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TMI Blog1999 (4) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal." 2. We have heard the learned Departmental Representative as well as the assessee's counsel. Before divulging to their respective submissions, we consider it necessary to record the undisputed facts, as borne out from the records before us, which, are, in the following terms: 2.1. As a result of newly inserted provisions of s. 194H of the IT Act, 1961 (hereinafter called as "the Act"), as a result of Finance Act, 1991, which received the assent of the President of India on 27th Sept., 1991, all these respondents were under an obligation to deduct and pay the tax at source @ 10 per cent from all payments or payables on account of commission after 1st Oct., 1991. 2.2. All these respondents, taking shelter under the provisions of sub-s. (2) of s. 194H according to which the Central Government has retained the power to exempt any person or class or classes of persons from the applicability of provisions of s. 194H(1), moved their respective petitions for exemption to the CBDT on 4th Nov., 1991, which was decided by the CBDT as per its order placed at pp 8 to 11 of the paper book, only after the directions of the Hon'ble High Court of Allahabad dt. 23rd July, 1992, giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd we have every reasonable expectation that we shall be granted similar exemption by the Government. Moreover, the exemption is not detrimental to the interest of the Revenue. On the contrary its consequences on us are very grave. We cannot keep out capital which has a marginal profit looked in the Department. Thereafter it is a cumbersome exercise to claim and obtain refund. In this connection, our bona fide stand in the writ petition may kindly be looked into. It is, therefore, requested that no action in the matter has been taken until the matter is finally decided by the Ministry of Finance as well as till the disposal of our writ petition before the High Court of Judicature at Allahabad. Thanking you, Yours faithfully, for UP National Mfrs. Ltd., Sd/- (Sharad Kumar Sah) Managing Director." (It is not considered necessary to reproduce the reply of other two assessees.) 3.1. The first respondent furnished the details of commission paid as per letter dt. 11th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: 1. As stated in detail vide our reply of date in compliance to show cause notice under s. 272A(2)(c) our petition to the Board seeking exemption from applicability of the newly introduced provision under s. 194H filed on 4th Nov., 1991, was decided on 30th Sept., 1992, and the order of the Board communicated to us shortly after in October, 1992. 2. Immediately hereafter and prior to the receipt of the order under s. 201, we deposited the tax payable under s. 194H on 29th Oct., 1992, and also filed the return in Form No. 26-I within 30 days of the communication of the Board's order. 3. In the facts and circumstances of the case there was no default on our part in this behalf attracting provisions of s. 271C of the Act. 4. It is, therefore, requested that the impugned proceeding initiated in the matter be dropped and filed and justice be done." The above reply has got no meaning at all to denote any cognizable reason so that the assessee may be exculpated under the law. The company and its directors wanted to give an exemption for itself to the general provisions of law as introduced by the Finance (No. 2) Act, 1991, w.e.f. 1st Oct., 1991, which provides for TDS in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han adhubakta ne bateya ki dhara 271C ke antargatha karan batho notice dt. 28th Dec, 1992, ki jari and spastikaran ki lia sunahi ki tankh 19th Jan., 1993, nishchit ki gia thi. Santhi adesh dt. 11th March, 1993, ki parith kia gia, jabki uparokth ayakar dt. 20th Oct., 1992 ki hi jama kar di gia thi. Tadanusar sansodith pararup 26-I dinank 30th Nov., 1992 ki dhakil kia gia. Sasthi ki kai bhi karan nahi kartha hai. 6. Iski Athariktha appellant ke adhibakta ne company ki appeal adesh s. 41/TDS/Varanasi/1992-93 adesh dinank 12th March, 1992 ka ullekh kia, jinke anusar dhara 201 ki mang nirastha kar dia gia tha. Atha: Un adhar par uparokth sasthi Uchit Nahi Hai. Unke atirikthyea bhi batha gia ki yea barsha ki karar ki bajah ki samay par ayakar ki katothi nahi kia. Yea katothi kebal 29 Oct., 1992 ki gia. Yeske athirikth M/s Sha Agencies ki adhirotith karna uchit nahi hai. Yish Sambandh me Appeal Adesh M/s Chinni Tullo Sales and Service Appeal No. 44/Ayakar upa Ayukta/Range/Varanasi/1993-94 Adesh dinank 5th Oct,1993 Ka ullekh Kia jiske antargatha Dhara 271C ki sasthi nirasth kar di gie hai. 7. Mane Apilarthi ki kathan par bichar kia. Ayakar ki kathothi karan batho notice jari karne ke p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "Fairness in action in the context of the penalty proceedings would demand that the assessee who is charged with the levy of penalty is given a reasonable opportunity of oral hearing. It is only by means of an oral hearing that the assessee can have an opportunity of persuading the officer concerned that he has a reasonable cause for the default. The words "reasonable cause" have not been defined under the Act but they could receive the same interpretation which is given to the expression "sufficient cause". Therefore, in the context which is beyond the control of the assessee. "Reasonable cause" means cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fide from furnishing their turn in time." 5. Concluding his submissions, the learned Departmental Representative emphasised that furnishing of a petition for exemption cannot be considered as a ground for entertaining a belief which in turn can be said to be bona fide, that the respondents were not liable to deduct the tax at source. 