H.L. Karwa, J.M.—This appeal by the assessee is directed against the order of CIT(A)-IX, Ahmedabad, dated 19-4-1995, confirming the penalty of Rs. 8,37,906 imposed by the Dy. CIT (Asst.), S.R.4, Ahmedabad, under section 272A(2)(g) of the Income-tax Act, 1961 (hereinafter referred to as the Act), relating to assessment year 1993-94.

2. The facts giving rise to the present appeal are that the assessee is private limited company engaged in construction business. The assessee-company was required to deduct tax at source under section 194C of the Act. For the assessment year under consideration the assessee had filed the annual return of TDS under section 206 of the Act on 23-6-1993, along with various certificates of deduction of tax at source under section 203 of the Act in Form Nos. 16B/16A. As per the provisions of section 203 of the Act r/w r. 31(3) of the Income-tax Rules, 1962, the assessee was statutorily required to issue TDS certificate in Form No. 16A to the person on whose behalf the tax was deducted within one month and fourteen days from the date of credit or payment. In this case, penalty order dated 22-12-1994, was passed by the Dy. CIT, Range-4, Ahmedabad. According to him the assessee failed to issue certificates in Form No. 16A during the stipulated period of one month and fourteen days time and consequently proceedings under section 272A(2)(g ) of the Act were initiated against the assessee. In this case, the ITO, TDS-III, Ahmedabad, had issued a notice to the assessee requiring it to show-cause as to why penalty under section 272A(2)(g ) of the Act should not be levied. Subsequently, the Dy. CIT, Range-10, has also issued a show-cause notice to the assessee. Thereafter, the case was transferred to Dy. CIT, Range-4, Ahmedabad, who also issued a notice dated 21-10-1994, proposing to levy penalty under section 272A(2)(g ) of the Act. The assessee vide its letter dated 16-6-1994, addressed to the ITO(TDS)-III, Ahmedabad, and vide letter dated 14-7-1994, addressed to the Dy. CIT, Range-10, Ahmedabad, strongly objected to the proposed levy of penalty under section 272A(2)(g) of the Act. In response to the show-cause notice, issued by the Dy. CIT, Range-4, Ahmedabad, the assessee filed a copy of the reply dated 14-7-1994, vide its letter dated 28-10-1994. In the said reply it was stated inter alia, that the assessee had deducted tax at source in time as per requirement of section 194C of the Act and had also deposited the amount of tax deducted into Government account as required under the relevant rules. As regards the issue of certificates to the parties, as per the provisions of section 203 it was submitted that the assessee was under a bona fide belief that such certificates could be issued at the end of the accounting year when the accounts of such parties are generally completed for the entire period. It was further contended that out of this belief the assessee had issued certificates to the concerned parties after the end of the accounting year. Further, it was also submitted by the assessee that there was no mala fide intention and the default on the part of the assessee is purely technical one, which should have been ignored. The Dy. CIT, Range-4, did not find any force in the submissions of the assessee made before him and consequently held that the assessee’s failure to issue certificates of deduction of tax during the stipulated period of one month and fourteen days was without any reasonable cause. According to him the certificates in Form Nos. 16B/16A were issued on dates varying between May, 1992 to April, 1993, as against the deduction made in the month of April, 1992, and March, 1993. He, therefore, imposed a penalty of Rs. 8,37,900 @ Rs. 100 per day for each day of default.

3. Aggrieved by the order of the Dy. CIT, Range-4, Ahmedabad, the assessee went in appeal before the CIT(A). It was contended by the assessee before the CIT(A) that it had not committed any default with regard to deductions of tax and payment thereof. Before imposing any penalty, it was necessary to establish the existence of some guilty intention on the part of the assessee. The assessee had duly deducted tax at source in time and it had paid the same in time. It was also submitted that the assessee had not acted in defiance of provisions of the Act. The delay in issuing the certificates was on account of bona fide ignorance of provisions of law.

4. The assessee also submitted before the appellate authority below that since the TDS forms were not available and the CBDT had to issue circulars again and again which is indicative of the fact that the provisions of issue of certificates were complicated. The assessee also pointed out that the relevant forms in which such certificates were required to be issued were not easily available. According to the assessee it was also one of the reasons for not issuing the certificates in time.

