R.P. Garg, AM

1. This is an appeal by the assessee against the order of the learned CIT(A) for the asst. yr. 1989-90 confirming the penalty levied under s. 272A(2) at Rs. 17,300.

2. The assessee is a limited company. It paid a sum of Rs. 1,38,000 to a contractor, M/s. Parag Enterprises. As per the provisions of s. 194C of the Act the assessee was required to deduct tax of Rs. 1,449 at source at the time of payment or credit given to the account and pay the same to the Government. Sec. 206 provides for filing a return of such deduction and payment of tax at source. Rule 37 of the IT Rules provides that such return is to be filed in Form No. 26C and submit the same within the time stated therein, which in the present case was 31st May, 1989. The assessee deducted the tax at source on 15th March, 1989 of Rs. 504 and on 12th May, 1989 of Rs. 945 and paid the same to the Government on 15th March, 1989 and 24th March, 1989 respectively, i.e., before 31st May, 1989, the day on which the assessee was required to file the return. The assessee, however, filed the return under s. 206 on 20th November, 1989, i.e. late by 173 days. As the assessee has not shown any reasonable cause for the delay in furnishing the return under s. 206, the Assessing Officer levied a penalty of Rs. 17,300 at the rate of Rs. 100 per day of delay. The CIT(A) upheld the penalty.

3. Referring to the provisions of s. 272A(2)(c) the learned counsel for the assessee, Shri V. H. Patil, submits that the law provides for penalty where an assessee fails to file the return due under s. 206 within the prescribed time. This section, according to him, prescribes the time for preparing the return and not for furnishing the same. For furnishing the return, s. 206 does not provide any time limit and, therefore, according to him, there could be no default committed by the assessee, which could be penalised. He referred to the provisions of s. 206 existing at the relevant time and those which were amended subsequently whereunder a time limit for filing is also provided. He further submits that the tax deducted at source was Rs. 1,449 and a penalty of Rs. 17,300 with respect thereto is disproportionate and confiscatory and in any event the amended provisions provided for a penalty equivalent to the tax involved, i.e., Rs. 1,449, which should alone be levied.

4. The learned Departmental Representative, Shri R. N. Bhadgaonkar, on the other hand, submits that the penalty is for non-filing of the return in due time and that there is a time prescribed under r. 37 of the IT Rules, 1962. He, therefore, submits that the assessee having failed to file the return in due time the penalty is rightly levied by the Assessing Officer. The provisions providing for a maximum amount of penalty equivalent to the amount of tax involved came on the statute book w.e.f. 1st October, 1991 and, therefore, cannot be given retrospective effect, as it is a substantive provision made specifically applicable prospectively. A penalty, he submits, has to be levied as per the law as it stood on the relevant time. It was only Rs. 100 per day of default and, therefore, cannot be said to be confiscatory. Tax deductible at source might be of any amount, the penalty has to be levied for the delay for which the amount deducted at source has no relevance. The learned counsel for the assessee in reply, submitted that the prescription of the time limit by the rule is not permitted as that power is only in the domain of the legislature and not the rules. He, therefore, submits that the time prescribed in the rules should be ignored.

5. I have heard the parties and considered their rival submissions. Sec. 272A(2)(c) reads as under :

"272A(2). If any person fails -

(a) ............

(b) ............

(c) to furnish in due time any of the returns, statements or particulars mentioned in s. 133 or s. 206 or s. 206A or s. 206B or s. 206C or s. 285B;

....................

he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but may extend to two hundred rupees for every day during which the failure continues."

A proviso to this section was added by Finance (No. 2) Act, 1991 w.e.f. 1st October, 1991 to the following effect.

"Provided that the amount of penalty for failure in relation to returns under s. 206 and s. 206C shall not exceed that amount of tax deductible or collectible, as the case may be."

On a bare reading of this provision it is evident that the penalty is for the failure of an assessee to furnish in due time any of the returns or statements or particulars mentioned in various sections, one of which with which I am concerned is s. 206. To be punishable under this section an assessee should fail to furnish the same in due time. The word "due" has different meaning and that meaning is to be put on it, which fits in with the context. It may mean "payable", "enforceable" or "just and proper" or "required" or "prescribed". When it is used in conjunction with time it means required or prescribed time. A return to be filed "in due time" means within the time limit, within which the law requires it to file. The obligation to file is under s. 206. This section, as it stood at the relevant time, reads as under :

"206. The prescribed person in the case of every office of the Government, the principal in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax under the foregoing provisions of this Chapter shall prepare, within the prescribed time after the end of each financial year, and deliver or cause to be delivered to the prescribed authority, such returns in such form and verified in such manner and setting forth such particulars as may be prescribed."

