The Dy. Commr. of Income Tax, TDS Circle, RAJKOT-GUJARAT V. M/s Gujarat Pipavav Port Ltd., AMRELI

ITA 111/RJT/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6850 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P BHATIA
• Assessee Lawyers: KIRAN NISAR
• Keywords: Bonafide belief
• Section: 201(1)

Judgement Text

ITA NO. 111/RJT/2017 & CO 15/RJT/2017 DCIT VS GUJARAT PIPAVAV PORT LTD ASSESSMENT YEAR: 2006-07 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO. 111/RJT/2017 & CO NO. 15/RJT/2017 ASSESSMENT YEAR: 2006-07 THE DCIT ..................APPELLANT TDS CIRCLE RAJKOT VS. M/S. GUJARAT PIPAVAV PORT LTD. ........................ RESPONDENT & POST UCHHAIYA VIA RAJULA, CROSS OBJECTOR AMRELI, GUJARAT - 365560 [PAN : RKTG 00431 E] APPEARANCES BY: CPBHATIA FOR THE APPELLANT KIRAN NISAR FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 03.11.2017 DATE OF PRONOUNCING THE ORDER : 28.11.2017 O R D E R PER PRAMOD KUMAR AM: 1. THIS APPEAL FILED BY THE ASSESSING OFFICER, AS A LSO THE CROSS OBJECTION FILED BY THE ASSESSEE, CHALLENGE CORRECTNESS OF THE ORDER DA TED 27.02.2017 IN THE MATTER OF PENALTY UNDER SECTION 271C OF THE INCOME TAX ACT, 1 961, FOR THE ASSESSMENT YEAR 2006-07. 2. GRIEVANCES RAISED BY THE ASSESSING OFFICER, AS S ET OUT IN THE MEMORANDUM OF APPEAL, ARE AS FOLLOWS:- 1. THE LD. CIT(A) IN FACTS AND CIRCUMSTANCES OF THE CASE ERRED IN DELETING THE PENALTY U/S. 271C OF THE I.T. ACT. 2. THE LD. CIT(A) IN FACTS AND CIRCUMSTANCES ERRED IN HOLDING THAT THE ASSESSEE DID DEDUCT TDS ALBEIT U/S. 194J INSTEAD OF 194-I WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE MANDATED TO DEDUCT TDS U NDER THE CORRECT PROVISIONS OF CHAPTER XVIIB OF THE I. T. ACT. 3. THE LD. CIT(A) IN FACTS AND CIRCUMSTANCES IN T HE CASE ERRED IN HOLDING THAT THE ISSUE WHETHER THE PAYMENT IS COVERED BY PROVISI ONS OF SECTION 194-I OF 194J IS NOT COMPLETELY FREE FROM DEBATE WITHOUT APPRECIA TING THE FACT THAT BOTH AT FIRST APPELLATE AND SECOND APPELLATE IT WAS CATEGORICALLY HELD THAT THE PAYMENT OF WHARF AGE CHARGES ATTRACTED WITHHOLDING PROVISIONS OF SECTION 194-I AS HOLD BY THE A.O. THUS THERE IS NO DISPUTE OF WHATSOEVER NAT URE AS AVERRED BY THE LD. CIT(A). ITA NO. 111/RJT/2017 & CO 15/RJT/2017 DCIT VS GUJARAT PIPAVAV PORT LTD ASSESSMENT YEAR: 2006-07 PAGE 2 OF 4 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE E ASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) OUGHT TO HAVE DECIDED THE ISSUE UNDER REFERENCE, IN THE LIGH T OF EVIDENCE OBTAINED BY HIM DURING THE APPELLATE PROCEEDINGS AFTER FOLLOWI NG THE DUE PROCEDURE OF LAW. 3. NOTWITHSTANDING RATHER ELABORATE GROUNDS OF APPE AL, WHICH ARE PRIMARILY ARGUMENTS IN SUPPORT OF THE APPEAL, THE SHORT GRIEV ANCE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER OR NOT LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE LEVY OF PENALTY OF RS.32,62,080/- IMPOSED ON THE AS SESSEE FOR SHORT DEDUCTION OF TAX AT SOURCE IN RESPECT OF WHARFAGE CHARGES PAID TO GU JARAT MARITIME BOARD. 