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Commissioner of Income-tax Vs. Smt. Prem Lata Seth - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 15 of 1973
Judge
Reported in[1974]96ITR323(P& H)
ActsIncome Tax Act, 1961 - Sections 221 and 221(1)
AppellantCommissioner of Income-tax
RespondentSmt. Prem Lata Seth
Appellant Advocate D.N. Awasthy and; S.S. Mahajan, Advs.
Respondent Advocate Bal Raj Kohli and; Ram Rang, Advs.
Cases ReferredD. C. Puliani v. Commissioner of Income
Excerpt:
.....reasons failed to deduct and pay the tax'.from this it follows that the income-tax officer can impose a penalty under section 221 of the act only if he is satisfied that the person or the officer concerned has failed to deduct and pay the tax without any sufficient cause. the learned counsel for the respondents conceded that, so far as an assessee in default as defined in sub-section (1) of section 201 of the act is concerned, penalty can be imposed, under sub-section (1) ofsection 221 of the act, by the income-tax officer, but stated that this would be only in regard to such assessee in default and not to other categories of the assessees in default and he urged that the present case was not a case of an assessee who has been declared as an assessee in default, because he failed to..........with the other sections, the conclusion is irresistible that it is the income-tax officer who can impose penalty. 8. the first section, in this context, that may be referred to is section 201, sub-section (1). this relates to a person whose duty it is to deduct the tax at source. sub-section (1) of section 201 of the act is to the following effect: ' if any such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax.'9. this sub-section, therefore, defines one type of ' assessee in.....
Judgment:

1. This order will dispose of six Income-tax References Nos. 15 to 20 of 1973 which relate to different assessment years in respect of the same assessed and involve a common question of law.

2. The Income-tax Officer had imposed penalties in different amounts against these assessees under Sub-section (1) of Section 221 of the income-tax Act, 1961, (hereinafter referred to as ' the Act')- The Appellate Assistant Commissioner upheld the penalties as levied by the Income-tax Officer. In the appeal filed before the Income-tax Appellate Tribunal (hereinafter referred to as ' the Tribunal '), the contention of the assessees was that nopenalty could be imposed by the Income-tax Officer under Section 221 of the Act, in the circumstances of the case, because this section does not specifically mention that it is the Income-tax Officer who is to impose the penalty. For this contention he relied upon a Bench decision of the Allahabad High Court in Smt. Kusum Kumari v. Union of India, [1972] 85 I.T.R. 19 (All.). The facts in the case before the Tribunal were fully covered by the aforesaid decision of the Allahabad High Court.

3. On behalf of the revenue it was contended that the Bench decision was not of the Punjab & Haryana High Court and, therefore, was not of a binding nature. The Tribunal however, observed as under:

'...The judgment of their Lordships of the Allahabad High Court covers this case and we do not agree with the learned departmental representative when he contends that technically we are not bound by the judgment of their Lordship of the Allahabad High Court. The judgment being from a superior court provides us with a sufficient guidance to decide the issue and, in seeking guidance from the judgment of their Lordships of the Allahabad High Court, we are doing nothing else but cementing the conventions of the rule of law which are well established, well accepted and, therefore, have a binding influence on us. We, therefore, entirely agree with the contention of the learned counsel for the assessee...'

4. The revenue filed an application for referring the question of law to this court and the Tribunal has referred the following question of law :

' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in deleting the penalties levied under Section 221(1) of the Income-tax Act, 1961 ?'

5. As was noticed in the referring order, the decision in Smt. Kusum Kwmari's case, which was relied upon by the assessee and on the basis of which the decision was given by the Tribunal, has since been reversed by a Full Bench of the Allahabad High Court in D. C. Puliani v. Commissioner of Income-tax, [1973] 89 I.T.R. 164 (All) [F.B.]. We have carefully gone through the Full Bench decision and also heard the learned counsel for the respondents and we may say, with respect, that the decision of the Full Bench is correct and is fully applicable to the present case.

6. Sub-section (1) of Section 221 of the Act runs as follows :

'When an assessee is in default or is deemed to be in default inmaking a payment of tax, he shall, in addition to the amount of thearrears and the amount of interest payable under Sub-section (2) of Section 220, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, and in the case of a continuing default, such furtheramount or amounts as the Income-tax Officer may, from time to time,direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears.'

7. This sub-section mentions the imposition of the penalty if the assessee is in default. There are other sections in the Act which give the details as to when an assessee would be in default. There are other provisions with regard to the filing of appeal against the penalty imposed under Section 221. No doubt, there is no mention in Sub-section (1) of Section 221 of the officer who can impose this penalty. It was in view of this omission that the Bench of the Allahabad High Court in Smt. Kusum Kumari's case held that there being this lacuna, no penalty could be imposed. The Full Bench, however, felt that this provision under Section 221 for the imposition of penalty cannot be read in isolation and if read in conjunction with the other sections, the conclusion is irresistible that it is the Income-tax Officer who can impose penalty.

