TaxTMI 
TaxTMI 
1982 (7) TMI 104
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....ry, the sugar mills were liable to pay interest at 15 per cent per annum for the period of delay beyond 14 days, and where the payment of interest on delayed payments was made to a cane growers society, the society was to pass on the interest to the cane growers concerned after deducting the administrative charges, if any, permitted by the rules of the society. The IAC found that during the years relevant to the assessment years 1971-72 to 1978-79 (except 1974-75) in the case of Gauri factory branch, the assessment years 1969-70 to 1973-74, 1977-78 and 1978-79 in the case of Padrajna factory branch and the assessment years 1969-70 to 1973-74, 1977-78 and 1978-79 in the case of Kathjuiyan factory branch, the assessee-company made payments by way of interest to Co-operative Cane Development Union or Cooperative Cane Development Council which in the aggregate exceeded the prescribed limit of Rs. 400 for payments up to 31-3-1975 and Rs. 1,000 thereafter and from these interest payments no tax was deducted at source, as required by section 194A of the Income-tax Act, 1961 ('the Act'). The IAC, therefore, issued to the assessee-company a show-cause notice giving the assessee a specific o....
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....; 1,008 1972-73 18,670 15,905 1973-74 8,698 &nb....
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....sp; 873 Penalty Interest PADRAJNA FACTORY BRANCH: Rs. Rs. 1969-70 ....
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....nbsp; 23,824 6,193 1978-79 4,608 507 KATHJUIYAN FACTORY BRANCH: 1969-70  ....
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....p; 4,314 1,208 1978-79 2,203 284 Aggrieved by the imposition of these penalties and interest, the assessee-company went up in appe....
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....201(1) was to be imposed under section 221, there was no need of a separate proviso to sub-section (1) of section 201 and that too in a phraseology different from what was appearing in the second proviso to section 221, except that the Legislature wanted a more stringent test to be prescribed before penalty was imposed for the default laid down under section 201(1) as compared to the other defaults of non-payments of tax and wanted to be sure that penalty for this default will not be imposed unless the ITO was satisfied that the failure to deduct the tax and pay the same to the Central Government's account was without good and sufficient reasons. This, according to Dr. Vaish, assumes great importance because what is at issue before us is the imposition of penalty, and in dealing with the penal provisions of the Act, it has to be construed strictly and the benefit of doubt, if any, has to go to the assessee. Viewed in this context, Dr. Vaish read out to us the penalty order of the IAC to point out that there was no finding by him that the failure to deduct the tax on payments by way of interest exceeding in the aggregate the prescribed limit, was without good and sufficient reasons ....
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....ll. 4. Another point made out by Dr. Vaish was that the interest received from the assessee-company by Co-operative Cane Development Council was passed on to the cane growers who were the ultimate recipients and in the case of none of these growers the aggregate of the payments on account of interest exceeded the prescribed limit of Rs. 400 up to 31-3-1975 or Rs. 1,000 thereafter. Our attention in this connection was invited by him to section 3A of the Sugar Cane (Control) Order, 1966 which had laid down that the interest on delayed payments made to a cane grower society has to be passed on after deducting administrative charges, if any, permitted by the rules of the society to the cane growers concerned. Here again, Dr. Vaish reiterated his submission that since we were dealing with the penal provisions, the provisions should receive strict construction and the benefit of doubt, if any, should go to the assessee. Dr. Vaish then referred to the explanation of the assessee in response to the show-cause notice as discussed in the order of the Commissioner (Appeals) wherein it was pointed out that for decades earlier the assessee-company was paying interest on delayed payments to the....
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....tion 201 were also not applicable, there was no question of any charge of interest under section 201(1A). Summing up, Dr. Vaish vehemently argued that the penalties as well as the interest were both unjustified and should be cancelled or else in the alternative, the penalties should be reduced to a token amount. 5. On the other hand, the learned departmental representative, Shri Prakash, submitted to us that as is obvious from the order of the IAC, imposing penalties under section 221 read with section 201 and levying interest under section 201(1A), all the facts and circumstances were considered, the assessee's reply was found to be quite irrelevant and without force, and a clear finding had been given that penal provisions were clearly attracted and thus in these circumstances, the imposition of penalty as sustained in appeal by the Commissioner (Appeals) and the levy of interest were perfectly justified. Proceeding further, Shri Prakash submitted that even though there was a slight difference in the wordings of the proviso to sub-section (1) of section 201 and the corresponding second proviso to sub-section (1) of section 221, it was a mere style of drafting which was of no con....
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....] 89 ITR 251, Shri Prakash submitted to us that where the words of a provision were clear and unambiguous, it was not permissible to read into the provision any words which were not there or to exclude words which were there and the words found in the provisions must be given their natural meaning. On this basis, Shri Prakash vehemently argued before us that the words 'income by way of interest' appearing in section 194A were clear and unambiguous and it was not possible to interpret them as income by way of interest which was chargeable to tax in the hands of payee. He, therefore, vehemently argued before us that the claim of the assessee's learned counsel Dr. Vaish before us that the provisions of section 194A were not applicable to the assessee-company under consideration here was without any force. We were taken to the provisions of section 201(1) which reads as follows: "(1) If any such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it ma....
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....at source from interest payments, this clearly shows the conscious disregard by the assessee-company of its statutory obligations. Summing up, Shri Prakash vehemently argued before us that the penalty under section 221, read with section 201, on the facts and circumstances of the present case was clearly attracted. Proceeding further, Shri Prakash argued that the penalty had already been reduced by the Commissioner (Appeals) from the maximum prescribed penalty to 50 per cent of the tax deductible and no further relief was called for. The provisions of section 201(1A) were read out to us in support of the contention that the charge of interest was mandatory and fixed under the statute and there is no discretion vested in any authority either to waive or reduce this interest. Summing up, Shri Prakash vehemently argued before us that there was no merit in the assessee's appeals. 6. The assessee's learned counsel, Dr. Vaish, in reply, submitted to us that for the imposition of penalty what was necessary was, firstly, the application of mind and, secondly, the judicial satisfaction and there is no room for these conditions being met by implication or by inference. He also submitted tha....
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....said to cover the payments by way of income from interest to these bodies. The other persons mentioned in the various notifications under section 194(3)(iii)(f) also do not cover the payees under consideration here. It might perhaps not be out of place to mention here that when the assessee applied to the Secretary, Ministry of Finance, Government of India and the Chairman, CBDT, the Chairman, CBDT by letter dated 1-11-1980 (as per copy filed by the assessee) clarified that the institution receiving the interest alone can be notified for the purpose of exemption of its interest income from deduction of tax at source and, therefore, the Co-operative Cane Development Unions or Cooperative Cane Development Councils which desire such exemption should be advised to apply through their ITO for this purpose. Here again, it will be necessary to point out that on a plain reading of sub-section (1) of section 194A, one is led to the irresistible view that it is not for the payer to sit in judgment or adjudicate upon whether income by way of interest paid by him was chargeable to tax in the hands of the payee and the payer was under an obligation to deduct tax at source on such payments unles....
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....aults subsequently and on that account alone the imposition of penalties under consideration before us cannot be challenged. No reasons have been shown to either the lower authorities or before us why the assessee could not insist from the payees under consideration here to furnish a declaration as required by the proviso to sub-section (1) of section 194A and it has also not been shown to us why even when such a declaration was not furnished, the assessee did not deduct the tax at source on payments by way of income from interest made to these bodies. While it is true that it is highly desirable that penalties should not be imposed after a lapse of a number of years but then where the default itself is detected by the revenue authorities after the lapse of a number of years, the assessee cannot be allowed to get away with the consequences of the default simply because, the default was not detected earlier. Viewed in this context, it is not under dispute that the default was discovered sometimes in August 1978, the first combined show cause notice was issued on 28-8-1978, the assessee's reply to the show cause notice was dated 19-9-1972 and the penalties were imposed on 23-10-1978.....