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C.I.T. v. The Executive Engineer Rural - INCOME TAX REFERENCE No. 51 of 1997 [2005] RD-AH 1246 (5 May 2005)


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Court no.37


Commissioner of Income-tax, Lucknow.   Applicant


The Executive Engineer, Rural Engg. Services, Barabanki. Respondent.


Hon'ble R. K. Agrawal, J.

Hon'ble Rajes Kumar, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following  question of law under section 256 (2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") relating to the assessment year 1989-90 for opinion to this Court.

" Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct in reducing the penalty imposed u/s 272-A of the I.T. Act, 1961 for the A.Y. 1989-90, by resorting to the proviso to Section 272-A (2) inserted by the Finance ( No.2) Act, 1991 w.e.f. 1.10.1991."

The brief facts of the case are that the assessee-respondent (hereinafter referred to as "the assessee") was required to file form 26-C on 30th May, 1989 as required under section 206 of the Act, but the same was filed on 23rd November, 1990 and due to delay in filing form 26-C, the Assessing Authority levied penalty at Rs.33,400/- under section 272-A of the Act at the rate of Rs.100/- for each day default. The penalty was confirmed in first appeal. Assessee filed second appeal before the Tribunal. The Tribunal partly allowed the appeal and reduced the penalty from Rs.33,400/- to Rs.700/- which is equivalent to the tax deductible in respect of which form was required to be filed. The Tribunal held as follows:

"I have considered the matter carefully.

A proviso was appended to sub-section (2) of Section 272-A of the Act by Finance (No.2) Act, 1991 with effect from 1.10.1991. Although patently it will apply only from the date of its inception, yet I find some force in the plea advanced by the learned counsel for the assessee that this being a beneficial provision, its advantage be granted to the assessee for the assessment year 1989-90.

The proviso in question runs as under:

Provided that the amount of penalty for failures in relation to returns u/s 206 and 206-C shall not exceed the amount of tax deductible or calculable, ass the case may be.

In the case in hand, it was submitted that the tax involved was a meager of Rs.700/- and paid in time which facts have also come in the impugned order. In the fitness of things it, therefore, appears that to levy a penalty of Rs.33,400/- on the assessee for a mere lapse of not filing Form No.24, particularly when the tax in question was not only properly deducted but also deposited on time would be amount to a judicial hardship. It appears that this proviso was brought on the statute book only to meet out such extreme and there is no reason why its operation could not be extended to an earlier assessment year, the issue now being decided during second appeal."

Heard learned Standing Counsel for the Revenue. No one appears on behalf of the assessee.

The Tribunal found that the tax amount involved was Rs.700/- and was paid in time. It is only the form which was filed beyond time. The Tribunal further held that the proviso to Section 272-A (2) was added by Finance (No. 2) Act, 1991 w.e.f. 1.10.1991 contemplates that the amount of penalty shall not exceed the amount of tax deductible. According to the Tribunal, proviso was brought on the statute to meet out extreme case and there is no reason why its operation could not be extended to the year under consideration.

In view of the finding recorded by the Tribunal that the tax amount was only Rs.700/- which was deposited in time and only lapse was that the required form was not filed within time. In the circumstances, there appears to be no revenue loss or any malafide intention on the part of the assessee. We are of the opinion that on the facts and circumstances of the case, there is no error in the order of the Tribunal restricting the amount of penalty to the extent of amount deductible considering the intent of the legislature by introducing Finance ( No.2) Act, 1991 by which the proviso has been added w.e.f. 1st October, 1991 restricting the amount of penalty to the amount of tax deductible only.

In the result, the question referred to us is answered in the affirmative i.e. in favour of the assessee and against the revenue. However, there shall be no order as to costs.

Dated. 5.5.2005.



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