TaxTMI 
TaxTMI 
1999 (4) TMI 105
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....nt and the matter is still sub judice before the 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'bl....
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....oodgrains trade under Notification No. 9007, dt. 3rd March, 1992, our case stands on a much higher and stronger footing for exemption and 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, &nbs....
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....ovisions including penalty provisions of s. 271C if the assessee proves that there was reasonable cause for the said failure. 3.4. The Dy. CIT rejected the respondents plea of bona fide belief and imposed the penalty after relying on the observations of the AO in order under s. 201. The order of the Dy. CIT in case of first respondent is in the following terms: "3. Since the person responsible deliberately violated the provisions of s. 194H of the IT Act for which he could not give and satisfactory reply, the Asstt. CIT (TDS), Varanasi, referred this case to the undersigned for the imposition of penalty under s. 271C of the IT Act. Accordingly, a show-cause notice under s. 271C of the IT Act was issued by the undersigned on 28th Dec, 1992, which was duly served on 30th Dec, 1992, fixing the date of hearing on 12th Jan., 1993. On the written application the case for hearing was adjourned on 19th Jan., 1993, and later on 29th Jan., 1993. On 29th Jan., 1993, neither the person responsible for any authorised representative appeared in person to explain his case, except filing a written submission which reads as under: 1. As stated in detail vide our reply of date in compliance....
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....i company ne M/s Sahu Agencies, Hemant Vidyut pratisthan and M/s Cinni Tullo sales service centre ki dinank 1st Oct., 1991 se 31st March, 1992, ki abadhi me bikari pax commission dia he. Upaiokth Avadhi Dhara 194H ke prabdhan ke anusar commission ki jama ya bhugthan ki rashi par ayakai ki kathothi Karni thi, Jinki avhab me karan kathoi notice di gia thi. Company se prapth 26-I kin anthargata commission ki rashi and aun par ayakar ki kathothi ka bibaran dia gya tha. Ysh Samamdha Company ne anapna prarup dt. 7th Sept.,1992 ki dhakil kia jabki awo dinank 30th April, 1992, ki dhakil tha. 3. Appellant ne batha ki yos par ayakar katothi ke samandha me chut ke lie kendriya sarkar ki anusar 1991 ki abedan patra dia tha, Jiska nistaran dt. 30th Sept., 1992, ki hua, Yo bhi Hon'ble High Court ke direction ke patrachat ho kia gia. Abedan patra kharij hone ki bad appellant ne 20th Oct., 1992, ki ayakar ki kathothi karke jama kar dia. 4. Nirdhant Adhikan ke anusar 89,24,231 rupee ki commission bhugthan kia, jin par 9,99,513 rupee ki ayakar ki money hothi hai, Atha Utnai rupaia ki sasthi adhiroth kia gia hai. 5. Appellant ki bidhan adhubakta ne bateya ki dhara 271C ke antargatha karan ba....
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....ion to comply with the provisions of the Act because had they intended to comply with or had its intention been bona fide, they should have filed their annual return of TDS as required under s. 206C by 30th April, 1992, which has not been in these cases. The non-furnishing of annual return has resulted in suppression of facts from the knowledge of the Department. According to him the failure to furnish the annual return was with a view to defy the legal provisions deliberately and not due to bona fide belief or reasonable cause as pleaded by the respondents. The learned Departmental Representative has heavily relied on the circumstantial evidence such as not furnishing of annual return, the failure to deduct and pay the tax at source and also the decision of Hon'ble Patna High Court in the case CWT vs. Jagdish Pd. Choudhary (1995) 125 CTR (Pat) 277 (FB) : (1995) 211 ITR 472 (Pat)(FB), wherein the doctrine of reasonable cause has been dealt with. The learned Departmental Representative has relied on the observations of the Asstt. CIT vs. U.P. National Mfg Ltd. Hon'ble High Court in paras C, D and E of the headnotes which run as under: "Fairness in action in the context of the pen....
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.... to provisions of s. 194H were concerned; because sub-s. (2) of s. 194H had given a right to approach the Government or CBDT for seeking exemption for the obligation envisaged under the provisions of s. 194H. According to him the assessee had the statutory right and it was in exercise of this right that they furnished their petitions for exemption to the CBDT on 4th Nov., 1991, but the CBDT remained silent on their petitions, till the directions to dispose of their petitions were issued the Hon'ble High Court of Allahabad while deciding their writ petitions. The assessee's counsel further submitted that the order of the CBDT were received in second week of October, 1992, and tax was deducted on 27th Oct., 1992, which was paid on 29th Oct., 1992. According to him, the law of equity and justice and fair play weighs in favour of the assessee because they had no intention to defy the sanction of law. It was, on the other hand, CBDT which acted in complete defiance to the principle of natural justice and fairplay. The assessee's counsel, therefore, submitted that as the failure to deduct and pay the tax at source was due to the bona fide belief which in turn amounted to a reasonable cau....
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...., 1991 but before the 1st; day of June, 1992, to a resident, any income by way of commission not being insurance commission referred to in s. 194D or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. (2) The provisions of sub-s. (1) shall not apply- (a) to such persons or class or classes of persons as the Central Government may, having regard to the extent of inconvenience caused or likely to be caused to them and being satisfied that it will not be prejudicial to the interest of the Revenue, by notification in the Official Gazette, specify in this behalf; (b) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-s. (1) to the account of, or to the payee, does not exceed two thousand five hundred rupees." 8.2. From the aforesaid provision what we have been able to understand is that the provision of sub....
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....ose." 8.5. In the above circumstances, if a person prefers to exercise such right, then to meet the obligation, he cannot be said to have done so to thwart the provisions of law casting obligation, provided, it is established that exercise of such a right, in the facts and circumstances of a given case, was bona fide or honest and the person was not only diligent but was careful also in exercising such a right. On the contrary and in the fairness of things, the CBDT should have decided the petition at once and if not at once then at least within a reasonable time so that the purpose of granting such a right was not defeated. 9. As far as the present cases are concerned, we are of the opinion that in view of the fact that a petition under s. 194H(2) was moved before the CBDT by exercising the right granted by the statute on 4th Nov., 1991, itself as against the fact that provisions of s. 194H were introduced w.e.f. 1st Oct., 1991, by the Finance (No. 2) Act, 1991, Bill for which was introduced in the Parliament on 24th July, 1991, and assent of the President of India was accorded on 27th Sept., 1991; it is quite clear that the petitioners were not only very diligent and quick ....
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....aid to have a bona fide belief. 11. As far as the present cases are concerned, we are of the opinion that under the given circumstances there were only two options available with the assessees, namely, (1) to deduct and pay the tax at source and wait for the orders of the CBDT, or (2) not to deduct and pay the tax at source and to wait for the order of the CBDT. 11.1. Had the assessee opted for the first, then, in our opinion, the provisions for granting right to seek exemption would have been rendered redundant insofar as the assessees were concerned and the very purpose of exercising of the right or seeking exemption would have got defeated. Since the legislature also does not seem to have intended so, the only option, in our opinion, which could be said to be fair and justifiable under the law was the second one i.e., not to deduct and pay the tax at source and wait for the order of the CBDT. In view of this discussion, we are of the opinion that the assessee's preference of the second option can in no way be said to be with an intention to defy the provisions of law. 11.2. Since we have already held that the petitions moved by the assessees were in honest exercise of "....