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TMI Blog2012 (3) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... tions under section 197A of the Act as the provision relates to cases where no tax is deductible - Once it is held that the proviso is remedial in nature, in the light of the law laid down by the Supreme Court in the decisions cited hereinabove, the proviso is required to be treated as retrospective in operation. The Tribunal was, therefore, right in law and on facts in directing that the penalty should be calculated in accordance with the proviso to section 272A (wherein it is stipulated that the penalty should not exceed the tax deductible) by giving retrospective effect to the proviso. - Decided in favor of the assessee - TAX APPEAL Nos. 61, 64 & 65 of 2000 - - - Dated:- 16-3-2012 - MS. HARSHA DEVANI AND R.M. CHHAYA, JJ. JUDGMENT Ms. Harsha Devani, J. These appeals under section 260A of the Income Tax Act, 1961 (the Act) arise out of common order dated 2.11.1999 passed by the Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") in ITA No.5262/Ahd/1994, ITA No.4586/Ahd/1995 and ITA No.3592/Ahd/1997 and the issues involved are also common, hence, the same were taken up for hearing together and are disposed of by this common judgment. 2. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the obligation to file copy of the statement in Form No.15H was introduced by the Finance Act, 1992 with effect from 1.6.1992 by amending section 197A of the Act and accordingly, till 1.6.1992, the Income Tax Act did not require Form No.15H to be filed in the office of the CIT. It was pleaded that the assessee was not aware of the said provision and in any case, there was no loss of revenue to the respondent and that the default, if any, was only a technical default for which no penalty should be levied. The Commissioner, however, did not find the explanation to be acceptable and found that this was a fit case for imposition of penalty under section 272A(2)(f) of the Act for the assessee's default of not furnishing declarations in Form No.15H before the Commissioner of Income Tax within the time allowed as provided under sub-section (2) of section 197A of the Act. He, accordingly, levied penalties of Rs. 1,23,000/- and Rs. 1,20,900/- for delay of 1230 days and 1209 days respectively in relation to Tax Appeals No.64 of 2000 and 65 of 2000. 6. Insofar as Tax Appeal No.61 of 2000 is concerned, there was a default on the part of the assessee in relation to 28 declarations in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation to file the prescribed form under section 197A in view of the above referred decision of the Pune Bench of the Tribunal. However as far as assessment year 1994-95 is concerned, the Tribunal was of the opinion that penalty should be levied because ignorance of law is certainly no excuse for a default committed. In the aforesaid factual background, the Tribunal upheld the action of the Commissioner of Income-tax in levying penalty for assessment years 1991-91 and 1992-93 for delay beyond 1.6.1992 and also for assessment year 1994-95 but directed that the penalty should be calculated in accordance with the proviso to section 272A of the Act wherein it is stipulated that the penalty levied should not exceed the tax deductible as the said proviso was held to be retrospective in operation by the Pune and Jaipur Benches of the Tribunal in the above referred decisions rendered by them. Being aggrieved, the revenue is in appeal. 9. Mr. M. R. Bhatt learned senior advocate submitted that the proviso to section 272A of the Act has been inserted by the Finance Act, 1991 with effect from 1.10.1991. At the relevant time the benefit of the proviso was given only to defaults under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly nor by implication retrospective in effect. 10. Reliance was also placed upon the decision of the Supreme Court in Commissioner of Income-tax v. Varas International P. Ltd ., [2006] 283 ITR 484, wherein it has been observed that it has been consistently held by the Supreme Court that for an amendment of a statute to be construed as being retrospective, the amended provision should itself indicate, either in terms or by necessary implication, that it is to operate retrospectively. Reference was also made to the decision of the Rajasthan High Court in Commissioner of Income-tax v. New Rajasthan Trading Co., [2004] 271 ITR 511, wherein the court in the context of the proviso to section 272A of the Act has held that in the absence of any retrospective effect to such provisions, the proviso cannot have any impact with regard to any default relating to assessment year 1989-90. No law can have retrospective effect unless it is so provided specifically by the law itself. 11. Supporting the view taken by the Tribunal, Mr. S. N. Soparkar learned senior advocate appearing on behalf of the respondent assessee, invited attention to the facts of the case to submit that default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponsible for paying the income in the nature referred to in sub-section (1), he is visited with penalty under section 272A which is excessive in nature. Reliance was placed upon the decision of the Supreme Court in Allied Motors (P) Ltd. v. Commissioner of Income-tax , 224 ITR 677, for the proposition that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole. The decision of this court in Commissioner of Income-tax v. Chandulal Venichand , [1994] 209 ITR 7, was cited for the proposition that it is a well recognised rule of construction that a statutory provision must be so construed as to avoid absurdity and mischief and that a clarificatory and explanatory provision should normally be interpreted to have retrospective effect. Reliance was placed upon the decision of the Supreme Court in Commissioner of Income-tax v. Alom Extrusions Ltd ., [2009] 319 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only. In the facts of the present case, as on the date of the default failure to file declarations in Form No.15-H was not exigible to penalty. Penalty came to be levied in respect of such failure only with effect from 1.6.1992. There is nothing in the language of section 272A of the Act to indicate that it was the intention of the legislature to affect existing rights. In the circumstances, when failure to file the declaration under rule 29C(5) of the Rules did not attract penalty, no penalty can be levied under section 272A of the Act till the time when failure to file declaration in Form No.15H became leviable to penalty thereunder. Failure to file the declaration in Form No.15H prior to 1.6.1992 not being a default under section 272A(2)(f) of the Act, the Tribunal was, therefore, justified in holding that for assessment years 1991-92 1992-93 no penalty can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the proviso to section 43B of the Act should be given effect to retrospectively from the time when section 43B became a part of the Income Tax Act, 1961, as it intended to obviate unexpected hardships in the application of section 43B. The court held that when a proviso is inserted to remedy unintended consequences and to make a section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole. 17. In Commissioner of Income-tax v. J.H. Gotla ( supra ) the Supreme Court held thus: "46. Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the Court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the Legislature from the language used. It is neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantive it would be prospective in effect and if remedial/curative then it would be effective retrospectively. 19 . In CIT v. Podar Cement (P) Ltd ., [1997] 5 SCC 482 the Supreme Court held that the circumstances under which the amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and, whether it will have retrospective effect or it was not so. 20. In Zile Singh v. State of Haryana ( supra ) the Supreme Court observed as follows: "13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only-'nova constitutio futuris formam imponere debet non praeteritis'-a new law ought to regulate what is to follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the relevant statutory provisions. 22. Section 197A of the Act, which came to be inserted in the Income Tax Act, 1961 vide the Finance Act, 1982 with effect from 1st June, 1982, makes provision for cases in which no deduction of tax is to be made, and reads thus: "197A. (1) Notwithstanding anything contained in section 193 or section 194 or section 194A or section 194EE, no deduction of tax shall be made under any of the said sections in the case of an individual, who is resident in India, if such individual furnishes to the person responsible for paying any income of the nature referred to in section 193 or section 194 or section 194A or, as the case may be, section 194EE, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. (2) The person responsible for paying any income of the nature referred to in sub-section (1) shall deliver or cause to be delivered to the Chief Commissioner or Commissioner one copy of the declaration referred to in sub-section (1) on or before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a )** ** **; or ( f ) to deliver or cause to be delivered in due time a copy of the declaration mentioned in section 197A; or ( g )** ** ** ** ** ** he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees, for every day during which the failure continues: Provided that the amount of penalty for failures in relation to returns under sections 206 and 206C shall not exceed the amount of tax deductible or collectible, as the case may be. ** ** **" 23. Sub-section (2) of section 272A came to be substituted vide Direct Tax Laws Amendment Act, 1987 with effect from 1.4.1989. Prior to its substitution, the said provision provided that if a person fails, - (f) to deliver or cause to be delivered in due time a copy of the declaration mentioned in section 197A, he shall pay, by way of penalty, a sum which may extend to 10 rupees for every day during which the failure continues. Upon substitution, sub-section (2) of section 272A of the Act inter alia provided that if any person fails, - ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of section 272A. The minimum and maximum penalty is prescribed at the rate of Rs.100 and Rs.200 for every day during which the default continues. Representations have been received that the aforesaid provision creates hardship in cases where the amount of tax deductible for which the return under section 206 is furnished is very small and the return could not be furnished in time for various reasons. 67.3 Section 272A of the Income Tax Act has, therefore, been amended to- ( a ) provide for levy of penalty for failure to furnish the certificate and the return required by section 206C, and ( b ) to provide that the amount of penalty leviable for failure to furnish returns under section 206 and 206C shall not exceed the amount of tax deductible/collectible for which such returns are required to be furnished. 67.4 These amendments shall come into force with effect from 1st October, 1991." 25. Subsequently, vide Finance (No.2) Act, 1998, the proviso to section 272A(2) came to be amended so as to provide that the maximum limit of penalty imposable for failures in relation to a declaration mentioned in section 197A and in relation to a certificate required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sections 193, 194, 194EE and 194A. In such cases the individual is required to furnish to the person responsible for deducting tax at source, a declaration in writing in the prescribed form and manner to the effect that his estimated total income in the previous year in which such income is to be included in computing his total income is nil. Thus, where the income of an individual for a previous year is nil, no tax is required to be deducted at source under the aforesaid provisions. Therefore, no income being payable in cases falling under section 197A of the Act, there is no loss of revenue. 29. While clarifying the amendment whereby the proviso to section 272A of the Act was inserted for the first time, the Board has stated that representations have been received that the aforesaid provision creates hardship in cases where the amount of tax deductible for which the return under section 206 is furnished is very small and the return could not be furnished in time for various reasons. Thus, it is clear that in view of the representations received by the Board and in view of the hardship caused to assessees as well as in view of the fact that the penalty levied is exorbitant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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