M P TEWARI Vs. Y P CHAWLA ITO

JUDGEMENT

(1.) The petitioner was working as Secretary of M/s. Hans Raj Gupta & Company (P) Ltd. (hereinafter referred to as the Company), for the last more than 40 years at a monthly salary of Rs. 1100. He was only looking after the clerical and routine matters and was not at all concerned with the payment of salaries to the other employees or with the deduction of tax at source. In fact, Shri Hans Raj Gupta was holding /controlling over 70 per cent of share capital of the company and was the real person who was inanaging the company and was responsible for the conduct of the affairs of the company.

(2.) The company is carrying on the business of hiring agricultural machinery and equipment like Kolhus and Pans for cane crushing to the farmers and other persons. In the year 1979-80, the business of the company suffered extreme slump due to severe draught condition in the country which caused heavy demage to the crops. .During that period the company's income suffered losses to the tune of more than Rs. 8 lakhs. Due to the extreme financial difficulties and absence of liquidity. the tax deducted at source though was deposited by the company with the income Tax Department but with some delay.

(3.) The Income Tax Officer served a notice dated 25-1-82 in respect of the years 1979-80 and 1980-81, requiring the company to show cause why penalty under Section 221 of the Income Tax Act (hereinafter referred to as the Act) should not be imposed, as the company had either failed to deduct the income tax at the time of payment of salaries and/or after deducting bad failed to pay the same within time. The company submitted the reply on 10-2-1982 inter-alia, stating that on account of abnormal conditions, as a result of which the company suffered heavy losses, there was some delay in the payment of tax deducted at source. Subsequently, the Income Tax Officer sent repeated show cause notices for the susequent years threatening prosecutions for the same default for which suitable replies were sent. The company also made representations that since they have already made payments voluntarily to the Department and have also paid interest in accordance with the provisions of section 201(1A) of the Act, the delay may be condoned without further penalty of any kind. It was also submitted that if it is considered absolutely necessary to levy some penalty in addition to the interest which had already been paid, the maximum penalty amounting to Rs. 5000 be levied for all these 4 years and the proceedings be dropped by condoning the delay. No action on these representations has been taken.