to above contention and in the alternative, it was, however, submitted that at the best, the penalty could have been levied at Rs. 13,300 and not at Rs. 38,30,400 as levied. It was pleaded for deletion of penalty imposed.
10. The learned Departmental Representative, on the other hand, vehemently argued that assessee clearly committed a default for which it was liable to penalty as imposed. The reading of the section clearly shows that penalty is imposable for each default that assessee has committed and assessee has to be proceeded against separately for each one of default. It was also submitted by learned Departmental Representative that provisions of section have been brought on the statute to enforce the provisions relating to tax deduction at source and to counter the same and in case a lenient view is adopted the purpose for which provision was brought on statute will be frustrated. Since default has clearly been committed by the assessee and the cause shown by the assessee-company was (sic-not) found to be sufficient or reasonable learned CIT was justified in imposing the impugned penalty and same deserves to be confirmed. As regards proviso referred to by learned authorised representative in his arguments is concerned, it was submitted that same is not retrospective in effect and as such cannot be invoked in restricting the penalty. As on the date of commission of default, there was no such proviso so penalty is imposable as has been proposed.
11. To counter the submissions of learned Departmental Representative, Shri Pradeep Dinodia, learned counsel for the assessee submitted that so far as retrospectivity of proviso to the said section is concerned, he is supported in his contention by the various decisions of the Tribunal and other judgments of Hon'ble Supreme Court as detailed below :
(1) Manufacturing Impex (P) Ltd. vs. Dy. CIT (1994-95) 26 BCAJ 961 (Bom) (2) Superintending Engineer vs. ITO (1996) 54 TTJ (Jp) 608 (3) Motisagar Estate (P) Ltd. vs. Dy. CIT (1993) 47 ITD 72 (Pune) (4) CIT vs. Poddar Cement (P) Ltd. (1997) 226 ITR 625 (SC) (5) Allied Motors (P) Ltd. vs. CIT (1997) 224 ITR 677 (SC)
12. It was thus pleaded by learned counsel for the assessee that as matter relates to procedure the same has to be interpreted being retrospective in nature as held in these cases and since in view of declarations furnished; there was no tax deductible at source, therefore, penalty is not imposable at all in view of the proviso and thus emphasized that the order of imposition of penalty is liable to be quashed.
13. The rival submissions have been heard and relevant record has been gone through. The case law as cited have also been looked into. Admittedly, the assessee has furnished declarations, as provided, in Form 15H late i.e., on 17th August, 1998. It is also undisputed fact that there is delay of 133 days in furnishing of 288 Forms 15H. This is the plea of the assessee that these 288 forms were to be collected through broker who was assigned the job of collecting the amounts for fixed deposit and declaration form and since Shri R. C. Singh, the broker, who was assigned the job of collecting amount for FD's and declaration Forms 15H could not submit these forms within the prescribed time and delay was caused in collecting these forms so he submitted these to the assessee on 12th August, 1998, which were further submitted on 14th August, 1998, to the CIT, Rohtak, who received these on 17th August, 1998, and this fact has been supported by the assessee by filing affidavit of the said broker which has not been rebutted by the Department nor it was found to be incorrect. In this case it would be relevant to point out that assessee did submit Form No. 15H as required though late. It is not the case where the tax can be deducted from the person for which there could have been postponement of tax. No material has been brought to show that the declarations filed were not correct. Thus, it is the plea of the learned counsel for the assessee that there was only technical and venial breach of the provisions of this Act. Coming to the reasonable cause for furnishing belated 15H forms, it is the plea that as per affidavit of Shri R. C. Singh, the same were delivered to the company on 12th August, 1988. Nowhere in the affidavit filed by the broker it was admitted by him that Forms 15H were delivered to the assessee prior to 12th August, 1988, and CIT before whom the affidavit of the broker had been filed, has not either summoned broker or held that contents of the affidavit to be not correct.
14. I have given very deep and thoughtful consideration to the entire submissions of rival parties, the decisions cited by the learned representatives of both the sides and facts and circumstances and are of the view that firstly, this is a case where assessee has pleaded of reasonable cause in furnishing Form No. 15H late and in support filed affidavit of the agent, who was assigned the job of collecting amounts of FD's and collecting Form 15H wherever required and owing to his difficulties, submission of these forms got delayed, and Revenue authority has neither summoned the broker nor held the contents of the affidavit to be incorrect.
15. After looking into the plea taken, affidavit filed and facts and circumstances, I am of the view that provisions of s. 273B are fully applicable to this case as assessee had bona fide reason which constitutes sufficient cause for having filed the declarations in Form 15H late, therefore, penalty as imposed is not imposable in this case and while accepting the appeal of the assessee, I order deletion of entire penalty.
16. Since there is difference of opinion between both the Members, constituting the Bench on the point as to whether there was a reasonable and sufficient cause for delay in submission of declaration in Form 15H or not, so matter now shall be referred to Third Member under s. 255(4) by the Hon'ble President of Tribunal and if the Third Member so nominated, concurs with the finding and conclusion of learned Accountant Member then again it would be a question whether penalty could be restricted to Rs. 13,300 as held by learned Accountant Member taking a composite default of 133 days @ Rs. 100 per day irrespective of number of forms to be submitted/involved. Since I have difference of opinion on this point also so I would like to give my reasons for the same which would be applicable only if my view as expressed above for deletion of penalty on the ground of reasonable cause is not agreed to by the learned Third Member to be nominated by Hon'ble President under s. 255(4) otherwise subsequent findings and reason to be given below should not be considered or acted upon and may be taken as redundant/infructuous.
17. As per s. 194A, assessee was required to deduct tax at source on the interest exceeding Rs. 2,500 paid or credited and same was to be deposited. As per the provisions of s. 197A, no deduction of tax is required to be made in case the assessee, on whose behalf tax is to be deducted, furnishes declaration in writing in duplicate in the prescribed form and verified in the prescribed manner that the tax on his total income of previous year in which such income is to be included would be nil. The assessee in this case is a public limited company which stated to be collecting FD's from public shareholders. In the year under appeal, the assessee was required to furnish 288 Forms 15H in respect of the parties on whose income the tax payable was claimed to be nil. Since these were not submitted in time to the Department so default occurred. The learned CIT concerned initiated penalty proceedings for late submission of 288 Forms 15H by invoking s. 272A(2)(f) of the Act for the financial year 1997-98 and after considering the reply of the assessee held it in default and imposed penalty of Rs. 38,30,400 for the default for a period of 133 days in respect of each of 288 Forms 15H at minimum rate of penalty. Assessee challenged the same on various grounds and relying upon the ratios of judgment as cited in earlier paragraphs has pleaded for deletion of penalty imposed or in alternative restricting the penalty to Rs. 13,300 because there was delay of 133 days in submissions of forms for which penalty @ Rs. 100 works out on this amount.
18. First of all I will like to reproduce relevant portion of ss. 197A(1) and 272A(2)(f) as under :
"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 included in computing his total income of the previous year in which such income is to be included in computing his total income will be nil.
(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 sub-s. (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him.
272A(2). - If any person fails
(a) to comply with a notice issued under sub-s. (6) of s. 94; or
(b) to give the notice of discontinuance of his business or profession, as required by sub-s. (3) of s. 176; or ** ** ** **
(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;
relation to a declaration mentioned in s. 197A, a certificate as required by s. 203 and returns under s. 206 and 206C shall not exceed the amount of tax deductible or collectible, as the case may be."