5. The assessee also raised an additional ground of appeal before the appellate authority below. The assessee challenged the penalty order on the ground that the same was passed after the expiry of six months from the date of initiation of penalty proceedings under section 272A(2)(g ) of the Act. It was also claimed that the penalty order passed on 22-12-1994, was barred by limitation as per the provisions of section 275(1)(c) of the Act. It was also claimed by the assessee that the penalty proceedings were initiated by the ITO(TDS-III), Ahmedabad, on 20-4-1994. The order was to be passed within six months from the date of initiation of penalty proceedings. Since the penalty proceedings were initiated on 20-4-1994, the penalty order was required to be passed on before 31-10-1994. The assessee claimed before the appellate authority below that the order passed on 22-12-1994, was barred by limitation and, therefore, the penalty order was illegal, bad in law and void ab initio.

6. After taking into consideration the submissions made on behalf of the assessee, the first appellate authority held that the default was committed by the assessee during the financial year 1-4-1992 to 31-3-1993. According to him by this period, the provisions relating to TDS had become almost crystallised. The assessee had issued certificates in all cases. According to the CIT(A), there is no dispute regarding Form Nos. 16A/16B. The assessee had issued certificates not on a single day but on 4 or 5 different dates in the month of April and May, 1993. He further held that the assessee had not brought any material on record to show that the assessee was under bona fide belief that certificates in question could be issued at the end of the accounting year. The CIT(A) accordingly rejected the above contentions of the assessee.

7. While dealing with the question of limitation, he has held that ITO, TDS-III, had no jurisdiction to initiate penalty proceedings under section 272A(2)(g) of the Act and therefore his letter to the assessee could not be taken into account for accounting the period of limitation of six months as contemplated under section 275(1)(c) of the Act. According to him in the instant case, the penalty proceedings were initiated by Dy. CIT, Range-10, vide his show-cause notice dated 24-6-1994. The penalty order was passed on 22-12-1994, by Dy. CIT, Range-4, Ahmedabad, and according to the CIT(A), the said order has been passed within six months from the date of initiation of penalty proceedings under section 272A(2)(g) of the Act. In that view of the matter, the CIT(A) confirmed the action of the Dy. CIT, Range-4, Ahmedabad, in levying the penalty under section 272A(2)(g ) of the Act.

8. Before us, Shri M.G. Patel, C.A. the learned counsel for the assessee vehemently argued that in the facts and circumstances of the present case, the CIT(A) was not justified in confirming the order of Dy. CIT, Range-4, Ahmedabad. According to Shri Patel, both the authorities below have not properly appreciated and considered the submissions made on behalf of the assessee. Furthermore, the learned counsel for the assessee reiterated the submissions made before the lower authorities. He also argued that the penalty order was not passed within the period of six months from the date of initiation of penalty proceedings and, therefore, the penalty order is illegal and bad in law and liable to be quashed. He also contended that from the facts of the case, it is clear that there was no attempt on behalf of the assessee to evade any tax liability or to cause any loss of revenue to the Department. According to Shri Patel, from the facts of the case it is clear that the assessee was under a bona fide belief that certificates in question were required to be issued at the end of the accounting year, when the accounts of such parties are generally completed for the entire year. It was also submitted by Shri Patel, that there was no mala fide intention while not issuing the certificates in question and the default on the part of the assessee is purely technical one which should be ignored and no penalty should be levied. In support of the above contentions, Shri Patel, the learned counsel for the assessee relied on the following decisions :

(1)Hindustan Steel Ltd. v. State Of Orissa†. [1972] 83 ITR 26 (SC);

(2)J & J Dechane v. CIT [1990] 182 ITR 345 (AP);

(3)Rajasthan Tribal Area Development Co-operative Federation Ltd. v. ITO [1998] 60 TTJ (Jp.) 427;

(4)Mahendra Prakash Sarraf v. Dy. CIT [1998] 60 TTJ (Del.) 542;