The words "shall prepare, within the prescribed time limit after the end of each financial year, and deliver or cause to be delivered" were substituted by the Finance (No. 2) Act, 1991 w.e.f. 27th September, 1991 by the following words "shall, within the prescribed time after the end of each financial year, prepare and deliver or cause to be delivered". The pre-amended section requires an assessee to prepare a return within a prescribed time and requires it to be delivered or cause to be delivered to the prescribed authority in such form and verified in such manner and setting forth such particulars as may be prescribed. This section is silent about the time within which it is to be delivered to the prescribed authority. Therefore, one can say that at the relevant time there was no time limit mentioned in the section within which an assessee is required to furnish the return and consequently the assessee cannot be said to have failed in delivering the return under s. 206 in due time.

6. The submission of the learned Departmental Representative is that r. 37 prescribes the time limit and, therefore, the assessee cannot plead that there was no time limit prescribed within which it was required to file the return. Rules, according to him, have also the force of law and the provisions of both the Act and the rules form an integrated code and should be read together. I do not dispute that statement of the learned Departmental Representative, but that would be only when the rules are framed within the parameters of Act. The word "prescribed" under s. 2(33) of the Act means prescribed by the rules made under the Act. Sec. 206 delegates the power to rule making authority to prescribe the form, the manner of verification and the particulars to be set forth therein. It is silent on the time element. The section does not authorise for providing time limit within which the form is to be delivered. Sec. 295 gives general power to the CBDT to make rules for carrying out the purposes of the Act. Sub-s. (2) provides specific matter for which rules could be made. Clauses (i), (j) and (p) of this sub-section read as under :

"(i) the form and manner in which any application, claim, return or information may be made or furnished and the fees that may be levied in respect of any application or claim;

(j) the manner in which any document required to be filed under this Act may be verified; and

(p) any other matter which by this Act is to be, or may be, prescribed."

The form or manner and other matter, which by this Act is to be or may be prescribed did not include the issue of limitation and this has been the subject matter of judicial scrutiny.

7. In Sales-tax Officer vs. Abraham 20 STC 367 (SC), s. 8(4)(a) of the Central ST Act, 1956 provided for a declaration to be filed in the prescribed manner, if one opted for the applicability of sub-s. (1) thereof. No law of limitation was provided for furnishing the declaration form in s. 8 of the 1956 Act. The limitation was provided by the third proviso to r. 6 of Central Sales Tax (Kerala) Rules, 1957. The Supreme Court held that the section did not authorise the rule making authority to prescribe a time limit within which a declaration is to be filed by a registered dealer. There also s. 13 of the ST Act, 1956 authorises Central Govt. to make rules like s. 295 of the IT Act. The declaration was filed in Form 'C' within a reasonable time and it was held to be a compliance with regard to s. 8(4)(a) of the Central ST Act. The Court held that the phrase "in the prescribed manner" occurring in s. 8(4) of the Act only conferred power on the rule-making authority to prescribe a rule stating what particulars were to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they were sold, and to which authority the form is to be furnished. It further held that the phrase "in the prescribed manner" in s. 8(4) does not take in the time element. In other words the section does not authorise the rule-making authority to prescribe a time limit within which the declaration is to be filed by the registered dealer. The Court observed that its view was supported by the language of s. 13(4)(g) of the Act which states that the State Govt. may make rules for "the time within which the manner in which and the authorities to whom any change in the ownership of any business or in the name, place or nature of any business carried on by any dealer shall be furnished". This, it was further held, makes it clear that the legislature was conscious of the fact that the expression "in the manner" would denote only the mode in which an act was to be done, and if any time limit was to be prescribed for the doing of the act, specific words such as "the time within which" were also necessary to be put in the statute.