19. From the perusal of relevant provisions of ss. 197A and 272A(2)(f) of the Act, it is abundantly clear that assessee is required to file Form 15H in each of the cases of the depositors in whose case interest amount exceeds prescribed limit and said depositor files in duplicate Form 15H to get benefit of non-deduction of tax at source, in that case assessee shall not deduct tax at source but, within 7 days from the end of the month in which such declaration in Form 15H in duplicate is received, furnish a copy of such declaration to the CIT or Chief CIT concerned, as the case may be. In case of default on the part of assessee in furnishing one copy of such form or forms (in the case of assessee) to the CIT concerned, assessee is liable to penalty of minimum of Rs. 100 and maximum of Rs. 200 per day for every day of default and there is no ambiguity or flaw in these provisions. As assessee is required to file one form in the case of each of the depositors in Form No. 15H, failure would entail penalty @ Rs. 100 to Rs. 200 per day with respect to each of the depositor in furnishing required form. Since charging provisions and penalty provisions are to be construed strictly so far as fiscal statute are concerned, therefore, statute in this regard has to be interpreted on the basis of language used and not de hors the same. The Courts and Tribunals have to ascribe natural and ordinary meaning to the words used by the legislature and ought not to substitute its own impressions and ideas in place of legislative intent as is available from plain reading of the statutory provision and in taking these views, support is being drawn from the decision of Hon'ble Supreme Court in the case of CIT vs. National Taj Traders (1980) 121 ITR 535 (SC) and in the case of Orissa State Warehousing Corpn. vs. CIT (1999) 237 ITR 589 (SC). While concurring with the view of learned CIT I uphold his action for imposing penalty to be worked out by taking default for period of 133 days in respect of each of 288 Forms 15H as all these forms were filed late but so far as restricting the amount of penalty to the extent of tax payable in view of proviso to s. 272A(2) of the Act is concerned, I am fully in agreement with the plea of the assessee's representative that penalty could not exceed total amount deductible. No doubt the amendment to this effect was carried out by Finance No. (2) Act of 1998, w.e.f. 1st April, 1999, but since this insertion which is applicable w.e.f. 1st April, 1999 is clarificatory in nature and same can be safely interpreted to have retrospective effect and for this proposition, the decision as cited by learned counsel for the assessee fully supports it wherein their Lordships of Hon'ble Supreme Court in the case of Allied Motors (P) Ltd. vs. CIT (supra) and CIT vs. Poddar Cement (P) Ltd.'s case (supra) that provisions which are clarificatory and procedural in nature to be applied retrospectively. To my mind relevant proviso relates to the procedure and as such same is to be treated to be retrospectively effective. As regards proposition of the assessee to restrict the penalty to Rs. 13,300 only I would like to clarify that said proposition is neither logical nor workable because, for example, in this case, it is presumed that assessee filed 287 forms out of 288 Forms No. 15H late by 10 days and rest one form late by 133 days. As per assessee's working, penalty for one form filed late by 133 days would work out to Rs. 13,300 and what would happen to other forms filed ten days late ? So this proposition cannot be held to be workable, logical, rationale or equitable. This way of calculating the penalty cannot be held to be proper or in consonance with the legislative intent.
20. Since there is a clear provision for complying with the requirement of law in filing of Form No. 15H wherever required after obtaining it from the depositor so it cannot be held to be mere formality neither its default could be said to be venial or trivial. The decision relied upon by the assessee are distinguishable on the facts. As it was pleaded that assessee has complied with the provisions of law in the earlier as well as in the subsequent assessment years which show that assessee was fully aware of the provisions. So decision rendered in the case of Sudharshan Auto & General Finance (supra) cannot be held to be applicable. So would be the decision in the case of Bansal Bros. (supra) where it was found that there was a bona fide belief on the part of the assessee that no obligation to file the return under s. 206 of the Act exists. Similarly, facts available in the case of Hindustan Steels Ltd. 64 ITD 384 are different from that of the assessee. In the aforesaid case return under s. 206 was on account of late receipt of TDS. Similarly in Pune Bench decision of Tribunal in the case of Executive Engineer (supra) in the penalty was imposed under s. 272A(2)(g) where bona fide of the assessee was established and assessee lacked knowledge of enclosing Form No. 16 along with annual return. Since facts in hand and those decided in these cases are distinguishable, it cannot be squarely applied to the facts of the present case. While accepting the appeal of the assessee partly, I restrict the imposition of penalty to the extent of Rs. 1,74,032 which is equivalent to amount of tax deductible at source and delete rest of penalty.
21. As a result, assessee gets relief of Rs. 36,55,368 (Rs. 38,30,400 - Rs. 1,74,032) and its appeal is accepted in part, in second situation as stated above.
ORDER UNDER S. 255(4) OF THE IT ACT, 1961 Miss Moksh Mahajan, A.M.
