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TMI Blog1976 (4) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... alary certificates and to deduct the tax in accordance with the provisions of s. 192 of the IT Act, 1961, the ITO initiated proceedings against him under s. 276(b) and 277 of the said Act. In response to the show cause notices, the Manager, Punjab National Bank explained that he was under a bonafide impression that the over-time allowance was in the nature of compensatory and causal payment by way of reimbursement of food-cum-refreshment expenses to the employee who worked after the office hours and as such the same was not liable to tax. It would be appropriate to reproduce his reply dt. 15th April, 1974. It reads as follows :— "The Income-tax Officer, Ward-C, Rohtak. Ref. No. Dated 15th April, 1975. Ref. :— Your letter dt. 6th March, 1974. Ref. :— Proceeding under s. 276(B) and 277 of the IT Act, 1961. We have carefully gone through the contents of your letter by which you have been pleased to require us to show cause why prosecution proceedings under s. 276(B) 277 be not lodged for failure to deduct tax in accordance with the provisions of s. 192 of the IT Act, 1961 and similarly for the failure to show over-time payment in the statement of salary and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk is that the statements of salary and tax deductions are prepared and done by the staff which are checked and signed by the Accountant and only countersigned by the Manager. The them Manager was given to understand that this was not includible in salary statement. It is precisely because this was treated as reimbursement that over time payments were not shown as part of salary and nor any tax was deducted therefore, since this does not partake of the nature of salary but diem allowance. The benefit of overtime payment is restricted only to 'Workman' category of employees and officers are not given this benefit. 8. Since the above treatment had been held out to be normal practice in the past in this branch to the them Manager that in the years under consideration so the same practice was followed. The omission to include it in salary or failure to deduct tax in entirely inadvertant and does not arise out of a deliberate act of the Management, as by this resort it doe snot gain anything out of it. 9. Since the omission has been occasioned by genuine and bonafide factors and circumstances as submitted above and in view of the absence of any mens rea on the part of the Manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revised salary certificate issued by employer/ Date of submission of revised return Difference in total salary between original certificate and the revised certificate issued by the employer. Penalty imposed under s. 271(1)(c) of the IT Act 1969-70 11-6-69/4-7-69 4,842/4,842 4-3-74/14-3-74 727 727 1970-71 19-5-70/25-6-70 5,508/5,508 2-3-74/14-3-74 738 738 1971-72 11-6-71/25-6-71 7,028/7,028 2-3-74/14-3-74 1,054 1,054 1972-73 24-4-72/6-6-72 8,091/8,091 2-3-74/14-3-74 1,155 1,155 1973-74 14-4-73/26-6-73 9,160/9,160 2-3-74/14-3-74 1,315 1,315 8. On appeal, the AAC did not agree with the ITO. He was of the vie that the penalty proceedings were quasi-criminal in nature and it was incumbent upon the Department to conclusively prove the guilt of the assessee before penalising him. According to him, the circumstances attending the case were sufficient to hold that the assessee was misled by the salary certificates originally issued by the Manager, Punjab National Bank, Rohtak and that he was under a bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponsibility and wherever short deductions are detected by the IT Department, the bank will have to realise the same from the employees and pay it to the Government with penalties imposed. In case, where the amount is not realisable form an employee for reasons of his having left the service or by death, or any other reason, the short-fall, if any, will have to be paid by the bank.' (v) On 6th March, 1974, the ITO, C-Ward, Rohtak, sent a communication to the Manager, Punjab Nationa Bank, Rohtak in connection with proceedings under s. 276(B) and 277 of the IT Act, 1961. The bank Manager's reply was contained in his letter dt. 15th April, 1974. Extracts from this letter are reproduced here below :— "We have carefully gone through the contents of your letter by which you have been pleased to require us to show cause why prosecution proceedings under s. 276(B) and 277 be not lodged for failure to deduct tax in accordance with the provisions of s. 192 of the IT Act, 1961 and similarly for the failure to show over-time payment in the statement of salary and tax deducted at sources. In connection with the above, it is submitted that there was no wilful default or deliberated mis-st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , West Bengal vs. Anwar Ali, that the proceedings under s. 28 (of the IT Act, 1922—corresponding to s. 271(1)(c) of the IT Act, 1961) were of a penal nature. It was held therein that "before penalty can be imposed, the entirety of circumstances must reasonable point to the conclusion that…… In the present case, there was no material on record to show that the appellant consciously and with dishonest intention excluded the over-time allowance received by him while furnishing the original return of income. 4. The appeal is allowed. The penalty is cancelled. The ITO shall give effect to this order." It is against this order of the AAC for each of the assessment years under consideration that the Department has filed the present appeals. 9. After going through the record and hearing the learned representative of the parties, I do not find any substance in these appeals. The crux of the problem is whether the omission of the assessee to declare the over-time allowance in the returns originally filed by him, was international or inadvertent. In my opinion, the mere fact that there was an omission on the part of the assessee to declare certain income in the return does not nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the over-time allowance was exempt from tax and that all the taxable income had been shown by the bank in the certificate issued by it. 10. It may also be mentioned that the Punjab National Bank (Head Officer, new Delhi) referred to the over-time allowance as includible in the taxable salary of the employees only in its circular dt. 8th Sept., 1975 issued by it to all its branches. The fact that similar reference was not made in the earlier circulars, issued by the Head Officer to its branches, also lands support to the version of the assessee that over-time allowance was considered to be exempt from tax under some mistake impression. 11. The learned representative of the Department emphatically urges that if the assessee had, in good faith, considered the over-time allowance as exempt from tax, he would have claimed exemption in respect of the same in part IV of the return. In my opinion, the mere omission to claim such an exemption in part IV does not conclusively establish the guilt of the assessee. Since the assessee was not assisted by a counsel, he could commit a mistake in not correctly filling up the return and as such this lapse would not, by itself attract penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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