8. Again in Bharat Barrel & Drum Mfg. Co. Ltd. vs. Employees' State Insurance Corpn. , the Supreme Court has held that there is no gainsaying the fact that if an employee does not file an application before the insurance Court within 12 months after the claim has become due or he is unable to satisfy the insurance Court that there was a reasonable excuse for him in not doing so, his right to receive payment of any benefit conferred by the Act is lost. Such a provision, in the opinion of the Court, affects substantive rights and must, therefore, be dealt with by the legislature itself and is not to be inferred from the rule-making power conferred by regulating the procedure unless that is specifically provided for. It was pointed out that in the constitution also where the Supreme Court was authorised with the approval of the President to make rules for regulating generally the practice and procedure of the Court, a specific power was given to it by Art. 145(1)(b) to prescribe limitation for entertaining appeals before it. It is, therefore, apparent, in the opinion of the Court, that the legislature does not part with the power to prescribe limitation which it jealously retains to itself unless it intends to do so in clear and unambiguous terms or by necessary intendment.

The fact that the legislature under the IT Act has retained this power to itself and has not parted it to the rule-making authority is evident from the various provisions contained in ss. 139, 249, 253, 256, the pre-amended and post amended s. 206. Sec. 206, as it stood at the relevant time, also provides for the limitation but for preparing the return only. Conversely, whenever the legislature wanted to leave the power to the rule-making authority it specifically gave it as it has done it under s. 200 of the it act for deducting and payment of tax at source.

9. Similarly, the Madras High Court in the case of P. Thirumurthi Chettiar vs. The State of Madras & Anr. 21 STC 489 (Mad) has held that where an Act does not provide for limitation with reference to a particular matter and the delegation of the power to make rules is conferred by a section of the Act which does not, expressly or impliedly, relate to the power of prescribing time, the authority to which the power is delegated cannot make a rule prescribing limitation. Therefore, as the proviso to s. 4 of the Madras Gen. ST Act, 1959, does not prescribe any limitation for refund of tax levied on declared goods, r. 23(3)(i) of the Madras Gen. ST Rules, 1959, prescribing a period of limitation for that refund, in the opinion of the Court is invalid and ultra vires the State Government.

10. These cases were rendered in writ jurisdiction of the High Court and the rules prescribing time limit were held ultra vires. The contention of the learned Departmental Representative is that the Tribunal, being creature of the statue does not have the power to declare the rule ultra vires and has to proceed on the basis of the provisions contained therein. Here again, I do not find any force in the submission of the learned Departmental Representative. Rules are for carrying out the purposes of the Act and cannot overtake the power of the legislature. An assessee cannot be denied a benefit under the statute or penalise for its inaction to conform to the limitation prescribed by the rule-making authority, if it has not been provided under the statute and the rule to that extent can be ignored. In a revision petition under s. 38 of the Madras General ST Act against the order of the Madras Sales-tax Appellate Tribunal, the Madras High Court held in Gordon Woodroffe & Co. (Mad) Pte. Ltd. vs. State of Madras 21 STC 120 (Mad) that s. 3(3) of the Madras Gen. ST Act, 1959 does not carry with it a power to make a rule prescribing a time limit for filing declarations and, therefore, an assessee, who did not file the declaration within the time prescribed by r. 22(5) could not be denied the benefit of concessional rate of tax under s. 3(3) of the ST Act. It held that there was nothing in the proviso to s. 3(3) to indicate that the declarations should be filed within a prescribed time, a time limit could not be prescribed under the rule-making power of the Government, and, therefore, the assessee could not be denied the benefit of the concessional rate of tax under s. 3(3). In a case under the IT Act, the Andhra Pradesh High Court in CIT vs. Hyderabad Asbestos Cement Products Ltd. has held in a reference jurisdiction under s. 256(1) that the power to specify conditions conferred on the Board by the second limb of s. 36(1)(iv) merely touches upon any routine conditions which the Board may stipulate for observance by the employer and cannot justify imposition of drastic cuts and divisions in the matter of allowing the contribution to the recognised provident fund and superannuation fund by the employer. Conditions Nos. 2 and 3 of the Notification No. SO 3433 dt. 21st October, 1965, as per the Court, are in excess of the power conferred on the Board by the second limb of s. 36(1)(iv). These conditions, being repugnant, the Court held, had to be disregarded and must give way to the substantive provisions of the Act contained in s. 36(1)(iv) of the Act. .... The Special Bench of the Tribunal in the case of Amar Dychem Ltd. vs. ITO 3 SOT 384 has held that r. 19A(3) was repugnant to and had the effect of whittling down s. 80J and, therefore, has to be ignored. Even though on merits the Supreme Court reversed this decision in the case of Lohia Machines Ltd. vs. Union of India (1985) 152 ITR 308 (SC) and held that r. 19A was not repugnant to s. 80J, it held that, if the rule made by a rule-making authority is outside the scope of its power, it would be void.

