JUBILEE INVESTMENTS AND INDUSTRIES LTD. VS ASSISTANT COMMISSIONER OF INCOME-TAX
2001 P T D 263
[238 I T R 648]
[Calcutta High Court (India)]
Before Y. R. Meena and Debi Prasad Sircar‑I, JJ
JUBILEE INVESTMENTS AND INDUSTRIES LTD
versus
ASSISTANT COMMISSIONER OF INCOME‑TAX and others,
G.A. No.1932 of 1999, A.P. O/T. No.377, A.P.O. No. T.No.. 647 and Writ Petition No.966 of 1999, decided on 13/05/1999.
Income‑tax‑‑‑
‑‑‑‑Deduction of tax at, source‑‑‑Delay in depositing TDS‑‑‑‑Penalty‑‑‑Levy of penalty justified though TDS deposited before levy of penalty‑‑‑Liable to pay interest as well as penalty‑‑‑Loss in business of assessee nothing to do with deposit of TDS amount‑‑‑Indian Income Tax Act, 1961, S.221.
The Explanation to section 221 of the Income Tax Act, 1961, provides that an assessee shall not cease to be liable to any penalty under this subsection merely by reason of the fact that before the levy of such penalty he has paid the tax. Once he failed to deposit TDS (tax deducted at source) amount in time, he is liable to pay penalty under section 221 of the Income -tax Act. Section 221 of the Act relates to cases where the assessee had deducted the tax but failed to deposit that amount within the prescribed time limit. Section 271C, the clause (a), applies where a person fails to deduct the whole or any part of the taxi as required by or under the provisions of Chapter XVIIB.
The assessee had deducted tax from interest other than interest on security in the financial year 1996‑67 .to the tune of Rs.9,67,94,972 but that had not been deposited to the account of the Central Government within the time allowed under the statute. The delay varied from one month to twelve months in respect of different deposits. For that failure on the part of the assessee, the Assistant Commissioner of Income‑tax imposed penalty of Rs.3 crores under section 221 of the Income‑tax Act.
Held, (i) that the Chief Commissioner had conferred power: on the Assistant Commissioner of Income‑tax (TDS), Circle 21(1), who had imposed penalty under section 221 of the Act, and; therefore, it could not be said that the Assistant Commissioner of. Income‑tax (TDS) had no power to impose penalty under section 221 of the Income Tax Act, 1961.
(ii) That whether the assessee had paid interest or not was immaterial. When it was found in default in depositing the amount of TDS within the time limit prescribed, it was liable to pay interest as well as penalty. Any loss or profit in the business of the assessee had nothing to do with deposit of
Dr. Pal for Appellant.
Agarwala for Respondent
JUDGMENT
As agreed upon by the both learned counsel for the parties, we heard the application as well as the appeal itself on the merits.
In this appeal, the petitioner has challenged the impugned order, dated April 20, 1999. His only grievance is that though the assessee has a case for interim order, but no interim relief has been given to the assessee for stay of recovery of penalty amount imposed by the Assistant Commissioner 'of Income‑tax, vide the order, dated March 8, 1999. The assessee had deducted tax from interest other than interest on securities in the financial year 1996‑97 and he has deducted tax to the tune of Rs.9,67,94,972 as T. D. S.., but that 'has not been deposited to the account of the Central Government within the time allowed under the statute. The delay varied from one month to twelve months in respect of different deposits. For that failure on the part of the assessee, the Assistant Commissioner of Income‑tax has initiated penalty proceedings under section 221 of the Income‑tax Act. . The case was listed 2/3 times. Notice was also served 2/3 tunes, but none appeared. Only on December 17, 1998, Mr. K.P. Trivedi appeared and furnished a written submission. In short, it reads as under:
"We are an investment company engaged primarily in dealing in shares. Last year has been one of the worst years for the share market in India and fall in the value of shares has been unprecedented. This affected even the mighty UTI as we come to know now. The huge loss suffered by us in the share business which was mostly carried out with borrowed funds affected our cash flow position very severely and the lenders who have been financing our business were reluctant to send us any more money. All this had cumulative effect of causing severe constraints."
The Assistant Commissioner of Income‑tax has considered the submissions filed by the assessee and found that T.D.S. deposit has nothing to do with the profit and loss of the company. Similarly, the worst year of the Indian share market has also no connection with the deposits of T.D.S. Finally he imposed the penalty of Rs.3 crores, under section 221 of the Income Tax Act, 1961.
Learned counsel for the appellant, Dr. Pal, submits that the Assistant Commissioner has no jurisdiction to impose penalty under section 221 of the Act. The concerned officer is a regular Assessing Officer who charged interest under section 201 of the Act.
Learned counsel for the Revenue; Mr. Agarwala, submits that the` Assistant Commissioner has been empowered by the Chief Commissioner of Income‑tax to pass penalty order under section 221 of the Act. He placed reliance on two notifications issued by the Chief Commissioner of Income tax. To consider whether the Assistant Commissioner of Income‑tax has jurisdiction or not, some provisions are necessary to be referred to. Subsection (7A) of section 2 of the Income‑tax Act defines "Assessing Officer". which reads as under:
"(2) (7A) 'Assessing Officer' means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income‑tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under subsection (1) or subsection (2) of section 120 or any other provision of this Act, and. the Joint Commissioner or Joint Director who is directed under clause (b) of subsection (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act."
Subsection (2) of section 120 of the Act empowers the Chief Commissioner to confer jurisdiction on any officer to perform all or any of the powers and functions conferred on' the Assessing Officer under this Act.
