Sh. Ashotosh Tandon, Mandi Gobindgarh V. ITO (TDS), Patiala

CO 10/CHANDI/2016

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4048 (ITAT-CHANDIGARH)
• Duration Of Justice: 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 23-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: N K SHAHI
• Keywords: Non-deduction of tax; Reasonable cause; TDS
• Section: 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER ITA NOS.337 & 338/CHD/2016 (ASSESSMENT YEARS: 2011-12 & 2012-13) THE INCOME TAX OFFICER(TDS), VS. SH.ASHOTOSH TANDON PATIALA. PROP M/S TANDON ENTERPRISES, MOTIA KHAN, MANDI GOBINDGARH. TAN NO. PTLA13755A AND C.O.NOS.10 & 11/CHD/2016 IN ITA NOS.337 & 338/CHD/2016 (ASSESSMENT YEAR : 2011-12 & 2012-13) SH.ASHOTOSH TANDON VS. THE INCOME TAX OFFICER( TDS), PROP M/S TANDON ENTERPRISES, PATIALA. MOTIA KHAN, MANDI GOBINDGARH. TAN NO. PTLA13755A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.K.SHAHI DEPARTMENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 20.06.2016 DATE OF PRONOUNCEMENT : 21.06.2016 O R D E R THESE APPEALS AT THE INSTANCE OF THE REVE NUE AND THE CROSS OBJECTIONS PREFERRED BY THE ASSESSEE ARIS E OUT OF 2 THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS), PATIALA DATED 28.1.2016 RELATING TO ASSE SSMENT YEARS 2011-2012 AND 2012-2013. SINCE COMMON ISSUES ARE RAISED IN THESE APPEALS AND THESE PERTAIN TO THE SA ME ASSESSEE, THESE WERE HEARD TOGETHER AND ARE BEING D ISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. 2. THE GROUNDS RAISED IN THE APPEALS FILED BY THE REVENUE ARE IDENTICAL IN BOTH THE ASSESSMENT YEARS AND THEY READ AS FOLLOWS : 1. THE LD.CIT (A) HAS ERRED IN HOLDING THAT AS NO D EMAND ON ACCOUNT OF NON COLLECTION OF TAX AT SOURCE HAS BEEN RAISED BY THE AO, THE ACTION OF THE AO CLEARLY ESTABLISHES THAT THE ASSESSEE IS NOT IN DEFAULT AS FAR AS TCS IS CONCERNED. 2. THE LD.CIT (A) HAS ERRED IN DELETING PENALTY IMPOS ED U/S 271 CA R.W.S 274 OF THE I.T. ACT, 1961 AS HE HIMSELF HELD THAT GOODS SOLD BY THE ASSESSEE ARE COVERED IN THE DEFINITION OF 'SCRAP' IN THE TERMS OF THE EXPLANATI ON (B) TO THE SECTION 206C OF THE I.T. ACT, 1961 AND ITS SALE IS LIABLE FOR TCS NOT ONLY AT THE FIRST STAGE BUT ALSO AT EACH STAGE OF SALE AS PROVIDED IN SECTION 206C OF THE IT. ACT, 1961. 3. THE LD.CIT (A) HAS FURTHER ERRED IN DELETING PENA LTY U/S 271CA R.W.S. 274 OF THE I.T. ACT, 1961 IGNORING THE FACT THAT NEITHER THE ASSESSEE DEDUCTOR COLLECTED TAX AT SOURCE WHILE SELLING OLD IRON SCRAP NOR OBTAINED FO RM NO.27C FROM THE BUYERS IN DUPLICATE AT THE TIME OF SALE AND SUBMITTED TO THE INCOME TAX DEPARTMENT WITHIN THE PRESCRIBED TIME LIMIT. 4. THE APPELLANT CRAVES LEAVE TO AMEND, ADD, ALTER OR DELETE ANY OF THE AFORESAID GROUNDS TILL THE DISPOSAL. 