1978 (5) TMI 47 - AT - Income Tax

Issues Involved:
1. Justification of the penalty imposed under Section 221 of the IT Act.
2. Timeliness and maintainability of the appeal filed before the AAC.
3. Proper service of the show-cause notice.
4. Legal liability of J.M. Baxi & Co. as agents under Section 163(2) of the IT Act.
5. Cooperation of the assessee and J.M. Baxi & Co. with the Revenue Department.

Issue-wise Detailed Analysis:

1. Justification of the Penalty Imposed under Section 221 of the IT Act:
The Tribunal found that the penalty imposed under Section 221 of the IT Act was not justified given the special facts and circumstances of the case. The assessee, a non-resident shipping company, faced genuine difficulties in remitting funds from abroad, which caused a slight delay in tax payment. The Tribunal emphasized that there was no contumacious or dishonest conduct by the assessee or J.M. Baxi & Co., who cooperated fully with the Revenue Department. The tax was eventually paid in full, albeit with a delay of about five months, which was considered a venial breach rather than a deliberate attempt to evade tax.

2. Timeliness and Maintainability of the Appeal Filed Before the AAC:
The Tribunal held that the appeal filed before the AAC was within the prescribed time and thus maintainable. It was noted that the correct date of service of the penalty order and demand notice was 3rd October 1975, not 4th September 1975, as contended by the AAC. The Tribunal found no evidence that Sri Unni, who allegedly received the notice on 4th September 1975, was authorized to accept statutory notices on behalf of J.M. Baxi & Co. Consequently, the appeal filed on 27th October 1975 was within the thirty-day period prescribed under Section 249(2) of the IT Act.

3. Proper Service of the Show-Cause Notice:
The Tribunal determined that the show-cause notice was not properly served. The notice was addressed to the non-resident care of J.M. Baxi & Co., but there was no formal declaration of J.M. Baxi & Co. as agents under Section 163(2) of the IT Act. The Tribunal found that the service on 29th July 1975 was not valid as there was no evidence that Sri Unni was authorized to receive the notice. Proper service was deemed to have occurred on 3rd October 1975 when the notice was served by registered post.

4. Legal Liability of J.M. Baxi & Co. as Agents under Section 163(2) of the IT Act:
The Tribunal found that J.M. Baxi & Co. were not formally declared as agents under Section 163(2) of the IT Act. The IT Act prescribes a specific procedure for treating a person as an agent of a non-resident, which was not followed in this case. The Tribunal held that the guarantee bond executed by J.M. Baxi & Co. did not make them liable as agents for the non-resident's tax under the IT Act. The liability of J.M. Baxi & Co. as sureties under the Indian Contract Act did not extend to penalties for non-payment of tax.

5. Cooperation of the Assessee and J.M. Baxi & Co. with the Revenue Department:
The Tribunal acknowledged the cooperative conduct of J.M. Baxi & Co., who provided necessary particulars for the assessment, received the demand notice, and took steps to ensure the tax was paid by the non-resident. The Tribunal noted that the delay in payment was due to genuine difficulties and not due to any fraudulent intent. The explanation sent by J.M. Baxi & Co. on 1st August 1975, which assured the ITO of their efforts to expedite payment, was not considered by the ITO due to a delay in receipt.

Conclusion:
The Tribunal concluded that the penalty imposed was not justified and canceled the same. The appeal was allowed, considering the special circumstances and cooperative conduct of the assessee and J.M. Baxi & Co.

Result:
The appeal is allowed.

← Previous Next →