11. The next contention of the learned Departmental Representative is that, as required under s. 296, the rules are placed before the Parliament and have their approval and, therefore, they have the force of an Act and was deemed to be an Act of the legislature itself. This contention has also no force in view of the following observations of the Supreme Court in the case of Gordon Woodroffe & Co. (Madras) Pvt. Ltd. vs. State of Madras (supra).

"The approval of the legislature to the rules is nothing, more than a sort of check upon delegated legislation, and does not in any way alter the quality of character of the rules as made under the rule-making power. The rules as approved by the Legislative Assembly undoubtedly have the force of law, but not the force of an enactment of the legislature."

Again in Hukam Chand vs. Union of India , the Supreme Court observes that the fact that the rules framed under the Act have to be laid before each House of Parliament would not confer validity on a rule of it is made not in conformity with s. 40 of the Act [Displaced persons (Compensation and Rehabilitation) Act]. This was also a case where rules could be made to carry out the purposes of the Act. It was further held that the Act of the Central Govt. in laying the rules before each House of Parliament would not, however, prevent the Courts from scrutinising the validity of the rules and holding them to be ultra vires on such scrutiny the rules are found to be beyond the rule-making power of the Central Govt. Thus, s. 296 does not add any greater force to the rules than what they ordinarily have as pieces of subordinate legislation. Even in the case of Lohia Machines Ltd. (supra) the Supreme Court held that it should not be understood that, even if the rule purporting to be made under a statute is outside the authority conferred by the statute, it should still be valid and have the force of law if it is placed before each House of Parliament and has not been disapproved by either House.

12. The learned Departmental Representative has yet another fire-pan. Time limit, he submitted, is a procedural matter and the power to put limit has specifically been given to the rule-making authority by the Finance (No. 2) Act, 1991 whereby the law provided that the prescribed person shall, within the prescribed time limit after the end of each financial year, prepare, deliver or cause to be delivered such return to the prescribed authority. This provision was substituted by Finance (No. 2) Act, 1991, w.e.f. 27th September, 1991 and was specifically made applicable from the date it received the assent of the President. Admittedly, the President gave his assent much after 31st May, 1989, which is the date prescribed by r. 37 or the filing of the return by the assessee on 20th November, 1989 and, therefore, it cannot have retrospective effect. It would be useful here to refer to the Supreme Court decision in the case of Bharat Barrel & Drum Mfg. Co. Ltd. . It is pointed out at page 866 that, where a statute prescribing limitation extinguishes the right, it affects substantial right while that which purely pertains to the commencement of action without touching the right is said to be procedural. Time limit in the present case causes an obligation on the assessee to deliver the return within a particular period and making him punishable on failure to do so. Therefore, it affects a substantial right. In my opinion, therefore, it could not be given retrospective effect particularly in view of the specific provision in the Finance Act that it would be effective from a date when the amended provisions received the assent of the President, which, as aforesaid, was admitted after 31st May, 1989 or even after the filing of the return by the assessee in November, 1989. For similar reason, I reject the contention of the learned counsel for the assessee that the maximum penalty prescribed by the proviso to s. 272A(2)(c) is equivalent to the amount of tax deductible at source or collectible from the assessee introduced by that very Finance (No. 2) Act, 1991, (as the same) cannot be given retrospective effect.

13. In view of the aforesaid discussion I hold that the time limit prescribed by r. 37 is in excess of the power of rule-making authority and, therefore, has to be ignored Applying the ratio of the decision of the Supreme Court in Abraham's case (supra), I hold that, in absence of any such time limit, it is the duty of an assessee to furnish the return within a reasonable time limit and in the present case, the assessee furnished the return on 20th November, 1989 much before the assessment was made and, therefore, in my opinion the assessee could be treated to have furnished the return within a reasonable time. That being so, the return filed by the assessee was within the requirement of s. 206 and, therefore, the assessee could be penalised under s. 272A(2)(c) of the Act. I, therefore, cancel the penalty and allow the appeal.