2014 (4) TMI 366 - HC - VAT and Sales Tax

Deduction of Tax at source Levy of Penalty Can it be said that the action of the assessee demonstrated animus or ill will or deliberate refusal to discharge its statutory obligation Opportunity of being heard Section 35(8) of Uttarakhand VAT Act, 2005 - Held that - The provision permitting imposition of penalty is u/s 35(8) of the Act - Before a penalty is imposed the person to be penalized must be heard - Person concerned gets an opportunity to explain his conduct - Having regard to such conduct, a discretion has been granted to impose penalty - That can be as much as twice the amount deducted, but not so deposited in Government Treasury Here amount deducted was deposited into Government Treasury - Before that simultaneously with the deductions an attempt was made to deposit the deducted amount, but the same could not be deposited as the banker of the AO did not agree to accept an outstation bankers draft - The fact remains that for delayed payment, assessee has already paid statutory interest. Authorities below did not exercise their discretion of imposing penalty, this court set aside the order of the AO imposing penalty, the appellate order as well as the order of the Tribunal Matter could have been remit, but since it is pending since 2006, we apply the thumb rule and assess the penalty at ₹ 25,000/- - The revision is disposed of Decided partly in favour of assessee.

Summary

Issues: Penalty imposition for failure to deposit tax deducted at source within the prescribed time frame.

The judgment revolves around the issue of penalty imposition under Section 35 of the Uttarakhand VAT Act, 2005 for the failure to deposit tax deducted at source within the stipulated time frame. The revisionist in this case deducted tax at source on specific dates but deposited the deducted amount after the prescribed deadline. The Assessing Authority imposed a penalty twice the amount of tax deducted, which was upheld on appeal but later reduced by the Tribunal. The primary question before the court was whether the revisionist's actions demonstrated deliberate refusal or animus in failing to deposit the tax within the required timeframe.

The court analyzed the provision of law under Section 35(8) of the Act, emphasizing the requirement for the person to be penalized to be given an opportunity to be heard before imposing a penalty. The provision allows for a penalty not exceeding twice the amount deductible but not deposited into the Government Treasury. The court considered the revisionist's conduct, where attempts were made to deposit the deducted amount through outstation bankers drafts, which were initially refused by the Assessing Officer's banker despite the revisionist offering to pay collection charges separately. The court noted that the revisionist had already paid statutory interest for the delayed payment, indicating a willingness to fulfill the obligation.

Ultimately, the court found that the authorities below did not appropriately consider the factual background and exercise their discretion in imposing the penalty. The court intervened, setting aside the penalty imposed by the Assessing Authority, the appellate order, and the Tribunal's decision. Instead of remitting the matter due to its prolonged pendency since 2006, the court applied a thumb rule and assessed the penalty at Rs. 25,000, disposing of the revision accordingly.