(5)Sundershan Auto & General Finance v. CIT [1998] 60 TTJ (Del.) 567 : [1998] 60 ITD 177 (Del.);

(6)Nestle India Ltd. v. Asstt. CIT [1997] 61 ITD 444 (Del.);

(7)Motisagar Estate (P.) Ltd. v. Dy. CIT [1993] 47 ITD 72 (Pune);

(8)Bansal Bros. v. Dy. CIT [1998] 64 ITD 129 (Del.);

(9)Executive Engineer v. Dy. CIT [1994] 48 TTJ (Pune) 47 : [1994] 48 ITD 414 (Pune); and

(10)Manesharlal v. Dy. CIT [1995] 53 TTJ (Jp.) 105.

9. Shri Ramesh Chander, the learned Departmental Representative, while supporting the orders of authorities below contended that as per the provisions of clauses (a) and (c) of sub-section (3) of section 272A it is clear that penalty cannot be levied by an authority lower than the Dy. Director or the CIT. According to Shri Ramesh Chander, the learned Departmental Representative in a particular set of circumstances where the penalty is to be levied or not has to be decided by the Dy. Director or the Dy. CIT. If any notice has been issued by the authority lower than the Dy. CIT as in the instant case, by the ITO, TDS-III, the said notice would be invalid for want of jurisdiction. Therefore, on the basis of such invalid notice it cannot be said that there was a proper and valid initiation of penalty proceedings under the provisions of law. He, therefore, submitted that the appellate authority below was correct in holding that the penalty proceedings initiated on 24-6-1994, by the Dy. CIT and completed before 31-12-1994, was well within the limitation and, therefore, it cannot be said that the order imposing penalty was passed after the expiry of six months period.

10. Shri Ramesh Chander, the learned Departmental Representative, further submitted that the assessee’s reliance on the CBDT circulars is simply an afterthought. According to him, the assessee has not brought any material on record to support as to how these circulars in fact had effected the assessee in particular. While relying on the order of the CIT(A), the learned Departmental Representative submitted that the default was committed by the assessee during financial year 1-4-1992 to 31-3-1993. According to him by this period the provisions relating to TDS had become crystallised. The onus was on the assessee to prove the ignorance of law or his bona fide belief that the certificates were to be issued at the end of the financial year. According to the learned Departmental Representative even otherwise also ignorance of law is not an excuse. He further contended that the assessee had issued certificates not on a single date but on 4 or 5 different dates in the months of April and May, 1993, which fact sufficient indicates that belief of the assessee that he was required to issue certificates at the end of the financial year is not being fiudction ( sic). He, therefore, submitted that the explanations given before the authorities below have rightly been rejected by the authorities below.

11. The learned Departmental Representative also submitted that the decision reported in [1995] 53 TTJ (Jp.) 105 (supra) is also not applicable in the facts and circumstances of the present case.

12. According to the learned Departmental Representative the assessee had also relied upon certain other decisions to point out that in the facts and circumstances of the present case, the penalty was required to be levied. The sum and substance of the decision relied upon by the assessee is that when the TDS had been deposited in the Treasury in time and when the Department had not suffered any loss on account of non-issue of certificates, within the stipulated time then such a default of not issuing certificates in time will not warrant penalty under section 272A(2)(g ) of the Act. According to Shri Ramesh Chander, the learned Departmental Representative in these decisions, the legal position in its entirety has not been considered and, therefore, these decisions are of no help to the assessee’s case. If for a moment the view adopted by those Benches of the Tribunal is accepted, it would render the provisions of section 272A(2)(g) totally redundant. Under section 272A(2)(g) the penalty is levied simply on account of non-furnishing of certificates as required by section 203 or section 206. The reading of section 203 or section 206C would reveal that the Legislature has imposed a heavy duty on the part of the assessee to issue not only those certificates but also to ensure that they are also issued in time. According to the learned Departmental Representative, in the instant case, it is an admitted fact that the assessee had not issued those certificates in time. He further, pointed out that the penalty in question is not at all covered by s. 273B of the Act. Thus it is clear that the moment, the assessee is found to have committed default in cases not covered under s. 273B, the penalties get attracted. According to the learned Departmental Representative in the decisions, which the assessee had relied to support his case, this aspect has not been considered. He, therefore, submitted that it is clear that in the case, the assessee has committed default under section 272A(2)(g) of the Act and, therefore, the penalty was leviable.

13. We have carefully considered the rival submissions and have also gone through the orders of the authorities below. It is worthwhile to mention here that the learned representatives of both the parties have filed written submissions in support of their respective stands. We have also considered the decisions cited by the parties. In this instant case, the first question to be decided by us is that whether the penalty order passed on 22-12-1994, was beyond the expiry of limitation period as prescribed under section 275(1)(c) of the Act. There is no denying the fact that the penalty order was passed under section 272A(2)(g) of the Act. The penalty order was passed under section 272A(2)(g) of the Act. The relevant provisions of the section read as under :

"Sec. 272A(2)—If any person fails

(a)to (f)..........................

(g)to furnish a certificate as required by section 203 (or section 206C)."

Now, it will be relevant to know that who is the competent authority to initiate the penalty proceedings and impose the penalty under section 272A(2)(g) of the Act. The relevant provisions read as under :

"Sec. 272A(3)—Any penalty imposable under sub-section (1) or sub-section (2) shall be imposed :

(a)In a case where the contravention, failure or default in respect of which such penalty is imposable occurs in the course of any proceeding before an IT authority not lower in rank than a Dy. Director or a Dy. CIT, by such IT authority;

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

(c)in any other case, by the Dy. Director or the Dy. CIT."

It is clear from clause (c) to sub-section (3) of section 272A that in any other case, the penalty is to be levied by the Dy. Director or the Dy. CIT. In other words, no IT authority lower than the rank of Dy. Director or Dy. CIT can impose the penalty under section 272A(2)(g) of the Act. The question whether the penalty is to be levied or not has to be decided by the Dy. Director or the Dy. CIT only. In such circumstances, the assessee is obliged to explain his case only before the Dy. Director or the Dy. CIT. It is obvious that the authority competent to impose a penalty under the impugned section has to initiate the penalty proceedings. We do not find any force in the contention of the assessee in the instant case that penalty proceedings were initiated by the ITO, TDS-III, Ahmedabad. In our view, the said authority was not competent under the relevant provisions of law to issue a show-cause notice to the assessee for default falling under section 272A(2)(g ) of the Act. Any proceeding initiated by the said officer was beyond his jurisdiction. Thus, the notice issued by the ITO, TDS-III, Ahmedabad, dated 20-4-1994, under section 272A(2)(g) was without any jurisdiction and, therefore, not tenable in the eyes of law. It is also relevant to point out that the assessee had furnished a reply dated 24-4-1994, to the show-cause notice issued by the ITO, TDS-III, Ahmedabad, and in the said reply the assessee has not objected to the competency/jurisdiction of the officer who had issued the notice. In this case, the ITO, TDS-III, Ahmedabad, was neither having jurisdiction to initiate the penalty proceedings nor was he competent to impose the penalty under section 272A(2)(g) of the Act and, therefore, the notice issued on 20-4-1994, was not a valid one and the proceedings initiated in this behalf can be considered as without jurisdiction. In our view, no prejudice is caused to the assessee, at the same time we find substance in the contention of the learned Departmental Representative that there was a mistake on the part of the ITO, TDS-III, Ahmedabad, in issuing the notice and when this mistake was noticed on 24-6-1994, by the Dy. CIT, he issued a show-cause notice to the assessee on the same date. In our view, the limitation of six months period would run from the date of show-cause notice issued by the Dy. CIT concerned, who having jurisdiction to initiate the penalty proceedings and to impose the penalty under section 272A(2)(g) of the Act. In this view of the matter, we are fully in agreement with the conclusion of the appellate authority below may in the instant case penalty proceedings were validly intitated on 24-6-1994, by the Dy. CIT and the penalty order was passed before the expiry of six months period from the date of initiation of penalty proceedings and, therefore, we do not see any merit in the contentions of the learned counsel for the assessee that the penalty order was passed beyond the prescribed time-limit. Accordingly, this contention of the assessee is rejected.

14. During the course of hearing of the appeal, the learned counsel for the assessee also invited our attention to various circulars by the CBDT vide Nos. 529, 597, 605, 607, 625 and 664 issued from time to time with regard to the prescribed Form Nos. 16, 16A and 16B in which the relevant certificates were required to be issued by the persons deducting the tax at source. In our view, there is no substance in the contention of the learned counsel for the assessee that at the relevant time, the TDS forms in question were not easily available and due to this there was also delay in issuing the certificate. We also find that no such plea was raised by the assessee before the Dy. CIT during the course of penalty proceedings. Furthermore, there is no material on record to show that the assessee had faced genuine difficulties in obtaining the relevant forms. In our view, the findings of the CIT(A) on this point is based on proper appreciation of facts and, therefore, this contention of the assessee is also not tenable.

15. It is an undisputed fact that the assessee had deducted the amount of TDS amounting to Rs. 42,510 in time as required under the provisions of section 194C of the Act and thus it also deposited the same into the Government account well within the prescribed time as required under the provisions of section 194C of the Act and it also deposited the same into the Government account well within the prescribed time as required under the Rules. In our view, there is substantial force in the contentions of the learned counsel for the assessee that the assessee was under bona fide belief and honest impression that the said certificates in question could be issued at the end of the accounting year, when the accounts of the concerned parties are generally completed for the entire year. The bona fide belief of the assessee could also be seen from the fact that there is no failure on its part to deduct the tax at source and pay to the Government Treasury. From the facts of the present case it can safely be inferred that there was no mala fide intention on the part of the assessee to deliberately disregard the legal obligation cast upon it under the provisions of relevant law. Furthermore, there was no loss of revenue to the Department or revision of any tax liability.

16. In the case of Bansal Bros. v. Dy. CIT (supra) the Tribunal, Delhi Bench, while deciding the penalty matter under section 272A(2)(g) of the Act has held as under :

"The levy of penalty is to be seen in the backdrop of nature and reasons of the default for which the penalty has been imposed. As to the nature of default, we find that instead of issuing certificate at the time of credit or payment of the sum of issue of a cheque for payment of any amount as prescribed in section 203 of the Act, the assessee has issued a consolidated certificate to the party after the end of the accounting period. It is not a case where no certificate at all has been issued to the party. Thus, at best the default of the assessee could be termed as technical breach. This is more so when we find that as per section points given below the form, the certificate is to be filed along with the return of income for the relevant year and not as and when certificates are issued. This appear comparison on of the forms prescribed for furnishing of annual return under section 206 and that under section 203 show that the information required to be furnished at the end of the assessee is almost the same. It is not the case of the Department that the assessee has not furnished annual return is regard to interest under section 206 of the Act within the prescribed time. It is also admitted that the assessee carries on business on a small-scale and in the year under consideration, the assessment has been framed on a loss as returned. The tax deducted at source on the other hand is Rs. 8,062 which has also been deposited in time. On the other hand, assessee’s explanation that non-issue of multiple certificate was on account of wrong impression on its part is not something which is unbelievable. In these circumstances, the default of the assessee could not be termed so serious to call for penalty as harsh as imposed."

The Tribunal further held as under :

"In view of the tax deducted at source being deposited in the treasury in time and parties not suffering any loss on account of non-issue of certificates, we would cancel the penalty as levied."

17. In the case of Executive Engineers v. Dy. CIT (supra) the Tribunal, Pune Bench, while dealing with penalty matter under section 272A(2)(g) r/w section 203 of the Act has observed as under :

"The highest Court of the land therefore, has laid down that there is no presumption in law that everybody knows the law. The assessee, therefore, when it pleaded before the Revenue that it was on account of ignorance that the tax deduction certificate could not be issued in new Form No. 16, was in our opinion, justified to take such a plea. The bona fides of the assessee could also be seen from the facts that there is no failure on its part to deduct the tax at source and pay it to the Government treasury. The failure if at all is to issue tax deduction certificate in new form as the assessee had already issued the tax deduction certificates in old forms which were either to be accepted by the Revenue. However, the default, in our opinion whatever may be its nature, should not result in any fine or penalty merely because the default is punishable with fines or penalty. It is trite law to mention that merely because there is a provision for levy of fine, fine must be imposed. Such an imposition depends on various circumstances."

In view of the decision of the Hon’ble Supreme Court in the case of Motilal Padampat Sugar Mills Ltd. v. State of Uttar Pradesh & Ors. [1979] 118 ITR 326 (SC), the Tribunal, Pune Bench, took the view that there is no presumption that every person knows the law.

18. The Andhra Pradesh High Court in the case of J & J Dechane v. CIT (supra ) has held that penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.

19. In the case of Rajasthan Tribunal Area Dev. Co-op. Federation Ltd. v. ITO (supra) the Tribunal, Jaipur Bench, while dealing with penalty matter under section 272A(2)(c ) of the Act, has held that penalty under section 272A(2)(c) was not justified for mere default in furnishing statement in Form No. 26 when there was no default in deducting tax at source or depositing the same in the Government account.

20. In the case of Mahendra Prakash Sarraf v. Dy. CIT (supra) the Tribunal, Delhi Bench, while deciding the penalty appeal under section 272A(2)(c) of the Act has held as under :

"Coming now to the facts of the present case, I find that the assessee had no intention to violate the law. Due amount of tax was deducted. It was paid to the credit of the Government in time. Only Form 26A was not filed. Having regard to the facts of the case, in my opinion, it is not a circumstance aliunde to which penalty can be sustained, as I find that there existed a bona fide belief in not furnishing Form No. 26A. This, in my opinion, is a reasonable cause. Assessee can, therefore, be exonerated from the rigour of penalty. I, therefore, direct the Assessing Officer to delete the same."

21. The Hon’ble Supreme Court in the case of Hindustan Steel Ltd. v. State or Orissa (supra) has held that the order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation.

22. It is worth mentioning that penalty provisions of section 272A were brought on statute with the primary object of ascertaining compliance of certain formalities prescribed under various provisions of IT Act and to curb any tendency on the part of certain assessees of conscious disregard and breach in compliance of such legal obligations. From the facts of the present case, it is clear that the assessee had not acted deliberately or in defiance of law and, therefore, levy of penalty was not proper and justified.

23. At this point of time it will be relevant to say that there is no merit in the contention of the learned Departmental Representative that the decisions of the Tribunal of different Benches, relied on by the assessee, are not applicable in the facts and circumstances of the present case. This argument of the learned Departmental Representative is also without any merit that the decisions of the Tribunal of different Benches had not considered the legal position in its entirety. How and in what manner these Benches of the Tribunal has not considered the legal position in its entirety, the learned Departmental Representative could not point out the same. Further, the learned Departmental Representative submitted that if the view adopted by those Benches of the Tribunal is accepted it would render the provisions of section 272A(2)(g) totally redundant. In our view, this argument of the learned Departmental Representative is also not tenable. In our opinion, in these decisions, no such view has been taken by the different Benches of the Tribunal. Similarly, in view of the decision of Hon’ble Supreme Court in the case of Motilal Padampat Sugar Mills Ltd. (supra), there is no substance in the contention of the learned Departmental Representative that ignorance of law is not an excuse. From the relevant provisions of income-tax law, it is clear that comprehensive procedure has been laid down not only for deduction of tax at source, but also the manner in which it is to be done. In such circumstances, if the assessee was under a wrong impression that certificates in question could be issued at the end of accounting year, is not something which is unbelievable.

24. Keeping in view the entire relevant facts of the case and the submissions made on behalf of both the parties and also in view of the decisions referred to above in our view the assessee if at all guilty of a technical default or venial breach, there was no failure on the part of the assessee to deduct the tax at source and pay to the Government account and, therefore, penalty should not have been levied.

25. In view of the above discussions, we held that the imposition of penalty of Rs. 8,37,900 as against the total tax deduction of Rs. 42,510 is not justified and accordingly we cancel the same.

26. In the result, the assessee’s appeal is allowed.