2001 (11) TMI 270 - AT - Income Tax

Summary

Issues:
Penalty under section 221(1) for default in complying with section 206C requirements.

Analysis:
The appeals were against the cancellation of penalties imposed by the Assessing Officer (AO) under section 221(1) for the assessment years 1994-95 to 1997-98. The assessee-firm, a seller of alcoholic liquor, collected tax at source under section 206C but failed to deposit it to the Central Government within the stipulated time. The AO initiated penalty proceedings, but the CIT(A) canceled the penalty, citing that without a demand notice under section 156, the assessee could not be considered in default. The Departmental Representative argued that since no separate order was required to determine the tax liability under section 206C, the notice under section 156 was unnecessary. However, the Tribunal held that without the notice under section 156, the assessee could not be treated as in default under section 220.

Referring to sections 201 and 206, the Departmental Representative contended that even though there were no specific provisions in section 206C akin to section 201 deeming defaulters as default assessee, the analogy could apply. However, after examining the law and CBDT circulars, the Tribunal disagreed. The Tribunal noted that penal provisions must be strictly construed, and since there were no specific provisions treating defaulters under section 206C as default assessee, penalty under section 221(1) was not applicable.

The Tribunal emphasized that the absence of specific provisions in the Act to consider defaulters under section 206C as default assessee meant that penalty under section 221(1) could not be imposed. It highlighted that legislative intent was crucial, and penalties should not be implied where not explicitly stated. The Tribunal also referred to CBDT circulars clarifying the responsibilities of tax collection under section 206C, which did not mention penalties under section 221(1).

The Departmental Representative argued that defaulters under section 206C could be deemed default assessee based on section 201 provisions. The Tribunal rejected this argument, stating that such interpretations would go against legislative intent. Ultimately, the Tribunal upheld the CIT(A)'s decision to cancel the penalties, as defaulters under section 206C could not be considered default assessee under section 221(1). Consequently, the appeals by the Revenue were dismissed.