Document Fragment View

Matching Fragments

278AA. Punishment not to be imposed in certain cases.-- Notwithstanding anything contained in the provisions of section 276A, section 276AB, or section 276B, or section 276BB, no person shall be punishable for any failure referred to in the said provisions if he proves that there was reasonable cause for such failure.

14. The language used in Section 276B of the I.T. Act indicates it is applicable when there is a failure by a person to pay to the credit of the Central Government (i) the tax deducted at source by such person as required under Chapter XVII-B or (ii) the tax payable by such person as required under Section 115-O(2) or second proviso to the Section 194-B of the I.T.Act.

15. It is germane to mention that the Section 278AA begins with a non-obstante clause, which is a powerful device in identifying the intention of the Legislature giving effect to the enacting part of the Section in case of conflict over the provisions mentioned in the non-obstante clause. Section 276-B is also included within the fold of Section 278 AA, which states that no person shall be liable for punishment for any failure to comply with Section 276B of I.T. Act, if he is able to prove that he was prevented by a reasonable cause for such failure. Thus, reasonable cause is required to avoid prosecution. It is both interesting and beneficial to know the interpretation given to "reasonable cause" in the context of the provision.

16. In K.R.M.V. Ponnuswamy Nadar Sons v. Union of India 3, the Madras High Court in the context of Section 276DD, explained the application of Section 278AA as follows;

"6. By a reading of the above two sections, it is clear that because of use of the non obstinate clause under section 278AA which takes within it section 276DD as well, reasonable cause could be shown by the assessee before imposing punishment for violations under section 269SS and proceeding to punish him under section 276DD. In other words, the assessee will have to show that there was a reasonable cause for such failure. Only then the question of prosecution will arise. This is undoubtedly a sufficient safeguard. ."

"34. So far as the first prerequisite is concerned, even after amendment, the prosecution has to prove the same, but so far as the second [1992] 196 ITR 431(MAD) 1989 SCC OnLine Pat 137; 1990 PLJR 107 prerequisite is concerned, the prosecution is not required to prove the same as effect of the amendment is that now there is a presumption in favour of the prosecution that the accused has no reasonable cause for his failure, of course the presumption is not explicit but the same becomes implicit if section 277B is read along with section 278AA. Why I say so will be apparent from section 278AA which lays down that no person shall be punished for such failure, if he proves that there was reasonable cause for such failure. The fact that under section 278AA an accused has to prove that there was "reasonable cause for his such failure would go to show that there is presumption in favour of the prosecution that the failure of the assessee was without any reasonable cause otherwise there was no occasion to insert section 278AA in the Act. It is said that if this interpretation is given, the amendment by which the words without reasonable cause or excuse" have been omitted from section 276B, becomes redundant. In my view, it cannot be said so. If these words would not have been omitted from section 276B, in that event, the provisions of sections 276B and 278AA would have been conflicting. The prosecutor in such a case would have to prove that the accused had no reasonable cause or excuse for his failure; whereas under section 278AA, an accused was required to prove that there was reasonable cause for such failure. If the prosecution itself failed to prove that the failure was without any reasonable cause or excuse, in that event, there could have been no occasion for the accused to prove that there was reasonable cause for such failure. If it could have been said that the accused was liable to be prosecuted only when the prosecution was able to show that there was failure on the part of the assessee in deducting and paying the tax, in that event, there was no necessity for inserting section 278AA in the Act. This provision in that case would have become redundant and it is well settled canon of interpretation that legislature does not use redundant words and make redundant provisions in a statute.