22. Since in the above captioned appeal we have difference of opinion on the following point, the matter is submitted to the Hon'ble President for reference to the Third Member :
"On the facts and in the circumstances of the case whether penalty order of the Accountant Member or Judicial Member is to be upheld ?"
U. B. S. Bedi, J.M.
23. Since in the above captioned appeal, we have difference of opinion on the following points, the matter is submitted to the Hon'ble President for reference to the Third Member :
"1. Whether, in view of facts and circumstances, the order, restricting the penalty to Rs. 13,300 @ Rs. 100 per day ignoring number of forms not furnished in place of Rs. 38,30,400 imposed by CIT by rejecting the contention of the assessee that it was prevented by sufficient and reasonable cause, is justified or order deleting the entire penalty accepting the plea of the assessee about reasonable and sufficient cause is justified ?
2. Whether, in alternative, if the plea of the assessee of being prevented by sufficient and reasonable cause is not found to be acceptable, the penalty could be restricted to tax deductible in view of recently amended proviso to s. 272A(2) which was not there at the time of imposing penalty."
Sikander Khan, A. M. (As Third Member)
24. This appeal was heard by Division Bench. The order was proposed by the learned AM. The learned JM did not agree to the proposed order and proposed a separate order in the case. In view of difference between the learned AM and the learned JM, the following questions were proposed by the learned JM to be referred to a Third Member :
"1. Whether, in view of the facts and circumstances the order restricting the penalty to Rs. 13,300 @ Rs. 100 per day ignoring number of forms not furnished in place of Rs. 38,30,400 imposed by CIT by rejecting the contention of the assessee that it was prevented by sufficient and reasonable cause, is justified or order deleting the entire penalty accepting the plea of the assessee about reasonable and sufficient cause is justified ?
2. Whether, in alternative, if the plea of the assessee of being prevented by sufficient and reasonable cause is not found to be acceptable, the penalty could be restricted to tax deductible in view of recently amended proviso to s. 272A(2) which was not there at the time of imposing penalty."
25. Disagreeing with the aforesaid proposed questions for reference to a Third Member, the learned AM proposed a different question as under :
"On the facts and in the circumstances of the case, whether penalty order of the AM or JM is to be upheld ?"
26. The Hon'ble President of the Tribunal appointed me as a Third Member under s. 255(4) of the IT Act, 1961. The learned Authorised Representatives of the assessee as well as the Revenue were heard and the materials on the file were perused by me.
27. The assessee in the instant case is a Principal Officer of M/s Escorts Employees Anciliaries Ltd., Faridabad. Under the provisions of s. 194A(1) he was required to deduct tax on interest exceeding Rs. 2,500 paid to the depositor or if the depositor as per the provisions of s. 197A(1) furnished declaration in writing in duplicate in the prescribed Form 15H 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 was to be included in computing his total income was nil then to pay the interest payable to him without deducting tax at source. The person responsible for paying interest to the depositor was required as per the provisions of sub-s. (2) of s. 197A to deliver or cause to be delivered to the Chief CIT or CIT one copy of the declaration in Form No. 15H on or before the 7th day of the month next following month in which the declaration was furnished to him.
28. On perusal of the record, in the Department, the CIT found that the assessee furnished the declaration in Form No. 15H in respect of 288 depositors on 17th August, 1998. He issued a show-cause asking the assessee to explain why penalty under s. 272A(2)(f) be not levied for late submission of the Form 15H. In reply filed to the show-cause notice, it was stated that the delay in submitting From No. 15H had occurred because :
"(i) M/s EEAL had invited deposits from the public and appointed broker to assist in this effort. The company's deposits are mainly from Faridabad/Delhi and have been obtained through the active assistance of broker, Mr. P. C. Singh, Faridabad.
(ii) Various application forms along with cheques for deposits had been received from time to time as per the scheme of fixed deposits. Interest have been paid accordingly and tax deducted at source where applicable.
(iii) In some cases where the FDR application had indicated that Form 15H would be submitted, but were not actually accompanied by such form, the company had reminded broker to collect the necessary Form 15H and furnish the same to the company. However, this was done only at the time of filing of return in Form 26A when a complete reconciliation of interest paid, etc. was carried out.
The broker then proceeded to collect the forms and file with the company. On receipt of the forms they were immediately filed with the Department by 14th August, 1998.
(iv) The delay in delivery of form to the company was caused owing to difficulties faced by the broker at his end. Affidavit from the broker in this regard is enclosed. Some of the forms do not indicate the date on which they have been signed. It is not clear how the date of March, 1998 can be presumed to be the date when the form was actually delivered to the company.
(v) The delay in submission of forms, if any, was only for reasons beyond control of the company. In view of the above facts, we would request that penalty proceedings initiated under s. 272A(2)(f) be filed specifically as well as payments of tax deducted have been deposited in time. The company is a professionally managed company and there was never any intent on the part of the company to delay deposit/deduction of tax."
29. It was, therefore, contended that there was reasonable cause for the delay and hence penalty was not exigible in the case.
30. The CIT was not satisfied and convinced with the aforesaid reply. He observed that the explanation was not tenable as there was no reasonable cause within the meaning of s. 273B of the Act. He added that as per law the person responsible for deducting tax on interest paid/credited to the depositors accounts could not disburse the interest without deducting tax at source, if he did not obtain the declaration in Form No. 15H in advance. Therefore, any action in contravention of law could not constitute reasonable cause. The assessee in this case paid/credited interest on 31st March, 1998, while Form 15H were received/collected later on by the broker/company even where the Form 15H were furnished by the depositor before 31st March, 1998, those forms had been received in the Department on 17th August, 1998 against due date of 7th April, 1998 which was in contravention of the provisions of law. The CIT therefore, held that the assessee was liable to penalty under s. 272A(2)(f) and accordingly he levied penalty of Rs. 38,30,400 for the delay of 133 days in respect of each of the 188 forms.
31. Aggrieved the assessee preferred appeal before this Tribunal.
32. It was submitted on behalf of the assessee before the Division Bench that the penalty levied was unwarranted and uncalled for because the broker Shri R. C. Singh could give the declaration in Form 15H to the assessee on 12th August, 1998, and they were submitted by the assessee to the CIT on 17th August, 1998. It was contended that the default had occurred at the end of the broker who had admitted it under affidavit given (p. 15 of the paper book). Neither in the earlier assessment nor in subsequent assessment year the assessee had committed such a default. It was further submitted that the assessee had asked the broker to give Form 15H in time and the broker had promised to do the same in time. However, since the depositors could not submit Form 15H in time, the broker could not give the same to the assessee in time and hence the delay. It was argued that there was reasonable cause for the delay in submitting the 288 Forms 15H and therefore, penalty under s. 272A(2)(f) was not exigible in the case. It was further submitted that there was no tax liability of the depositors in whose cases Form 15H were submitted by the assessee late. It was contended that there was no loss of revenue as a result of the delay in submitting Form 15H.
33. It was further submitted that the CIT while levying penalty had ignored the proviso to s. 272A(1) which states that amount of penalty for failure in relation to a declaration mentioned in s. 197A shall not exceed the amount of tax deductible or collectible as the case may be. Thus the penalty could not have exceeded an amount of Rs. 1,74,032. Further more there was only one default on the part of the assessee and not the multiplicity of the default for which penalty was to be imposed for each such default. This would not have been the intention of the legislature. Reliance was placed on the decision of Pune Bench of the Tribunal in the case of Executive Engineer vs. Dy. CIT (1994) 48 ITD 414 (Pune) for asst. yr. 1989-90. It was clearly held therein that in reading of s. 272A(2)(g) indicated that the imposition of penalty has been prescribed for the total default. The default could not be considered in respect of each employee separately. There could only be one default.
34. Reliance was placed on Tribunal Delhi Bench decisions in the case of Sudhershan Auto & General Finance vs. CIT (1998) 60 TTJ (Del) 567 : (1997) 60 ITD 177 (Del), Bansal Bros. vs. Dy. CIT (1998) 64 ITD 129 (Del) and Mahendra Prakash Sharaf vs. Dy. CIT (1998) 60 TTJ (Del) 542 : (1998) 64 ITD 382 (Del).
35. In the alternative it was submitted that at best the penalty could be levied at Rs. 13,300.
36. The learned Departmental Representative on the other hand, supported the order of the learned CIT and contended that as per the proviso of said section penalty was leviable for each default in respect of each Form 15H. He added that the proviso to s. 272A(2) was not of retrospective effect and as such could not be invoked for restricting the penalty.
37. In reply to the aforesaid submissions and contentions of the learned Departmental Representative, the learned authorised representative of the assessee submitted that proviso to s. 272A(2) was of clarificatory nature and the same was applicable to the present case to the effect that the penalty should not exceed the amount of tax deductible or collectible as the case may be. He relied on the following decisions :
(1) Manufacturing Impex (P) Ltd. vs. Dy. CIT (1994-95) 26 BCAJ 961 (Bom) (2) Superintending Engineer vs. ITO (1996) 54 TTJ (Jp) 608 (3) Motisagar Estate (P) Ltd. vs. Dy. CIT (1993) 47 ITD 72 (Pune) (4) CIT vs. Poddar Cement (P) Ltd. (1997) 226 ITR 625 (SC) (5) Allied Motors (P) Ltd. vs. CIT (1997) 224 ITR 677 (SC)
38. He contended that as the matter relates to the procedure, the same has to be interpreted as being retrospective in nature.
39. The learned AM after due consideration of the materials on the file and the submissions of the rival parties, came to the view that there was no reasonable cause for the delay in submitting Form 15H. Nowhere in his affidavit the broker had given the reasons for furnishing the declaration in Form 15H late to the assessee. It was the duty of the assessee to collect Form 15H from the broker who was his agent in time. The circumstances in which the assessee could not collect the declaration in Form 15H in time and the difficulty if any felt in collection of the same had not been detailed before the Division Bench. The decisions relied upon by the assessee were distinguishable on the facts of the present case.
40. However, she accepted the assessee's contention that the proviso to s. 272A(2) inserted w.e.f. 1st October, 1991, was of clarificatory nature and had retrospective effect. In this view she relied upon the decision cited by the learned Authorised Representative of the assessee above and Supreme Court decision in the case of Allied Motors (P) Ltd.'s case (supra), Poddar Cement (P) Ltd.'s case (supra) She added that the provision relates to the procedure and as such it had to be treated as retrospective in effect. Again she held that for all the 288 Form 15H the default of delay in submission to CIT will be one and not 288 i.e., for each form separately.
41. In the above view of the matter, the learned AM reduced the penalty from Rs. 38,30,400 to Rs. 13,300.
42. The learned JM in his dissent note opined that on the facts and in the circumstances of the case and in view of the explanation and affidavit furnished in respect of delay, there was reasonable cause for the delay in submitting the 288 declarations in Form 15H. He observed that the delay occurred due to the delay on the part of the broker in giving Form 15H to the assessee. The broker gave Form 15H to the assessee on 12th August, 1998, and the assessee submitted the same to the CIT on 17th August, 1998. He added that the provision of s. 273B was applicable in the case regarding the reasonable cause. On this ground he ordered for the deletion of the entire penalty.
43. In the alternative he observed that in case the Third Member came to the view that there was no reasonable cause as held by the learned AM then the penalty to be imposed in the case would be Rs. 1,74,032 in view of the proviso to s. 272A(2) which states that the amount of penalty for failure in relation to the declaration mentioned in s. 197A shall not exceed the amount of tax deductible or collectible. As the amount of tax deductible or collectible was Rs. 1,74,032, the amount of penalty had to be restricted to the same amount. He disagreed with the learned AM on the point that the default in respect of 288-15H Forms had to be treated as one default and not the default separately in respect of each of the 288 forms. He, therefore, did not subscribe to the learned AM's view that the penalty should be restricted to Rs. 13,300 being the penalty for the delay of 133 days @ 100 per day of delay.
44. I have gone through the materials on the file and heard the learned Authorised Representatives on both the sides in dispute. With regard to the points of difference between the learned AM and the learned JM, both the learned Authorised Representatives in the course of hearing before me as Third Member have reiterated the submissions made before the Division Bench which have been elaborately discussed in the proposed order of the learned AM and in the dissent note of the learned JM. The submissions and contentions of the rival parties have also been discussed in this order as above. I do not consider it necessary to repeat the same again here. However, learned Departmental Representative raised one new point that assessee had committed default in not deducting tax from interest when Form 15H had not been filed by depositors by 31st March, 1998.
