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Commissioner of Income-tax Vs. Wesman Engineering Co. (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 121 of 1971
Judge
Reported in[1976]104ITR605(Cal)
ActsIncome Tax Act, 1961 - Section 140A(1) and 140A(3)
AppellantCommissioner of Income-tax
RespondentWesman Engineering Co. (P.) Ltd.
Appellant AdvocateA. Sen Gupta and ;P.K. Majumdar, Advs.
Respondent AdvocateR.N. Bajoria and ;D.K. Dhar, Advs.
Excerpt:
- .....the 27th october, 1966. instead of depositing the said amount the assessee wrote a letter to the income-tax officer on the 3rd november, 1966, requesting the income-tax officer to adjust the advance tax paid amounting to rs. 65,826 from the total amount of tax due. the officer was also informed that the assessee had difficulties in the matter of depositing the tax within time on account of the number of interveningholidays and also on account of the fact that the funds of the assessee had been depleted on account of payment of bonus to its staff and workers. the assessee sought permission to pay the balance in two equal instalments.2. the assessee further addressed a letter to the income-tax officer dated 4th november, 1966, for extension of time for payment of the aforesaid tax.....
Judgment:

Dipak Kumar Sen, J.

1. The facts admitted and/or found as appearing from the statement of the case in this reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax, West Bengal I, Calcutta, may be briefly narrated as follows:

In the relevant assessment year, namely, 1966-67, M/s. Wesman Engineering Co. (P.) Ltd., the assessee, submitted its return of income on the 27th September, 1966. On the basis of its return the assessee should have deposited a sum of Rs. 93,105 as tax under Section 140A(3) of the Income-tax Act, 1961, by the 27th October, 1966. Instead of depositing the said amount the assessee wrote a letter to the Income-tax Officer on the 3rd November, 1966, requesting the Income-tax Officer to adjust the advance tax paid amounting to Rs. 65,826 from the total amount of tax due. The officer was also informed that the assessee had difficulties in the matter of depositing the tax within time on account of the number of interveningholidays and also on account of the fact that the funds of the assessee had been depleted on account of payment of bonus to its staff and workers. The assessee sought permission to pay the balance in two equal instalments.

2. The assessee further addressed a letter to the Income-tax Officer dated 4th November, 1966, for extension of time for payment of the aforesaid tax reiterating the circumstances under which payment could not be made. This letter was in reply to the letter of the Income-tax Officer dated the 29th October, 1966. The Income-tax Officer was also requested to make a provisional assessment under Section 141 of the Income-tax Act, 1961, and to issue necessary challan for payment of the balance tax.

3. The Income-tax Officer did not accept the submissions of the assessee and levied a penalty of Rs. 18,620. The assessee wrote another letter dated the 10th January, 1967, setting out the circumstances and contended that the order of penalty was not justified. It was stated, inter alia, that the assessee had deposited a sum of Rs. 50,000 on the 7th November, 1966, and a further sum of Rs. 43,141 on the 13th December, 1966, in terms of the provisional assessment.

4. The assessee also preferred an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner accepted the contentions of the assessee and by his order held that there was no occasion for levy of any penalty on the assessee as no amount under Section 140A(1) was payable on the date when such penalty was imposed.

5. From this order of the Appellate Assistant Commissioner the revenue went up on appeal to the Tribunal. It was contended before the Tribunal on behalf of the revenue that the Appellate Assistant Commissioner was not correct in cancelling the penalty inasmuch as the word used in subsection (1) of Section 140A of the Income-tax Act, 1961, is 'shall'. It was contended that the provisions of this section were mandatory and there was no option left to the Income-tax Officer but to levy a penalty in a case of self-assessment where tax remained outstanding beyond 30 days. It was submitted that if after the expiry of 30 days tax on the basis of voluntary assessment remained unpaid there was no occasion for extension of time and the Income-tax Officer was entitled to levy the penalty. The quantum of the penalty was also sought to be justified on the ground that there was no provision for charging any interest under this section.

6. It was contended on behalf of the assessee that in view of the decision of this court in the case of Commissioner of Income-tax v. Vegetable Products Ltd., : [1971]80ITR14(Cal) the order of the Appellate Assistant Commissioner was justified.

7. The Tribunal after considering the respective submissions of the parties construed Section 140A of the Income-tax Act, 1961, and held that levy of penalty was not compulsory. The Tribunal also noted that the sectiongave a right to the assessee to have reasonable opportunity of being heard before penalty could be levied. The Tribunal, accordingly, upheld the order of the Appellate Assistant Commissioner.

8. Against this order of the Tribunal the following question has been referred to us :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that though there was a failure on the part of the assessee to pay tax under Sub-section (3) of Section 140A of the Income-tax Act, 1961, the Income-tax Officer had a discretion not to impose any penalty under that sub-section or that the penalty was not justified ?'

9. Section 140A reads as follows :

'140A. Self-assessment-.--(1) Where a return has been furnished under Section 139 and the tax payable on the basis of that return as reduced by any tax already paid under any provision of this Act exceeds five hundred rupees, the assessee shall pay the tax so payable within thirty days of furnishing the return.

(2) After a provisional assessment under Section 141 or a regular assessment under Section 143 or Section 144 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards the provisional assessment or regular assessment, as the case may be.

(3) If any assessee fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), he shall, unless a provisional assessment under Section 141 or a regular assessment under Section 143 or Section 144 has been made before the expiry of the thirty days referred to in that sub-section, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, so however, that the amount of penalty does not exceed fifty per cent, of the amount of such tax or part, as the case may be:

Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard.'

10. From the language of this section and in particular Sub-section (3) thereof it appears that the verb 'shall' governs the rest of the sub-section, namely, that the assessee shall be liable by way of penalty to pay such amount as the Income-tax Officer may direct. Once the direction is given by the Income-tax Officer for payment of such penalty no doubt the assessee Is bound to pay the same. But the sub-section does not cast an absolute duty on the Income-tax Officer to levy a penalty.

11. As the Tribunal had observed, under this section the assessee is given an opportunity of being heard before any penalty is imposed. This opportunity would be illusory if the penalty was automatic. Further, under this section, the Income-tax Officer has discretion as to the rate of the penalty within the ceiling of 50 per cent. This also indicates that the penalty does notfollow automatically under this sub-section. Appeal is also provided for against such penalty.

12. In the view of the matter as discussed above it appears to us that the conclusion lo which the Tribunal arrived in the instant case was correct and it must be held that under the section the Income-tax Officer has a discretion not to impose any penalty.

13. As to the other part of the question, namely, whether the penalty in the instant case was justified or not it appears that nowhere in the earlier proceedings it was contended by the revenue that in the facts and circumstances the penalty imposed was justified. The Tribunal has found that facts were before the Income-tax Officer to support the assessee's case that it was not in a position to deposit the tax on the basis of the self-assessment. The officer soon accepted the assessee's request to make a provisional assessment, and the assessee paid the demand on the basis of such provisional assessment. The Tribunal has found that in the facts and circumstances the penalty was not justified, which finding is not challenged as perverse or based on no evidence.

14. The revenue all along proceeded on the sole basis that penalty was imposable in the instant case only by reason of the language of the section and on no other ground.

15. In this view of the matter we answer the question referred in the affirmative and in favour of the assessee.

16. There will be no order as to costs.

Deb, J.

17. I agree.


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