6. The assessee's counsel, on the other hand, in addition to supporting the orders of the CIT(A) su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de belief which in turn amounted to a reasonable cause, the penalty under s. 271C was not justified. 7. As regards the decisions relied upon by the learned Departmental Representative the assessee's counsel submitted that the decision is in favour of the assessee and not the Revenue because all the three ingredients mentioned in the legal proposition laid down in this decision were absent in the present cases. 7.1. Concluding his submissions, the assessee's counsel submitted that the delay was due to bona fide belief that due to petitions under s. 194H(2) it was not liable to comply with the provisions of s. 194H(1). Accordingly to him it was right also because had the assessee deducted and paid the tax at source then there was no fun in making the provisions of exemption and, therefore, the purpose of granting right to seek exemption would have got defeated and also because the CBDT has granted such exemption to such other assessee as per Notification dt. 6th Feb., and 3rd March, 1992, which in turn was a reasonable cause as envisaged in the provisions of s. 273B and consequently the assessee were not liable to pay any penalty under s. 271C. Another plea advanced by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to understand is that the provision of sub-s. (1) cast an obligation on the person responsible for paying commission or brokerage for deducting and paying the tax at source, whereas the provisions of sub-s. (2) grants a right to such person either not to deduct and pay the tax at source if the income so paid does not exceed Rs. 2,500 or, if exceeds, then approach the Central Government for seeking exemption from the application of provisions of sub-s. (1) of s. 194H. In other words, if on one hand the obligation to deduct and pay the tax at source were absolute, then on the other hand, the right to seek exemption were absolute. 8.3. Coming to the nature of right granted by sub-s. (2) of s. 194H we are of the opinion that granting of such a right to the assessee by the legislature is not a mere formality. When the same provisions of law have provided an obligation and also have granted a right then the exercise of such a right should be seen in the light of principles of natural justice and since, as observed by the Lord Bridge in the case of Lloyd vs. Mcmahan, a decision of House of Lords reported as (1987) 1 All ER 1118, the principles of natural justice are not "engraved on ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not only very diligent and quick enough in exercising the right but were diligent and careful and serious even after furnishing the petitions and that is why when it was found that the CBDT was not taking any action on their petition, they approached the Hon'ble High Court of Allahabad in July, 1992, by way of writ petition. It was, therefore, on the directions of the Hon'ble High Court of Allahabad, dt. 23rd July, 1992, given while deciding the writ petitions of respondent-assessees, that the CBDT decided their petitions by its order, dt. 30th Sept., 1992, whereby the request for grant of exemption was denied. In our opinion and under these circumstances it cannot be said that exercise of right by the respondent-assessees for seeking exemption under s. 194H(2) was either to thwart the provisions of s. 194H(1) to delay the compliance to the legal provisions or was with mala fide intention. 10. After having held as above the next question for our decision is that can a person under the circumstances, as are before us, be said to have a right to entertain or can entertain a bona fide belief that he is not liable to discharge the obligation during the pendency of the petition f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sees were in honest exercise of "absolute right" granted by the statute and the delay was on the part of the CBDT, not only the present assessees, but everybody else also would have entertained a relief that during the pendency of the petition he is not to comply with the provisions of s. 194H(1). 11.3 We are, therefore, of the opinion that even if there can be two possibilities then also the entertainment of such a belief being one of the possibilities and being an honest posssibility, the assessees were neither wrong nor had defied any settled principles of law by entertaining a belief that during the pendency of the petition before the CBDT they were not to comply with the provisions of s. 194H(1). Even otherwise, if it was not so, then had the assessee deducted and paid the tax then existence of provisions for granting an absolute right for seeking exemption from such obligation would have no meaning for the assessee, i.e. would have been rendered redundant a situation which could have not been intended by the legislature itself. 12. Viewing the present cases in the totality of the circumstances and legal provisions as discussed above, we are of opinion that the assessees c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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