45. I would first take up the points of difference proposed by the learned AM and by the learned JM separately to be referred to Third Member and decide which of the two is relevant for consideration for deciding the issue in question. The learned AM proposed the point of difference in a broader manner which could cover all the points of difference between them, inasmuch as, according to her the finding should be obtained from Third Member whether the proposed order of the learned AM was correct or the view of the learned JM was to be upheld.
46. The learned JM on the other hand proposed two points for consideration of the Third Member. In point No. 1, he raised the issue whether the learned AM was correct in reducing the penalty to Rs. 13,300 by rejecting the contention of the assessee that it was prevented by sufficient and reasonable cause in submitting Form 15H in time. In point No. 2, he raised the issue whether after rejecting the plea of the reasonable cause the penalty could be restricted to the tax deductible in view of the proviso to s. 272A(2) of the Act.
47. After due consideration of the points of difference proposed by the learned AM and the learned JM to be referred to a Third Member and keeping in view implications of both I have come to the view that the point of difference between the learned AM and learned JM as proposed by learned AM gives ample scope for Third Member to decide on all the points of difference in the case. In fact, two points proposed by the learned JM are amply covered within the wide scope of meaning of only one point proposed by the learned AM. The various aspects of the difference between the two are fully covered within the single point of reference to Third Member as proposed by the learned AM.
48. Now I come to the most important and fundamental issue in this case i.e., whether the assessee was prevented by sufficient and reasonable cause from filing 288 declarations in Form 15H to the CIT in time. The assessee explained before the CIT who levied the impugned penalty in this case and also reiterated in the appeal before the Division Bench that the delay had occurred because the broker Shri R. C. Singh was responsible for collecting deposits and Form 15H from the depositors had given Form 15H to the assessee as late as on 12th August, 1998, and soon thereafter on 17th August, 1998 the assessee had filed and submitted that same to the CIT. Thus, the delay was on account of delay on the part of the broker who could not collect Form 15H from the depositors in time and therefore, he gave the same to the assessee as late as on 12th August, 1998. The assessee had also pointed out before the Division Bench that it had asked the broker to give From 15H in time and the broker had promised to do so but he could not do so because the depositors had given their respective Forms 15H late. As will be seen from the various reasons for the delay as submitted before the CIT as reproduced above that in some cases where FDR applications of the depositors had indicated that Form 15H would be submitted but were not actually accompanied by such forms, the company had reminded the broker to collect necessary Form 15H and furnish the same to the company. However, this was done only at the time of filing of return in Form 26A when the complete reconciliation of interest paid etc. was carried out. The broker had then proceeded to collect the forms and filed with the company. On receipt of the forms they were immediately filed with the Department on 17th August, 1998. It was further explained to the CIT in the course of penalty proceeding that the delay in delivery of forms to the company was caused owing to the difficulties faced by the broker at his end. Affidavit from the broker in this regard was enclosed. It was contended that the delay in submission of forms if any was only for reasons beyond the control of the company. It was further contended that there was no intent on the part of the company to delay submission of the form or deduction of tax. I am of the view that the CIT himself should have felt convinced in the course of penalty proceedings that there was reasonable cause for the delay in submitting Form 15H by the assessee. It had been abundantly explained that the circumstances under which the Forms 15H were received by the broker from the depositors later were beyond the control of the broker. Similarly, the circumstances under which the delay occurred in receiving the Form 15H and submitting the same to the CIT by the assessee were beyond the control of the assessee.
49. I find that on the basis of the materials on the file, explanations and affidavit of the broker furnished and various decisions cited, it was logical and imperative to come to the view that there was reasonable cause for the delay and the case was covered by s. 273B.