4. THE ISSUE IN APPEAL LIES IN A NARROW COMPASS OF MATERIAL FACTS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING, CONSTRUCTING , OPERATING AND MAINTAINING THE PORT ON BUILD OWN OPERATE TRANSFER (BOOT) BASIS. THE PORT IS DESIGNED TO HANDLE BULK, CONTAINER AND LIQUID CARGO AND TO PROVIDE ANC ILLARY PORT SERVICES. IT WAS IN THIS BACKDROP THAT THE ASSESSEE ENTERED INTO AN AGREEMEN T WITH GUJARAT MARITIME BOARD (GMB) UNDER WHICH THE ASSESSEE WAS GRANTED THE RIGH T TO USE WATERFRONT AGAINST PAYMENT OF CHARGES TO BE COMPUTED ON THE BASIS OF A CTUAL THROUGHPUTS ACHIEVED IN A MONTH. TREATING THIS PAYMENT AS A ROYALTY, THE ASSE SSEE DEDUCTED TAX AT SOURCE, UNDER SECTION 194J, WHICH WAS 5.16% AT THE RELEVANT POINT OF TIME, FROM THE PAYMENTS MADE TO GMB. THE ASSESSING OFFICER, HOWEV ER, WAS OF THE VIEW THAT THE ASSESSEE OUGHT TO HAVE TREATED THESE PAYMENTS AS RE NT, AND, ACCORDINGLY DEDUCTED TAX AT SOURCE UNDER SECTION 194J WHICH WAS 22.44% A T THE MATERIAL POINT OF TIME. THE ASSESSING OFFICER RAISED A DEMAND, UNDER SECTIO N 201 R.W.S. 194I, FOR SHORT DEDUCTION OF TAX AT SOURCE. AS THIS ISSUE REGARDIN G SHORT DEDUCTION OF TAX AT SOURCE TRAVELLED IN APPEAL BEFORE A CO-ORDINATE BENCH OF T HIS TRIBUNAL, THE MATTER WAS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR R E-ADJUDICATION IN THE LIGHT OF FIRST PROVISO TO SECTION 201(1) WHICH WAS HELD TO BE RETR OSPECTIVE IN NATURE. IN EFFECT THUS, AS LONG AS THERE WAS NO LOSS OF REVENUE BY SUCH SHO RT DEDUCTION OF TAX AT SOURCE, THE RECIPIENT HAS DULY FILED HIS RETURN OF INCOME UNDER SECTION 139(1) AND RECIPIENT HAS DULY INCLUDED THESE AMOUNTS IN HIS RETURNED INCOME AND PAID DUE TAXES THEREON, THE DEMAND UNDER SECTION 201(1) IS NOT TO BE RAISED. TH E MATTER, HOWEVER, DID NOT REST THERE. THE ASSESSING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271C BY, INTER ALIA, OBSERVING AS FOLLOWS:- 11. CONSIDERING ALL THE RELEVANT FACTS AND DISCUSS ION MADE IN THE FOREGOING PARA(S) IT IS CLEAR THAT THE ASSESSEE HAS COMMITTED DEFAULT OF NON DEDUCTION OF TAX AT SOURCE ON PROVISION FOR UNDER WHAREFAGE AT R S.32,62,080/-. THEREFORE, THE ASSESSEE HAS DEFAULTED IN COMPLYING WITH THE TD S PROVISIONS OF THE I.T. ACT AND HAS THUS RENDERED ITSELF LIABLE FOR LEVY OF PEN ALTY U/S 271C OF THE I.T. ACT. 12. THE TOTAL AMOUNT OF TAX THE ASSESSEE COMPANY HAS FAILED TO DEDUCT OR PAY TO GOVT. ACCOUNT WORKS OUT TO RS.32,62,080/-. AS P ER PROVISIONS OF SECTION 271C OF THE IT ACT THE ASSESSEE COMPANY IS LIABLE T O PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH IT HAS FAILED TO DEDUCT OR PAY, AS THE CASE MAY BE. ACCORDINGLY I AM SATISFIED THAT IT IS A FI T CASE FOR LEVY OF PENALTY U/S 271C OF THE I.T. ACT AND THEREFORE I IMPOSE AND ORD ER TO LEVY THE PENALTY OF RS.32,62,080/- I.E. EQUAL TO THE AMOUNT OF TAX WHIC H IT HAS FAILED TO DEDUCT OR ITA NO. 111/RJT/2017 & CO 15/RJT/2017 DCIT VS GUJARAT PIPAVAV PORT LTD ASSESSMENT YEAR: 2006-07 PAGE 3 OF 4 PAY. ISSUE DEMAND NOTICE AND CHALLAN ACCORDINGLY I .T.N.S. 150 FORMS PART OF THIS ORDER. 5. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO CANCELLED THE PENALTY IN QUESTION BY OBSERVING AS F OLLOWS:- 6. I HAVE DULY CONSIDERED THE ORDER U/S 271C, SUB MISSION OF THE APPELLANT AND ALSO GONE THROUGH ORDER OF THE AO U/S 271(1)/201(1A ), PENALTY ORDER IN QUESTION, ORDERS OF CIT(APPEALS) AND HONBLE ITAT. AFTER TAKING EVERYTHING INTO ACCOUNT I AM OF CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY DUE TO FOLLOWING REASONS: (A) THE APPELLANT DID DEDUCT TDS ALBEIT UNDER PROVI SIONS OF SECTION 194J INSTEAD OF 194I. THIS IN ITSELF SHOWS THAT THERE W AS NO MALAFIDE INTENTION OF THE APPELLANT I.E. IT HAD NO INTENTION NOT TO DEDUC T TDS. AND THE A.O. IN HIS ORDER U/S 201(1)/201(1A) PASSED ON 25/03/2011 HAS R IGHTLY OBSERVED THAT THE ASSESSEE HAS DULY DEDUCTED TDS AND DEPOSITED I N THE GOVERNMENT ACCOUNT AND THE INTENTION OF THE ASSESSEE IS NOT TO CONCEAL THE TDS AMOUNT AND HENCE THE PENALTY U/S 271C IS NO INITIATED. A NO OF VARIOUS COURTS ARE ALL IN FAVOUR OF THE APPELLANT ON THIS ISSUE. (B) EVEN OTHERWISE ALSO THE ISSUE WHETHER THE PAYME NT IS COVERED BY PROVISIONS OF SECTION 194I OR 194J IS NOT COMPLETEL Y FREE FROM DEBATE. AND THE APPELLANT HAS NOT CONCEALED ANY FACT. HENCE, IN VIEW OF THE ABOVE FACTS AND LAW PENALTY LEVIED IS HEREBY CANCELLED. 6. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 8. WE FIND THAT IT IS ONLY ELEMENTARY THAT, AS PROV IDED IN SECTION 273B, NO PENALTY UNDER SECTION 271C SHALL BE IMPOSABLE FOR ANY FAILU RE REFERRED TO IN SECTION 271C AS LONG AS THE ASSESSEE CAN PROVE THAT THERE WAS A REA SONABLE CAUSE FOR THE SAID FAILURE. IT IS IN THIS CONTEXT THAT ONE HAS TO EVA LUATE STATED BONAFIDE BELIEF OF THE ASSESSEE THAT DEDUCTION AT SOURCE WAS REQUIRED TO B E MADE UNDER SECTION 194J. IN OUR CONSIDERED VIEW, THE APPLICATION OF SECTION 194 I ON THE FACTS OF THIS CASE, AT THE MINIMUM, WAS NOT ENTIRELY FREE FROM DOUBT. AS A MA TTER OF FACT, THERE IS NO FINDING ON THIS ASPECT OF THE MATTER, BY THE CO-ORDINATE BENCH IN QUANTUM PROCEEDINGS. IN ANY CASE, WHEN ASSESSEE IS DEDUCTING TAX AT SOURCE UNDE R ONE SECTION AND MAKING DUE DISCLOSURE OF HIS STAND, AND THE RECIPIENT IS A PUB LIC BODY, NO MALAFIDES CAN BE ATTRIBUTED TO SUCH SHORT TAX DEDUCTION, EVEN IF THA T BE SO, BY THE ASSESSEE. IN OUR CONSIDERED VIEW, THE WELL REASONED FINDINGS OF THE LEARNED CIT(A) ARE CORRECT, JUDICIOUS AND DO NOT CALL FOR ANY INTERFERENCE. WE APPROVE THE SAME AND DECLINE TO INTERFERE IN THE MATTER. AS WE DO SO, WE MAY ALSO MAKE IT CLEAR THAT THE GROUNDS OF APPEAL RAISED BEFORE US, TO A CERTAIN EXTENT, DEAL WITH IRRELEVANT FACTORS AND DO NOT CALL FOR OUR SPECIFIC COMMENTS. SUFFICE TO SAY THAT IN OUR CONSIDERED VIEW RELIEF GRANTED BY THE CIT(A) IS JUSTIFIED AND MEETS OUR AP PROVAL. 9. THE REVENUES APPEAL IS THUS DISMISSED. ITA NO. 111/RJT/2017 & CO 15/RJT/2017 DCIT VS GUJARAT PIPAVAV PORT LTD ASSESSMENT YEAR: 2006-07 PAGE 4 OF 4 10. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE CROSS-OBJECTION, AND THE CROSS-OBJECTION IS, AS SUCH, DISMISSED FOR WANT OF PROSECUTION. 11. IN THE RESULT, THE APPEAL AS ALSO THE CROSS-OB JECTION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 28 TH DAY OF NOVEMBER, 2017 SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 28 TH DAY OF NOVEMBER, 2017 **AM**BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT 1. DATE OF DICTATION: ..27.11.2017- - 6 PAGES MANU SCRIPTS OF HONBLE AM ARE ATTACHED. ORDER PREPARED ACCORDINGLY...... ... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ....28.11.2017....... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 28.11.2017....... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .28.11.2017. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : 28.11.2017.. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: ..