Commissioner of Income Tax vs Dy. Housing Commissioner, Raj. Housing Board, Jodhpur

N. N. Mathur, J.

Instant reference u/s 256(1) of the Income Tax Act, 1961, has been made by the Tribunal, Jaipur, seeking opinion of this court on the following substantial question :

"Whether, in the facts and circumstances of the case, the Tribunal was justified in upholding the levy of token penalty, below the minimum prescribed by the Act by observing that there was a reasonable cause for the delay in filing the annual return and was the Tribunal right in drawing a right inference from the CBDT circulars?"

The respondent Dy. Housing Commissioner, Rajasthan Housing Board, Jodhpur, is the person responsible for paying the tax on the income chargeable to tax under the head "Salaries" to the employees working under him. He is also responsible u/s 206 of the Act of 1961, for deducting tax at source. He is also required to prepare, deliver or cause to be delivered to the prescribed Income Tax authority within the prescribed time after the end of the each financial year, a return of the tax deducted in the prescribed Form No. 24. Though the respondent duly deducted the tax at source before making the payment of salaries to his employees and also deposited the same with the State Exchequer in time, yet he failed to file the return of such deductions. Thus, the assessing officer imposed penalty of Rs. 24,000 being the minimum u/s 272A(2)(c) of the Act.

In the first appeal, the Commissioner (Appeals) sustained a token penalty of Rs. 2,400. On appeal by the revenue, the Tribunal dismissed the appeal.

In CIT v. Superintending Engineer, Circle-I, P.W.D., Udaipur being IT Ref. No. 17/1996 "Thus, the penalty u/s 272A(2)(c) cannot be levied in a routine manner. The discretion vested with the authority is to be exercised judiciously on consideration of all the relevant circumstances. A bona fide breach cannot lead to a penalty u/s 272A(2)(c)."

It was further held that in case of negligence, it would be a sound exercise of discretion, to inflict minimum or nominal penalty but in case of inadvertent office mistake, it would not be a sound exercise of judicial or quasi-judicial power to inflict a penalty on the head of the public office. It was further observed that tax authority should also evolve a method of advising the head of office by way of notice or reminder providing an opportunity to comply with the provisions, the breach of which may lead to levy of penalty. A penalty can be levied only in the case that head of office does not act even after such a notice.

In view of the aforesaid, the above question is decided in favour of the respondent Dy. Housing Commissioner, Rajasthan Housing Board, Jodhpur, and against the revenue.

OPEN