50. The learned Departmental Representative had made a new point in his submission before me that if Form 15H had not been received by the assessee from 288 depositors by 31st March, 1998, the assessee should have deducted tax from interest as per s. 194A. As regards this contention I am of the view that it is not relevant and valid for the present issue. The impugned penalty was levied under s. 272A(2)(f) for submitting Form 15H late and not for non-deduction of tax from interest. It had also to be kept in mind here that as per explanation furnished before the CIT the concerned depositors had stated in their applications that they would furnish declaration in Form 15H because they did not have taxable income. Therefore, the assessee had bona fide belief that tax would not be deductible in respect of these depositors.
51. A close reading of sub-s. (2) of s. 197A clearly shows that the assessee was required to deliver a copy of declaration in Form 15H on or before the 7th day of the month next following the month in which the declaration was furnished by the depositor to him. There is no evidence on record that the concerned depositor had furnished Form 15H to the broker/assessee on or before 31st March, 1998 and not on a date closer to the date on which the broker gave these forms to the assessee. The assessee had already explained to CIT that the depositors had not furnished the Form 15H in time to the broker and hence the broker gave the Form 15H to the assessee on 12th August, 1998 and the assessee submitted the same to the CIT immediately thereafter on 14th August, 1998. Since the depositors had not furnished the declaration in Form 15H on or before 31st March, 1998 the assessee was not responsible to submit the same to CIT by 7th April, 1998. In the absence of any evidence to the contrary it had to be accepted that the broker had received the declaration in Form 15H from 288 depositors on or immediately before 12th August, 1998, when he gave them to the assessee. The assessee submitted the same to the CIT on 14th August, 1998, and thus there was no default for which the assessee could be liable to penalty under s. 272A(2)(f). There was no cause for action under s. 272A(2)(f) as the assessee had not committed default under s. 197(2). In this view of the matter also penalty under s. 272A(2)(f) was not exigible in the case.
52. In the above view of the matter, I would subscribe to the view of the learned JM that there was reasonable cause for the delay in submitting Form 15H and hence no penalty was exigible in the case.
53. After holding as above that there was reasonable cause for the delay and hence penalty under s. 272A(2)(f) was not exigible in the case, there remains no need to go into the difference between the learned AM and the learned JM regarding the quantum of penalty. However, since the reference to me for opinion as Third Member covered the difference on quantum of penalty also, I would like to dwell upon it also and give my opinion.
54. It will be seen that there was agreement between the learned AM and the learned JM on the issue that the proviso to s. 272A(2) was clarificatory in nature and hence was applicable to the present case. But they differed on the point whether the penalty would be leviable for the delay in respect of each of the 288 forms or it would be treated as one default only. The learned AM held the latter's view whereas the learned JM held the former view. A reading of the provision of s. 272A(2)(f) would clinch the issue and show that the view of the learned JM was correct. Clause (f) of sub-s. (2) of s. 272A provides as under :
"If any person fails :
(f) to deliver or cause to be delivered in due time a copy of the declaration mentioned in s. 197A ** ** ** he shall pay by way of penalty a sum of one hundred rupee for every day during which the failure continues."
55. In connection with the above, a reading of s. 197A(1A) and 197A(2) would also be quite relevant here :
"Sec. 197A(1A) :
Notwithstanding anything contained in s. 193 or s. 194A or s. 194K, no deduction of tax shall be made under any of the said sections in the case of a person (not being a company or a firm if any person furnishes to the person responsible for paying any income of the nature referred to in s. 193 or 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."
(2) The person responsible for paying any income of the nature referred to in sub-s. (1) for 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 sub-s. (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him."
56. The aforesaid provisions of s. 197A(2) make it clear that the person responsible for paying the interest to the depositor i.e., the assessee in the present case was required to submit one copy of the declaration in Form 15H on or before the 7th day of the month next following the month in which the declaration was furnished to him. These provisions read with the provision of s. 272A(2)(f) quoted above which also speaks of delivery to the CIT in due time a copy of the declaration as required in s. 197A(2), make it clear that the penalty is to be levied with reference to the default of delay in submitting copy of each declaration separately. Proviso to s. 272A(2) effective from 1st April, 1999 also speaks of failure in relation to a declaration mentioned in s. 197A, I, therefore, agree with the view of the learned JM that penalty was leviable for the delay in respect of each of the 288 15H Forms. The view of the learned AM that the default in respect of 288 forms should be treated as one aggregate default, to me, does not appear to be correct view.