8. The first section, in this context, that may be referred to is Section 201, Sub-section (1). This relates to a person whose duty it is to deduct the tax at source. Sub-section (1) of Section 201 of the Act is to the following effect:

' If any such person and in the cases referred to in Section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax.'

9. This sub-section, therefore, defines one type of ' assessee in default '. There is a proviso added to this sub-section which runs as follows :

' Provided that no penalty shall be charged under Section 221 from such person, principal officer or company unless the Income-tax Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax.'

10. Thus it is clear that, so far as an assessee in default covered by subsection (1) of Section 201 of the Act is concerned, before a penalty can be imposed, the Income-tax Officer has to be satisfied that the person or the officer has ' without good and sufficient reasons failed to deduct and pay the tax'. From this it follows that the Income-tax Officer can impose a penalty under Section 221 of the Act only if he is satisfied that the person or the officer concerned has failed to deduct and pay the tax without any sufficient cause. The learned counsel for the respondents conceded that, so far as an assessee in default as defined in Sub-section (1) of Section 201 of the Act is concerned, penalty can be imposed, under Sub-section (1) ofsection 221 of the Act, by the Income-tax Officer, but stated that this would be only in regard to such assessee in default and not to other categories of the assessees in default and he urged that the present case was not a case of an assessee who has been declared as an assessee in default, because he failed to deduct and pay the tax, but that it was a case where the assessee failed to pay the tax due from him individually.

11. This argument of the learned counsel for the respondents cannot be accepted. Sub-section (1) of Section 221 of the Act deals with all types of defaults and the penalty can be imposed on any type of the assessee in default. In any case, the other provisions make the point further clear. Section 246 of the Act deals with appeals and starts by saying ' any assessee, aggrieved by any of the following orders of an Income-tax Officer may appeal to the Appellate Assistant Commissioner against such order '. Clause (1) relates to an order under Section 201 and Clause (o), Sub-clause (ia), relates to an order under Section 221. Reading Sections 246 and 221, the inference is irresistible that the intention of the legislature was that the Income-tax Officer was to impose penalty under Section 221. This is exactly the line of reasoning followed by the Full Bench of the Allahabad High Court in D. C. Puliani's case. We feel that this is the correct interpretation.

12. The learned counsel also referred us to the various other provisions under which penalties could be imposed and he brought to our notice Sections 140A(3), 272 and 273 where it is the Income-tax Officer who has to impose the penalty but under Sub-section (1) of Section 271 of the Act, penalty can be imposed either by the Income-tax Officer or by the Appellate Assistant Commissioner. This sub-section provides as under :

' If the Income-tax Officer or the Appellate Assistant Commfssioner, in the course of any proceedings under this Act, is satisfied that any person--

(a) has without reasonable cause failed to furnish the return of total income....

(b) has without reasonable cause failed to comply with a notice ....

(c) has concealed the particulars of his income .... he may direct that such person shall pay by way of penalty,....'

13. All that it says is that, if the matter comes to the notice of the Income-tax Officer, he can impose the penalty and, if the matter does not come to the notice of the Income-tax Officer but it comes to the notice of the Appellate Assistant Commissioner, the latter can impose the penalty. This would not in any way take away from the argument that, so far as Section 221 of the Act is concerned, when read with Sections 201 and 246 of the Act, the conclusion is irresistible that it is the Income-tax Officer who can impose a penalty.

14. The learned counsel for the respondents then referred to Sub-section (2) of Section 274. All that this sub-section provides is that if the amount of income exceeds a sum of Rs. 25,000 'the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner ' who can impose the penalty. This section also does not advance the ease of the learned counsel for the respondents any further. As was observed by the Full Bench of the Allahabad High Court, Section 220 of the Act provides the circumstances under which an assessee can be deemed to be in default. According to the proviso to Sub-section (1) of Section 220, an Income-tax Officer can reduce the period within which the notice of demand is to be complied with by payment of the tax. Sub-section (3) of this section provides that the Income-tax Officer may extend the time and Sub-section (4) provides that if the amount is not paid within the time limited under Sub-section (1) or extended under Sub-section (3), the assessee shall be deemed to be in default. From this it is clear that it is the Income-tax Officer who has to determine whether a particular person becomes an assessee in default and Section 221 only provides for the consequences of the assessee being in default and those consequences are that a penalty is to be paid. If everything else is to be dealt with by the Income-tax Officer, the inference is obvious that a penalty can also be imposed by the Income-tax Officer. However, as indicated above, proviso to Sub-section (1) of Section 201 and clauses (1) and (0) of Section 246 of the Act leave no manner of doubt that it is the Income-tax Officer who is authorised to impose a penalty.

15. In view of the above, therefore, we answer the question referred in the negative, i.e., in favour of the revenue. In the peculiar circumstances of the case, we make no order as to costs.


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