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TMI Blog1979 (1) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... with the result the compulsory deposit could not be made along with the last instalment of advance tax. However, I arranged for funds shortly thereafter and made the compulsory deposit on 29th March, 1975, i.e. within the month of March. For the foregoing extenuating causes and in view of the shortness of delay, I pray that the penalty proceedings may please be cancelled and justice rendered". The ITO stated that the explanation was not convincing, that there was a clear default and levied a penalty of Rs. 607. 2. In appeal, the AAC also stated that there was no reasonable cause and confirmed the penalty. 3. The assessee is in appeal and the submission was that there was real paucity of funds; that the delay was only about a fortnight and the payment was made within the Financial Year and there was no material whatsoever to controvert explanation tendered for the delay. It was, therefore, pleaded that the penalty should be cancelled. 4. The learned Departmental Representative, on the other hand, submitted that under the provisions of s. 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, there was no discretion vested with the ITO where there was default as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision was mandatory for it enjoins that the ITO shall by an order in writing direct the person to pay penalty etc. During the hearing, the attention of the learned Departmental Representative was drawn to the decision of the Calcutta High Court in the case of CIT, West Bengal vs. Wesman Engineering Co. (P) Ltd.(5) which related to imposition of penalty under the provisions of s. 140-A of the ITA, 1961 wherein the Calcutta High Court agreed with the Tribunal that the aforesaid provisions gave an opportunity of being heard to the assessee before penalty was imposed and such opportunity would be illusory if the penalty was to be automatic. The submission of the learned Departmental Representative in reply was that under the provisions of s. 140A, the words used were "may" and not "shall" direct imposition of penalty. He, therefore, submitted that no analogy could be drawn from the decision of the Calcutta High Court. 5. The provisions in the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 which provided for an appeal from penalty imposed are contained in s. 12 thereof. s. 12 reads as under: "Appeals and Revision : Any depositor aggrieved by any order of the ITO impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory obligation is a matter of direction of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out." I think there is sufficient guidance in this decision to justify the view that mere failure to carry out the statutory obligation need not necessarily visit the consequence of imposition of penalty. Something more must be shown and that is whether there is dishonest conduct on the part of the defaulter who is said to have committed the breach. The Supreme Court has spoken earlier on several occasions on this question. Reference may be made to the decisions in Revula Harip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proviso that Parliament did not intend to create absolute offence under s. 221 (1). At the relevant time there was no proviso in the section as it stood. If the incorporation of the proviso was only intended to put the matter beyond doubt, then, of course, the fact that the section was in different form earlier may not be very material. I see no intention expressed nor do I read any implied intention in s. 221 (1) as it stood prior to the amendment which may be sufficient to hold that the normal rule that mens rea must be read as an ingredient of the offence is to be ruled out in this case. I am, therefore, of the view that the amendment did not really effect any change in the law. In order to justify the imposition of a penalty under s. 221, the ITO should not only find that there is default but should also consider the question whether there was good and sufficient reason for the default and only if he finds that there were none, he could proceed to impose the penalty. In other words, the situation prior to the amendment of 1970 was the same as that after such amendment. Neither the ITO nor the appellate and revisional authorities have considered the question whether impositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of C.W.T. vs. Kripashanker Dayashanker Worah(3) has stated at page 768 as under: "It is true that a taxing provision must receive a strict construction at the hands of the courts and if there is any ambiguity the benefit of that ambiguity must go to the assessee. But that is not the same thing as saying that a taxing provision should not receive a reasonable construction" and the Supreme Court in R. B. Jodha Mal Kuthiala vs. CIT(4) has stated at page 575 as under: For a minute, let us look at things from the practical point of view. If the thousands of evacuees who left practically all their properties as well as business in Pakistan has been considered as the owners of those properties and businesses as long as the "Ordinance" was in force, then those unfortunate persons would have had to pay income-tax on the basis of the annual letting value of their properties and on the income, gains and profits of the business left by them in Pakistan though they did not get a paisa out of those properties and businesses. Fortunately, no one in the past interpreted the law in the manner Mr. Mahajan wants us to interpret. It is true that equitable consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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