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TMI Blog1997 (7) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-3-198931-5-198914-6-1989 Contract Payment 69431-3-198931-5-198914-6-1989 Contract Payment 3,80331-3-198931-5-198914-6-1989 Salary 2,0352-2-19899-2-198913-2-1989 Salary 5,38231-3-19897-4-19891-5-1989 Royalty 7,98,30430-6-19887-7-19885-9-1988 Technical know-how fee 7,00,00031-3-19897-4-198915-9-1989 Royalty 7,89,00131-3-19897-4-198921-10-1989 3. The appellant was issued a show-cause notice by the Assessing Officer. There was no reply from the assessee even though it had stated on19-8-1991that a reply would be given by27-9-1991. The Assessing Officer accordingly levied interest at Rs. 1,30,631 under section 201(1A). Simultaneously proceedings under section 221 had also been taken identical to the dates of which proceedings under section 201(1A) were taken. Here also, there being no reply the Assessing Officer held that the appellant has failed to pay the tax without good and sufficient cause. He levied penalty @ 10% of the amount of tax worked out at Rs. 2,31,730. 4. The assessee went in appeal before the CIT(A) before whom two main submissions were made i.e., (a) since the appellant had paid a tax before issue of show-cause notice both under sections 201(1A) and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex-factory selling price of the product was to be paid as royalty. Clauses 4C, 5A and 5B indicate that without going into the accounts it is not possible to ascertain the amount of royalty. By way of illustration it was pointed out that the net Ex-factory sale price of the product has to be exclusive of the Excise Duty minus the cost of standard bought out components and landed cost of imported components irrespective of procurement including freight, insurance, custom duty, etc. It was submitted that since without finalisation of accounts the amount of technical know-how/royalty were not capable of being ascertained and, therefore, CIT(Appeals) was wrong to reject this submission without giving any reason especially when no adverse remarks is made in his conclusion vis-a-vis technical know-how. 5.2 It was further pointed out that delay in finalisation of accounts was not deliberate. During the middle of the financial year i.e., on21-7-1988operations under section 132(1) were carried out by the Revenue against the assessee when all books of accounts, vouchers, correspondence with parties from the period 1985 to date, were seized. Shri Syali invited our attention to the Panchnama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already placed on record. 5.4 Shri Syali also addressed us at length on the approach to the levy of penalty under section 221 of the Income-tax Act with reference to non-deduction or deduction but non-payment of tax under TDS provision. It is submitted that the approach to penalty for an assessee deemed to be in default under section 201(1) read with section 221 has to be understood in its correct perspective. Under sub-section (1) of section 201, a person responsible for deducting tax at source in the event of non-deducting or, after deduction, failing to pay, "may be" deemed to be an assessee in default. The emphasis is on the word "may". Therefore, according to Shri Syali, it is not as if in every case where there is a failure to deduct or pay the tax, as required, the provisions become automatically applicable. 5.5 Shri Syali submitted that the wording may be compared with the wording of sub-section (4) of section 220 which provides that where the amount is not paid within the prescribed time, the assessee "shall" be deemed to be in default. 5.6 Shri Syali submitted that proviso to section 201(1) expressly stipulates that although the assessee is deemed to be in default, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental Representative placed reliance on the decision of the lower authorities and submitted that a reasonable opportunity has been given by the Assessing Officer and in the circumstances, the assessee was wrong in submitting that good and sufficient cause existed. 7. We have heard the learned representatives and have also gone through the relevant record. In the present case, the fact/explanation on record have not been examined in their proper perspective. It is settled law that mere delay is not sufficient to attract provisions of section 221 --- CIT v. Chembara Peak Estates Ltd. [1990] 183 ITR 471 (Ker.). It becomes essential to analyse with reference to material on record and give a finding to discharge the onus. It is evident that there being no default with reference to royalty as on 30-6-1988, and, there being a good and sufficient cause, i.e., the delay in finalisation of accounts on account of seizure of books of account by the department the appellant was left with no choice but to pass the entries only after receipt of copies of seized documents. Having passed the entries at that time though as of date, on which accounts are being made, i.e.,31-3-1989the delay is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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