By a notification, slated May 23, 1991, the Chief Commissioner of Income‑tax, Calcutta, has conferred the power on the Assistant Commissioner of Income‑tax (T.D.S.), Circle 21(1), to exercise powers in respect of all matters relating to Chapter XVIIB except section 195, Chapter XVIIB and Chapter XXI of the Income Tax Act, 1961. The relevant portion of the notification reads as under:
"All matters relating to all the sections in Chapter XVIIB, except section 195, Chapter XVIIB and Chapter XXII of the‑Income Tax Act, 1961, for the assessment deemed to be in default in respect of the tax under subsection (1) of section 201 of the said Act in respect of all assessees/D.Os. under the Government of West Bengal within Calcutta. He will hold jurisdiction overall matters relating to deductions made by the Government of West Bengal or on behalf of the Government of West Bengal under all the sections in Chapter XVIIB (except section 195) of the Income Tax Act, 1961. The said Assistant Commissioner of Income‑tax, Circle 21(1) will also exercise powers vested under subsections (1) and, (1A) of section 201 and section 221 of the Income Tax Act, 1961, relating to deductions of tax at source made by the Government of West Bengal as per provisions of sections 192, 193, 194, 194A, 194BB, 194C, 194D and 194E of the Income Tax Act, 1961. "
The Chief Commissioner has conferred power on the Assistant Commissioner of Income‑tax (TDS), Circle 21(1), who has imposed penalty under section 221 of the Act, therefore, it cannot be said that the Assistant Commissioner of Income‑tax (TDS) has no power to impose penalty under section 221 of the Act of 1961.
Dr. Pal, learned counsel for the appellant, further submits that by19 this notification, the Chief Commissioner of Income‑tax cannot empower the Assistant Commissioner of Income‑tax, as penalty for default can be imposed by the Joint Commissioner of Income‑tax only under section 271C of the Act: He further submits that when the tax is paid, no penalty proceedings can be initiated under section 221 of the Act.
The Explanation to section 221 provides that for the removal of doubt it is hereby declared that an assessee shall not cease to be liable to any penalty under this subsection merely by reason of the fact that before the levy of such penalty he has paid the tax. That makes it clear that payment of tax by the assessee, which was deducted at source, does not make any difference. Once he failed to deposit the T.D.S. amount in time, he is liable to pay penalty under section 221 of the Act of 1961.
Dr. Pal submits that the penalty for default can be imposed under section 27 1C by the Joint Commissioner of Income‑tax, how the Chief Commissioner of Income‑tax can empower the Assistant Commissioner of Income‑tax to impose penalty, for default, under section 221 of the Act.
A perusal of both the sections, i.e., section 221 and section 271C, shows that though both the penalties are for default‑either in deducting the T.D.S. or after deducting the T.D.S. the assessee failed to deposit that amount with the Central Government account within time. Section 221 of the Act relates to cases where the assessee has deducted the tax but failed to deposit that amount within the prescribed time‑limit. Section 271C, clause (a), provides where a person fails to deduct the whole or any part of the tax as required by or under the provision of Chapter XVIIB. Clause (b) provides‑‑‑ "pay the whole or any part of the tax as required by or under subsection (2) of section 115‑0". Clause (ii) provides default regarding the second proviso to section 194B. That power has been conferred on the Joint Commissioner of Income‑tax. Thus, it is clear that penalty under both the sections, is on different grounds. Therefore, it cannot be said that the powers which are conferred by the statute on the Joint Commissioner have been assistant C.I.T. conferred on the Assistant Commissioner. The Joint Commissioner is not empowered to levy penalty where a person has failed to deposit the T. D. S. amount which has been deducted by any person. Therefore, .we find no force in this submission of Dr. Pal.
Dr. Pal also argued that once interest is charged for the period of default, no penalty can be imposed.
If we read carefully the provisions of section 221, section 221 provides that when an assessee is in default or is deemed to be in default in making the payment of tax deducted at source, he shall, in addition to the amount of the arrears and the interest payable under subsection (2) of section 220, be liable, by way of penalty, to pay such amount as the Assessing Officer may direct. Therefore, whether the assessee has paid the interest or not is immaterial. When he is found in default in depositing the amount of T.D.S. within the time limit prescribed, he is liable to pay interest as well as he is liable to pay penalty.
The admitted facts that the assessee has not paid the T.D.S. amount within the time limit prescribed, for that he has also paid the interest, that further supports the finding that he has not deposited the T.D.S. amount within time. The case of the assessee before the Assistant Commissioner was that he suffered loss and financial stringency, therefore, he could not deposit that amount in time.
The Assistant Commissioner has rightly pointed out that once the T.D.S. is deducted from the income of somebody, the assessee is merely a custodian of the T.D.S. amount. He cannot touch the amount. That amount is to be deposited within the time prescribed in the Central Government account and any loss or profit in the business of the assessee has nothing to do with deposit of the T.D.S. amount. In view of these aforesaid facts and relevant provisions discussed above, we do not find any merit in this appeal and no case is made out for interim order.
However, it is made clear that the observations made by us will not prejudice the interest of either of the parties before the learned Single Judge, he may proceed in accordance with law.
Consequently, the appeal as well as the applications are dismissed. Stay prayed for operation of this order is rejected.
All parties are to Act on a signed xerox copy of this dictated order on usual undertaking.
M.B.A./150/FC
Appeal dismissed.