3 3. BRIEFLY STATED, THE FACTS OF THE CASE PERTAININ G TO THE GROUNDS RAISED BY THE REVENUE ARE AS FOLLOWS : 3.1) THE ASSESSEE IS AN INDIVIDUAL. HE IS RUNNING THE BUSINESS OF PURCHASE AND SALE OF IRON SCRAP. WHEN THE ASSESSEE MAKES PURCHASE OF IRON SCRAP , THE TAX WAS COLLECTED BY THE PARTIES FROM WHOM THE ASSESSEE MADE PURCHASE S. FURTHER, WHEN THE IRON SCRAP WAS SOLD BY THE ASSESS EE, NO TAX WAS COLLECTED AT SOURCE UNDER SECTION 206(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THEREFORE, PEN ALTY PROCEEDINGS UNDER SECTION 271CA OF THE ACT WERE INI TIATED. 3.2) IN REPLY TO THE SHOW CAUSE NOTICE FOR IMPOSIT ION OF PENALTY UNDER SECTION 271CA OF THE ACT, THE ASSESSE E SUBMITTED THAT HE IS NOT LIABLE FOR TAX COLLECTION AT SOURCE SINCE ITEMS SOLD BY THE ASSESSEE DO NOT FALL WITHIN THE PROVISIONS OF SECTION 206C OF THE ACT. FURTHER, IT WAS SUBMITTED THAT THE PURCHASERS OF SCRAP FROM ASSESSE E HAVE DULY PAID THE INCOME-TAX ON SUCH PURCHASES AND DECL ARED THE SAME IN THEIR INCOME-TAX RETURNS. THEREFORE, IT WA S SUBMITTED THAT PENALTY CANNOT BE LEVIED UNDER SECTION 271CA O F THE ACT. FOR THE ABOVE PROVISION, THE ASSESSEE RELIED ON THE ORDER OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD. (2005) 24CCH 1 (BANG TRIB) DAT ED 14.10.2013. 3.3) HOWEVER, THE JCIT(TDS) REJECTED THE OBJECTION RAISED BY THE ASSESSEE AND IMPOSED THE PENALTY AMOUNTING T O RS.9,36,953/- FOR ASSESSMENT YEAR 2011-12 AND 4 RS.10,55,430/- FOR ASSESSMENT YEAR 2012-13. 4) AGAINST THE IMPOSITION OF PENALTY UNDER SECTIO N 271CA OF THE ACT, THE ASSESSEE PREFERRED APPEALS BE FORE THE FIRST APPELLATE AUTHORITY. THE CIT (APPEALS) DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE ON TWO COUNTS. THE CIT ( APPEALS) HELD THAT SINCE THE PURCHASERS OF IRON SCRAP FROM A SSESSEE HAVE ALREADY PAID THE INCOME-TAX ON SUCH PURCHASES AND DECLARED THE SAME IN THEIR INCOME-TAX RETURNS, PENA LTY CANNOT BE LEVIED UNDER SECTION 271CA OF THE ACT. THE RELE VANT FINDINGS OF THE CIT (APPEALS) READ AS FOLLOWS : 6.4 WITH REGARD TO GROUNDS NO 5, 6, 7 AND 9 RAISED B Y THE APPELLANT, AS FAR ASSESSMENT ORDER IS CONCERNED THER E IS NO DOUBT THAT THE ASSESSING OFFICER HAS STATED ALL THE NECESSA RY FACTS ALONG WITH EXPLANATIONS AND REASONS FOR NON ACCEPTANCE OF APPELLANT'S PLEA. IT IS AN ADMITTED FACT THAT THE APPELLANT HAS FUR NISHED COMPLETE DETAILS OF SALES OF SCRAP MADE TO VARIOUS TRADERS ALONG WITH COPIES OF THEIR INCOME TAX RETURNS OF THE RELEV ANT ASSESSMENT YEAR EVIDENCING THE PAYMENT OF DUE TAXES ON THEIR I NCOME BY THE RESPECTIVE PURCHASERS. ON PERUSAL OF ORDER DATED 18 .03.2013 PASSED BY THE INCOME TAX OFFICER (TDS), PATIALA, IT IS OBSERVED THAT NO DEMAND ON ACCOUNT OF NON COLLECTION OF TAX AT SO URCE HAS BEEN RAISED AND SHE HAS CHARGED INTEREST ON THE TAX NOT SO COLLECTED TILL THE FILLING OF ITR BY RESPECTIVE BUYERS RELYING ON T HE JUDGMENT OF HINDISTAN COCA COLA BEVERAGES PRIVATE LIMITED VS COMMISSIONER OF INCOME TAX 211 CTR (SC) 545 WHILE H OLDING THAT THE BUYERS HAVE PAID THE TAXES ON THEIR RESPECTIVE INCOME, HER ACTION CLEARLY ESTABLISHES THAT SHE HAS NOT TREA TED THE APPELLANT AS ASSESSEE IN DEFAULT AS FAR TCS IS CONCER NED IT IS AN ACCEPTED LEGAL POSITION THAT WHERE THE PURCHASER HAS P AID THE TAX ON HIS INCOME, THE REVENUE CAN ONLY CHARGE INTEREST ON THE TAX NOT SO COLLECTED U/S 206(7) OF THE ACT, TILL THE FILLING OF ITR BY HIM. I HAVE CONSIDERED THE CASE LAWS REFERRED BY THE APPELLAN T AND AM 5 OF FIRM VIEW THAT THE JUDGMENT OF HON'BLE INCOME TAX APPELLATE TRIBUNAL DELIVERED IN THE CASE OF WIPRO GE MEDICAL S YSTEMS LTD (2005) 24 CCH 0001 BANG TRIB. IS APPLICABLE. THE RELEV ANT EXCERPT READS AS UNDER:- '8. REGARDING PENALTY UNDER S. 271C OF THE ACT, IT H AS BEEN SUBMITTED ON BEHALF OF THE ASSESSEE THAT SUFFICIENT COMPLIANCE WAS MADE BECAUSE THE TAX DEMAND WAS ALREADY PAID BY WIPRO LTD. HENCE, THERE WAS A REASONABLE CAUSE FOR NOT LEV YING PENALTY. IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSE E BROUGHT TO OUR NOTICE, THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN WIPRO FINANCE LTD. (SUPRA), WHEREIN A NUMBER OF DECISIONS WERE RELIED UPON BY THE TRIBUNAL ON THIS ISSUE. IN THE CASE OF THE AZADI BACHAO ANDOLAN (SUPRA), THE HON'BLE DELHI HIGH COURT HAS HELD THAT LEVY OF PENALTY UNDER S. 271C FO R FAILURE TO DEDUCT TAX AT SOURCE IS NOT AUTOMATIC. ABSENCE OF REASONABLE CAUSE HAS TO BE ESTABLISHED BEFORE LEVY OF SUCH PENALTY.' AS AFORESAID, THE FACTS OF THE PRESENT CASE ARE COV ERED BY THE ABOVE JUDGMENT. THE JOT (TDS), CHANDIGARH HAS NOT FOLLO WED IT ON THE GROUND THAT THE JUDGMENT HAS NOT ATTAINED FINAL ITY. IN MY CONSIDERED VIEW, THE VIEW TAKEN BY THE JOT (TDS) IS NOT ACCEPTABLE. CLEARLY THE HON'BLE ITAT IS A FINAL FACT FINDING AUT HORITY AND UNLESS ANY UPPER COURT HAS UPSET ITS JUDGMENT ON THE SAME ISS UE, ITS DECISION WILL PREVAIL AND ANY OFFICER OPERATING UNDER LAW CA NNOT IGNORE IT ON THIS GROUND. ACCORDINGLY, THIS JUDGMENT HAS FULL BI NDING FORCE IN THE PRESENT CASE. FURTHER, VARIOUS COURTS HAVE ALSO SETT LED THE ISSUE AS IN THE CASE OF SREE MANJUNATHAN WINES VS CIT (2011) 20 2 TAXMAN 62Q_{KARN) WHICH HELD THAT IN CASE APPELLANT HAS NOT C OLLECTED THE TAX U/S 206C FROM BUYERS, IT IS HELD THAT TO IMPOSE PENALTY FOR NON COLLECTION OF TAX AT SOURCE, IT IS NECESSARY TO FIN D OUT WHETHER BUYER HAS PAID TAX IN ACCORDANCE WITH THE PROVISIONS OF T HE ACT AND ONLY WHEN THE BUYER HAS NOT PAID THE TAX THEN THE AUTHOR ITIES CAN PROCEED AGAINST THE APPELLANT, WHO WAS UNDER OBLIGAT ION TO COLLECT TAX AT SOURCE AND REMIT THE SAME TO GOVT. ACCOUNT. ACCO RDINGLY, I ACCEPT THESE GROUNDS OF APPEAL RAISED BY THE APPELLANT AND D ELETE THE PENALTY OF RS. 9,36,953/- IMPOSED BY THE ASSESSING OFFICER. 6 4.1) FURTHER, THE CIT (APPEALS) HELD THAT DEMAND N OTICE UNDER SECTION 156 OF THE ACT HAS TO BE ISSUED BY TH E OFFICER WHO PASSED THE PENALTY ORDER AND SINCE IT IS ISSUED BY DIFFERENT OFFICER, IT IS AN INCURABLE MISTAKE. HOW EVER, SINCE THE PENALTY HAS BEEN QUASHED ON OTHER GROUNDS, THE CIT (APPEALS) HELD THAT THIS PLEA OF THE ASSESSEE IS OF NO CONSEQUENCE AND DISPOSED OFF THE SAME AS NON-EST. 5) THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. AT THE VERY OUTSET, THE LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE ISSUE IN QUESTION HAS BEEN HEARD BY THE TRIBUNAL IN THE CASE OF ITO (TDS), PATIALA VS. SHRI OM PARKSH GUPTA (HUF), MANDI GOBINDGARH IN ITA NOS.341 & 342/ CHD/2016 VIDE ORDER DATED 20.6.2016. 5.1) THE LEARNED D.R. AGREED THAT IDENTICAL ISSUE HAS BEEN HEARD BY THE TRIBUNAL IN THE CASE OF ITO (TDS), PATIALA VS. SHRI OM PARKSH GUPTA (HUF), MANDI GOBINDGARH (SUPRA) VID E ORDER DATED 20.6.2016. 6) I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ORDER OF THE TR IBUNAL REFERRED TO ABOVE IN THE CASE OF ITO (TDS), PATIALA VS. SHRI OM PARKSH GUPTA (HUF), MANDI GOBINDGARH WAS PRONOUNCED TODAY I.E. ON 20.6.2016. THE ISSUE RAISED IN THIS APPEAL IS IDEN TICAL TO THE ISSUE RAISED IN THE ABOVE-CITED CASE. THE MATTER H AS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE AB OVE CASE. THE RELEVANT FINDINGS OF THE TRIBUNAL IN THE ABOVE CASE READ AS UNDER : 5. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD. 7 CIT(APPEALS) IN CANCELING THE PENALTY. THE LD. CIT(APPEALS) HAS RECORDED SPECIFIC FINDING OF FACT THAT ASSESSEE FURNISHED COMPLETE DETAILS OF SALES O F SCRAP MADE TO VARIOUS TRADERS ALONGWITH COPIES OF THEIR INCOME TAX RETURNS OF RELEVANT ASSESSMENT YEA R PROVING THAT PAYMENT OF DUE TAXES HAVE BEEN MADE BY THE RESPECTIVE PURCHASERS. IT WAS ALSO RECORDED THAT NO DEMAND ON ACCOUNT OF NON-DEDUCTION OF TAX A T SOURCE HAS BEEN RAISED BY THE ASSESSING OFFICER AND ONLY INTEREST HAS BEEN CHARGED. IT IS, THEREFORE, CLEARLY ESTABLISHED THAT REVENUE DEPARTMENT HAS NOT TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT AS FAR AS TCS IS CONCERNED. THE LD. CIT(APPEALS) WAS, THEREFORE, JUSTIFIED IN FOLLOWING DECISION OF BANGL ORE BENCH IN THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD. IN WHICH THE TRIBUNAL HAS CONSIDERED REASONABLE CAUSE FOR NOT LEVYING THE PENALTY WHEN SUFFICIENT COMPLIANCE WAS MADE BECAUSE OF THE TAX DEMAND HAD ALREADY BEEN PAID. SINCE TAXES HAVE ALREADY BEEN PAID BY THE BUYERS AND THERE WAS NO TAX DEMAND REMAINED. THEREFORE, LD. CIT(APPEALS) CORRECTLY HE LD THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO COMP LY WITH PROVISIONS OF LAW. FURTHER, THE ASSESSEE SINC E BEGINNING HAS BEEN CLAIMING THAT ASSESSEE IS NOT COVERED BY THE DEFINITION OF SCRAP IN TERMS OF SECTION 206C OF THE ACT. THE EXPLANATION OF THE ASSESSEE WAS SUPPORTED BY ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF NAVINE FLOURINE INTERNATIONAL LTD. V ACIT (SUPRA). EVEN THOUGH THE LD. CIT(APPEALS) DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE ON MERIT BUT THE FACTS DISCUSSED ABOVE CLEARLY CONSTITUTE THAT THERE WAS A REASONABLE CAUS E FOR FAILURE TO COMPLY WITH PROVISIONS OF LAW. SINC E, THERE IS NO DEMAND ARISES AGAINST THE ASSESSEE AND ALL TAXES HAVE BEEN PAID AND NO LOSS TO REVENUE HAV E BEEN CAUSED, THEREFORE, IT IS NOT A FIT CASE FOR LE VY OF PENALTY AGAINST THE ASSESSEE. HON'BLE DELHI HIGH 8 COURT IN THE CASE OF WOODWARD GOVERNOR INDIA P.LTD. VS CIT 253 ITR 745 HELD AS UNDER : LEVY OF PENALTY UNDER SECTION 271C OF THE INCOME-TAX ACT, 1961, FOR FAILURE TO DEDUCT TAX AT SOURCE, IS NOT AU TOMATIC. IN ORDER TO BRING IN APPLICATION OF SECTION 271C, IN THE BACKDROP OF THE OVERRIDING NON OBSTANTE CLAUSE IN SECTION 273B, ABSENCE OF REASONABLE CAUSE, EXISTENCE OF WHICH HAS TO BE ESTA BLISHED, IS A SINE QUA NON. BEFORE LEVYING PENALTY, THE CONCERNED OF FICER IS REQUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAI LURE TO DEDUCT TAX AT SOURCE, THE SAME WAS WITHOUT REASONABLE CAUSE. THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT TH ERE EXISTS REASONABLE CAUSE WHICH WAS THE REASON FOR THE FAILU RE. THERE- AFTER, THE OFFICER HAS TO CONSIDER WHETHER THE EXPLANAT ION OFFERED BY THE ASSESSEE OR OTHER PERSON AS REGARDS THE REAS ON FOR FAILURE, WAS ON ACCOUNT OF REASONABLE CAUSE. 6. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DISCUSSION AND FINDINGS RECORDED BY LD. CIT(APPEALS), I DO NOT FIND ANY MERIT IN THE APPEAL S OF THE REVENUE. BOTH APPEALS OF THE REVENUE ARE, ACCORDINGLY, DISMISSED. 6.1) IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, W HICH IS IDENTICAL TO THE FACTS OF THE PRESENT CASE, I CONFI RM THE ORDERS PASSED BY CIT (APPEALS). IT IS ORDERED ACCORDINGLY . 7) HENCE, BOTH THE APPEALS FILED BY THE REVENUE AR E DISMISSED. C.O.NOS.10 & 11/CHD/2016 (IN ITA NOS.337 & 338/CHD/ 2016): 8) THE LEARNED COUNSEL FOR ASSESSEE FILED AN APPLICATION TODAY I.E. DATED 20.6.2016 FOR SEEKING PERMISSION TO WITHDRAW BOTH THE CROSS OBJECTIONS. 9 8.1) THE LEARNED D.R. DID NOT HAVE OBJECTION AGAIN ST THE SAME. 8.2 IN VIEW OF THE APPLICATION OF THE LEARNED COUN SEL FOR ASSESSEE, BOTH THE CROSS OBJECTIONS FILED BY AS SESSEE ARE DISMISSED AS WITHDRAWN. 9) IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED AND BOTH THE CROSS OBJECTIONS FILED B Y THE ASSESSEE ARE DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JUNE, 2016 SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER DATED : 21 ST JUNE, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH