Superintending Engineer (B&R), Jalandhar V. The Income Tax Officer, Jalandhar

ITA 102/ASR/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0670 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISRA
• Assessee Lawyers: DINESH SARNA
• Keywords: Bonafide belief; Question of law; Reasonable cause; Non compliance; Bonafide mistake
• Section: 273B; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JA LANDHAR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NOS.101 TO 104(ASR)/2016 ASSESSMENT YEAR: 2007-08 TO 2010-11 SUPERINTENDING ENGINEER (BSR),MUNICIPAL CORPORATION, JALANDHAR. PAN: JLDS05030A VS. INCOME TAX OFFICER TDS-II, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. DINESH SARNA (ADV. ) RESPONDENT BY: SH. A.N.MISRA (DR) DATE OF HEARING: 20.06. 2016 DATE OF PRONOUNCEMENT:2 2.06.2016 ORDER PER BENCH: THIS IS A BUNCH OF FOUR APPEALS FILED BY ASSESSEE A GAINST THE CONSOLIDATED ORDER OF LEARNED CIT(A), JALANDHAR, DA TED 10.12.2015 FOR ASST. YEARS: 2007-08 TO 2010-11 RESPECTIVELY. 2. THE ASSESSEE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) BY WHICH HE HAD CONFIRMED THE PENALTY IMPOSED BY ASSESSING OFFI CER U/S 271C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE PENA LTY ORDER ARE THAT ASSESSEE NAMELY SUPERINTENDING ENGINEER (BSR), MUNI CIPAL CORPORATION, JALANDHAR MADE CERTAIN PAYMENTS DURING THE F.Y.2006 -07 TO 2009-10. THE PAYMENTS WERE MADE TOWARDS REPAIR OF VEHICLES A ND ALSO INCLUDED ITA NOS.1 01 TO 104(ASR)/2016 ASST. YEARS: 2007-08 TO 2010-11 2 PAYMENTS TO MEDIA/NEWSPAPERS FOR ADVERTISEMENTS ON WHICH THE ASSESSEE DID NOT DEDUCT TDS. THE ASSESSEE HAD FURTH ER MADE PAYMENTS TO CERTAIN ARTISTS ON WHICH TDS @ 2% WAS DEDUCTED I NSTEAD @ 10% AS REQUIRED U/S 194J OF THE ACT. IN VIEW OF THESE VIOL ATIONS THE ASSESSING OFFICER IMPOSED PENALTY U/S 271C OF THE ACT. 4. AGGRIEVED THE ASSESSEE FILED APPEALS BEFORE LD. CIT(A) AND SUBMITTED THAT DUE TO BONAFIDE BELIEF THAT ASSESSEE WAS NOT REQUIRED TO DEDUCT THE FAX FOR REPAIR OF VEHICLES AND FOR MEDIA /NEWSPAPERS FOR ADVERTISEMENTS, THE TAX WAS NOT DEDUCTED, HOWEVER, WHEN THE MISTAKE WAS POINTED OUT TO THE ASSESSEE THE ASSESSEE IMMEDI ATELY DEPOSITED THE TAX ALONG WITH INTEREST THEREON. IN RESPECT OF SHOR T DEDUCTION OF TDS @ 2% INSTEAD OF 10%, THE ASSESSEE SUBMITTED THAT THE SHORT DEDUCTION HAS BEEN MADE DUE TO THE FACT THAT ASSESSEE MISCONSTRUE D THE PROVISIONS OF TDS. IT WAS ALSO SUBMITTED TO LD. CIT(A) THAT THERE WAS A REASONABLE CAUSE FOR SHORT DEDUCTION OF TAX AND RELIANCE WAS A LSO PLACED ON THE APEX COURT DECISION IN THE CASE OF CIT VS. ELI LILLY & C O. (INDIA) PVT. LTD. & ORS. REPORTED IN 312 ITR 225 AND FURTHER RELIANCE W AS PLACED ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT, BANGLORE VS. RAJAJINAGAR CO-OPERATIVE BANK LTD., BANGLORE, I TA NO.86 OF DATED 20.07.2011. HOWEVER, THE LD. CIT(A) WAS NOT SATISFI ED WITH THE SUBMISSIONS OF ASSESSEE AND HE UPHELD THE ACTION OF A.O BY HOLDING AS UNDER: ITA NOS.1 01 TO 104(ASR)/2016 ASST. YEARS: 2007-08 TO 2010-11 3 5.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE JOIN T COMMISSIONER OF INCOME TAX (TDS), LUDHIANA AS MADE BY HIM IN THE CONSOLIDATED PENALTY ORDER DATED 13.02.2012. I HAVE ALSO CONSIDERED WRITTEN SUBMISSI ONS FILED BY THE LD. AR OF THE PR VIDE LETTER DATED 10.12.2015. I HAVE FURTHER CONS IDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY LD. AR OF THE PR IN CON NECTION WITH THE ISSUE UNDER CONSIDERATION. I HAVE AGAIN CONSIDERED THE OT HER MATERIAL BROUGHT BY THE LD. AR OF THE PR ON RECORD. ON CAREFUL CONSIDERATION OF TH E RIVAL CONTENTIONS. I AM ALSO OF THE OPINION THAT THE PR WAS REQUIRED TO DEDUCT T AX AT SOURCE AS PER PROVISIONS OF SECTION 194C AND 194J OF THE ACT WHILE MAKING PAYMEN T ATTRACTING PROVISIONS OF SECTION 194C AND 194J OF THE ACT TO DIFFERENT PERSON S WHICH HE FAILED TO DO SO. MOREOVER, THE PR WAS NOT HAVING ANY REASONABLE CAUSE FOR NOT DEDUCTING TDS ON PAYMENT ATTRACTING PROVISIONS OF SECTION 194C & 194 J OF THE ACT. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT HAVE DI STINGUISHABLE FACTS FROM THE FACTS OF THE CASE OF THE ASSESSEE AND ARE NOT APPLI CABLE HERE AS IN EACH CASE THERE WAS A REASONABLE CAUSE WHEREAS IN THE CASE OF THE A PPELLANT THERE WAS NO JUSTIFIABLE OR REASONABLE CAUSE. UNDER SUCH CIRCUMS TANCES, I DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE IN THE MATTER OF PE NALTY LEVIED BY THE JOINT COMMISSIONER OF INCOME TAX (TDS), LUDHIANA IN THE C ASE OF THE APPELLANT UNDER SECTION 271C OF THE ACT FOR FAILURE ON HIS PART TO D EDUCT TDS AS PER PROVISIONS OF SECTION 194C AND 194J OF THE ACT ON DIFFERENT PAYMEN T IN EACH YEAR. 5.3 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CI RCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE JOINT COMMISSIONER OF IN COME TAX (TDS), LUDHIANA IS FULLY JUSTIFIED IN LEVYING THE PENALTY IN THIS CASE UNDER SECTION 271C OF THE ACT FOR FAILURE ON THE PART OF THE APPELLANT TO DEDUCT TDS AS PER PROVISIONS OF SECTION 194C AND 194J OF THE ACT ON PAYMENT ATTRACTING PROVISIONS OF SECTION 194C & 194J OF THE ACT IN EACH YEAR. THE PENALTY OF RS.1,30,336/- FO R THE F.Y.2006-07, RS.40,895/- FOR THE F.Y. 2007-08, RS.19,040/- FOR THE F.Y.2008-09 AND RS.11,438/- FOR THE F.Y.2009-10 TOTALING IN ALL TO RS .2,01,709/- UNDER SECTION 271C OF THE ACT FOR FAILURE ON THE PART OF THE APPEL LANT TO DEDUCT TDS AS PER PROVISIONS OF SECTION 194C & 194J OF THE ACT ON VARI OUS PAYMENTS IN EACH YEAR IS UPHELD. IN THE RESULT, GROUND NO.1 OF APPEAL TAKEN BY THE PR IN EACH YEAR IS DISMISSED. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE ASS ESSEE WAS UNDER A BONAFIDE BELIEF THAT IT WAS NOT REQUIRED TO DEDUCT THE TDS IN RESPECT OF PAYMENTS OF REPAIR OF VEHICLES AND PAYMENTS TO MEDI A/NEWSPAPERS FOR ADVERTISEMENTS AND THEREFORE, IT DID NOT DEDUCT THE TAX AND REGARDING SHORT DEDUCTION OF TAX THE LD. AR SUBMITTED THAT DU E TO WRONG READING OF ITA NOS.1 01 TO 104(ASR)/2016 ASST. YEARS: 2007-08 TO 2010-11 4 PROVISIONS THE ASSESSEE DEDUCTED TDS @ 2% INSTEAD O F 10%. IT WAS SUBMITTED THAT WHEN THE MISTAKE WAS POINTED OUT THE N IMMEDIATELY TAX ALONGWITH INTEREST WAS DEPOSITED AND WHICH PROVES T HAT THE MISTAKE WAS NOT INTENTIONAL AND ASSESSEE UNDER A BONAFIDE BELIE F HAD NOT DEDUCTED THE TAX AND SIMILARLY IN CASE OF SHORT DEDUCTION OF TAX THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT A PARTICULARS RATE OF TDS WAS APPLICABLE. THE LD. AR RELIED ON THE CASE LAWS WHICH WERE RELIED BE FORE THE CIT(A). 7. THE LD. DR, ON THE OTHER HAND, HEAVILY PLACED HI S RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT AO IMPOSED THE PENALTY FOR VARIOUS YEARS FOR NOT DEDUCTING TAX AT SOURCE WHICH THE LD. CIT(A) ALSO CONFIRMED . THOUGH DETAILED SUBMISSIONS WERE MADE T O LD.CIT(A) BUT LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF ASSESEE THA T NON DEDUCTION OF TAX WAS DUE TO A REASONABLE CAUSE AND THE MISTAKE WAS D UE TO A BONAFIDE MISTAKE. WE FIND THAT THE ASSESSEE IS A GOVT. DEPAR TMENT AND WAS NOT HAVING SUFFICIENT TECHNICAL STAFF AND UNDER BONAFID E BELIEF THE DEPARTMENT DID NOT DEDUCT THE TAX ON PAYMENTS MADE FOR REPAIR OF VEHICLES AND FOR ADVERTISEMENT EXPENSES AND DEDUCTE D ONLY 2% TAX FOR PAYMENTS TO ARTISTS INSTEAD OF 10% . ON BEING AWARE OF THIS MISTAKE DUE TO A SURVEY ON THE ASSESSEE, THE ASSESSEE PROMPTLY DEPOSITED TDS ALONG WITH INTEREST. THE PENALTY PROVISIONS U/S 271C ARE NOT AUTOMATIC AND THE ITA NOS.1 01 TO 104(ASR)/2016 ASST. YEARS: 2007-08 TO 2010-11 5 PENALTY U/S 271C IS NOT IMPOSABLE FOR ANY DEFAULT T O COMPLY WITH THE PROVISIONS OF THE ACT, IF THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. SECTION 273B MAKES IT C LEAR THAT IF THE ASSESSEE IS ABLE TO PROVE THE REASONABLE CAUSE FOR NON COMPLIANCE OF SUCH PROVISIONS NO PENALTY IS IMPOSABLE. THE HONBL E APEX COURT IN THE CASE OF CIT VS. ELI LILLY & COM. (INDIA) PVT. LTD. (SUPRA) HAS HELD THAT PROVISIONS OF SECTION 271C CANNOT BE HELD TO BE MAN DATORY OR COMPENSATORY OR AUTOMATIC BECAUSE UNDER SECTION 273 B PARLIAMENT HAS ENACTED THAT PENALTY SHALL NOT BE IMPOSED IN CASES FALLING THERE UNDER SEC. 271C WHERE THE MISTAKE IS DUE TO BONAFIDE BELI EF. THE HONBLE COURT HELD THAT ONLY THOSE PERSONS WILL BE LIABLE TO THE PENALTY WHO DO NOT HAVE GOOD AND SUFFICIENT REASON FOR NON DEDUCTING THE TA X. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT, BANGLORE V S. RAJAJINAGAR CO- OPERATIVE BANK, LTD. BANGLORE (SUPRA) HAS HELD THAT WHERE AN ASSESSEE COMMITTED A BONAFIDE MISTAKE IN MISCONSTRUING THE P ROVISIONS OF LAW AND DID NOT DEDUCT TDS AND AFTERWARDS ON BEING AWARE OF ITS MISTAKE DEPOSITED THE TDS ALONG WITH INTEREST THEN PENALTY U/S 271C SHALL NOT BE LEVIED. IN THE PRESENT CASE THERE IS NO DISPUTE ABO UT THE FACT THAT IMMEDIATELY WHEN THE MISTAKE WAS POINTED OUT TO THE ASSESSEE THE ASSESSEE MADE PAYMENTS OF TAX ALSONG WITH INTEREST. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT, BANGLORE V S. RAJAJINAGAR CO- OPERATIVE BANK LTD. BANGLORE (SUPRA) HAS HELD AS UN DER: ITA NOS.1 01 TO 104(ASR)/2016 ASST. YEARS: 2007-08 TO 2010-11 6 IN THE INSTANT CASE, THE ASSESSEE IS A CO-OPERATIV E BANK CLAUSE 5 OF SUB-SECTION (3) OF SECTION 194A EXPRESSLY EXEMPTS THE BANK FROM DEDUCTING THE TAX AT SOURCE ON INTEREST PAYABLE BY THE BANK TO ITS MEMBERS AND OTHER CO-OPERATIVE SOCIETIES. AS STATED BY THE ASSESSEE, THEY DID NOT PROPERLY CON STRUE THIS PROVISION. BY MISCONSTRUING THIS PROVISION THEY ALSO DID NOT DEDU CT TAX FROM THE INTEREST PAYABLE TO NON-MEMBERS. THAT IS THE BONAFIDE MISTAKE WHICH THEY HAVE COMMITTED. THEIR BONAFIDES IS DEMONSTRATED TO THE EFFECT THAT ONCE I N A SURVEY THE SAID MISTAKE WAS NOTICE AND POINTED OUT IMMEDIATELY THEY HAVE PA ID THE TAX WITH INTEREST. THEREFRE, IN THE LIGHT OF THIS UNDISPUTED FACTS OF THIS CASE., WHEN THE APPELLANTE COMMISSIONER AND THEH TRIBUNAL HELD THAT THE SAME C ONSTITUTES A REASONABLE CAUSE AND WHEN THE SAME IS NOT SHOWN TO BE FALSE, T HE ASSESSEE HAS SATISFIED THE REQUIREMENT OF SECTION 273-B, IN WHICH EVENT, NO PE NALTY SHALL BE IMPOSABLE. THEREFORE, THE ORDER PASSED BY THE TRIBUNAL AND THE APPELLANT COMMISSIONER IS VALID AND LEGAL AND DO NOT SUFFER FROM ANY LEGAL IN FIRMITY WHICH CALLS INTERFERENCE. ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE FIND THAT IN THE PRESENT CASE ALSO THE BONAFIDE BELIEF OF ASSESSEE IS DEMONSTRATED WITH THE FACT THAT AS SOON AS SURVEY W AS COMPLETED THE ASSESSEE DEPOSITED TAX ALONG WITH INTEREST. FURTHE R KEEPING IN VIEW THE FACT THAT GOVT. DEPARTMENTS DO NOT HAVE TECHNICAL S TAFF TO HANDLE THESE ISSUES OF NON DEDUCTION OF TDS AND SHORT DEDUCTION OF TDS IT IS A REASONABLE CAUSE FOR NOT DEDUCTING/SHORT DEDUCTION OF TAX AND THEREFORE THE PENALTY IN THESE CASES WAS NOT IMPOSABLE. IN VI EW OF THE ABOVE, THE PENALTY IMPOSED AND CONFIRMED BY LD. CIT(A) IS DELE TED. 9. IN VIEW OF THE ABOVE, THE APPEALS FILED BY ASSE SSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22.06.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: ITA NOS.1 01 TO 104(ASR)/2016 ASST. YEARS: 2007-08 TO 2010-11 7 (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER