Tata Autocomp Systems Ltd., Pune V. Additional Commissioner of Income-tax,

ITA 1126/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7515 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANERJEE
• Assessee Lawyers: VENKATACHALAM
• Keywords: Reasonable cause
• Section: 273B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO S . 1126 & 1127 /P U N/201 6 / ASSESSMENT YEAR S : 20 0 9 - 1 0 & 2010 - 11 TATA AUTOCOMP SYSTEMS LTD., TACO HOUSE, DAMLE PATH, OFF LAW COLLEGE ROAD, ERANDWANE, PUNE 411004 . / APPELLANT PAN: AAACT1848E VS. THE ADDL. COMMISSIONER OF INCOME TAX (TDS), PUNE . / RESPONDENT / APPELLANT BY : S HRI VENKATACHALAM / RESPONDENT BY : SHRI SUMITRA BANERJEE / DATE OF HEARING : 0 3 .0 8 . 2017 / DATE OF PRONOUNCEMENT: 30 . 0 8 .201 7 / ORDER PER SUSHMA CHOWLA, J M : BOTH T H E APPEAL S FILED BY THE ASSESSEE ARE AGAINST CONSOLIDATED ORDER OF CIT (A) , PUNE - 10 , DATED 0 9 .0 3 .201 6 RELATING TO ASSESSMENT YEAR S 20 0 9 - 1 0 AND 2010 - 11 AGAINST PEN ALTY LEVIED UNDER SECTION 271C OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . ITA NO S . 1126 & 1127 /PUN/201 6 TATA AUTOCOMP SYSTEMS LTD. 2 2 . BOTH THE APPEAL S RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO.1126/PUN/2016 TO ADJUDICATE THE ISSUES. 3. THE ASSESSEE IN ITA NO.1126/PUN/2016 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ADDITIONAL COMMI SSIONER OF INCOME - TAX (TDS), PUNE OF LEVYING PENALTY OF RS. 320,427 UNDER SECTION 271C OF THE ITA IN RESPECT OF SHORT - DEDUCTION OF TAX AT SOURCE ON CERTAIN, PAYMENTS CHARGEABLE TO TAX UNDER SECTIONS 194C, 194 I AND 194J OF THE ITA. 2. THE LEARNED CIT(A) ER RED IN NOT APPRECIATING THAT THERE WAS A REASONABLE CAUSE FOR SHORT DEDUCTION OF TAX AT SOURCE IN RESPECT OF SUCH PAYMENTS. 3. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE SUBMISSIONS MADE BY THE APPELLANT IN PROPER PERSPECTIVE. 4. THE LEARNED CIT(A) ERRED IN MAKING THE FOLLOWING OBSERVATIONS: '...THE APPELLANT, A REPUTED CONCERN, HAS A BACKING OF COMPETENT. EMPLOYEES, ACCOUNTANTS, ETC. CANNOT MAKE A PLEA IN A PLAIN MANNER THAT DUE TO INADVERTENT PRESSING OF A KEY, THE IMPUGNED MISTAKE OCCURRED...... . .......IT IS ALSO WORTH TO BE MENTIONED THAT THE LARGE NUMBER OF REGULAR PAYEES WHERE INVOLVED IN RECEIVING THE AMOUNT AFTER SHORT DEDUCTION OF TAX AND NOBODY EVER POINTED OUT TO APPELLANT DEDUCTOR REGARDING SUCH SHORT DEDUCTION CONTINUOUSLY FOR TWO YEA RS SO THAT THE APPELLANT COULD RECTIFY THE MISTAKE SUO MOTTO. THE ABOVE FACTS CLEARLY ESTABLISH THAT THE INTENTION OF THE APPELLANT WAS NOT IN BONAFIDE NATURE AND ACCORDINGLY, IT HAS FAILED TO EXPLAIN THE REASONABLE CAUSE IN A BONAFIDE MANNER....... ' THE APPELLANT OBJECTS TO THE ABOVE OBSERVATIONS OF LEARNED CIT(A) WHICH ARE CONTRARY TO THE FACTS OF THE CASE AND IN LAW. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT SINCE THE APPELLANT HAD ACTED BONA FIDE, NO PENALTY OUGHT TO HAVE BEEN LEVIED. 6. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. ITA NO S . 1126 & 1127 /PUN/201 6 TATA AUTOCOMP SYSTEMS LTD. 3 4. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271C OF THE ACT FOR SHORT DEDUCTION OF TAX AT SOURCE ON CERTAIN PAYMENTS CHARGEABLE TO TAX UNDER SECTION 194C, 194I AND 194J OF THE ACT. PENALTY UNDER SECTION 271C OF THE ACT HAS BEEN LEVIED AT RS. 3,20,427/ - IN ASSESSMENT YEAR 2009 - 10 AND AT RS.2,65,367/ - IN ASSESSMENT YEAR 2010 - 11. THE CASE OF ASSESSEE BEFORE US IS THAT THERE WAS REASONABLE CAUSE FOR SHORT DEDUCTION OF TAX AT SOURCE IN RESPECT OF SUCH PAYMENTS AND HENCE, THERE IS NO MERIT IN LEVY OF PENALTY. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IN THE COURSE OF MAKIN G PAYMENTS TO THE VENDORS HAD SHORT DEDUCTED THE TAX AT SOURCE TO THE EXTENT OF RS.3,20,427/ - IN ASSESSMENT YEAR 2009 - 10 AND RS.2,65,367/ - IN ASSESSMENT YEAR 2010 - 11. BECAUSE OF THE AFORESAID SHORT DEDUCTION, SHOW CAUSE NOTICE WAS ISSUED BY THE ADDL. CIT (TDS) RANGE, PUNE AS TO WHY PENALTY UNDER SECTION 271C OF THE ACT BE NOT LEVIED UPON THE ASSESSEE. IN REPLY, THE ASSESSEE EXPLAINED THAT NEW ERP SYSTEM WAS BEING INTRODUCED IN THE COMPANY DURING THE FINANCIAL YEARS 2008 - 09 AND 2009 - 10 AND INADVERTENTLY, S OME TDS KEYS WERE NOT ATTACHED TO THE VENDOR CODES PROPERLY, WHICH HAD RESULTED IN SHORT DEDUCTION OF TAXES. THE MANUAL ERROR WAS CLAIMED TO BE BECAUSE OF LACK OF SUFFICIENT SYSTEM KNOWLEDGE OF THE PERSONS HANDLING THE VENDOR PAYMENTS ; THE TAXES WERE DEDU CTED AT SHORTER RATE UNDER VARIOUS SECTIONS. THE ASSESSEE FURTHER POINTED OUT THAT THE SHORTFALL OF TAXES ALONG WITH INTEREST WAS PAID WHEN POINTED OUT BY THE OFFICER, HENCE, THE ASSESSEE HAD BONAFIDE INTENTION OF PAYING TAXES PROPERLY. THE ASSESSEE FURT HER CLAIMED THAT BECAUSE OF AFORESAID REASONABLE CAUSE, THERE WAS FAILURE ON ASSESSEES PART TO DEDUCT AND PAY THE TAXES AND ITA NO S . 1126 & 1127 /PUN/201 6 TATA AUTOCOMP SYSTEMS LTD. 4 PLEA WAS RAISED THAT PENALTY PROCEEDINGS INITIATED MAY BE DROPPED IN VIEW OF SECTION 273B OF THE ACT. THE ADDL. CIT WAS OF THE VIE W THAT THE ASSESSEE HAD COMMITTED DEFAULT IN VIEW OF PROVISIONS OF SECTION 271C OF THE ACT BY SHORT DEDUCTING THE TAX REQUIRED BY OR UNDER THE PROVI SIONS OF CHAPTER XVII - B OF THE ACT. THE ASSESSEE WAS THUS, HELD TO BE IN DEFAULT AND PENALTY UNDER SECTION 271C OF THE ACT WAS LEVIED AT RS.3,2 0 ,4 27 / - . 6. THE CIT(A) OBSERVED THAT WHERE THE ASSESSEE HAD BACKING OF COMPETENT EMPLOYEES, ACCOUNTANTS, ETC. THEN IT COULD NOT MAKE A PLEA THAT DUE TO INADVERTENT PRESSING OF A KEY, THE IMPUGNED MISTAKE OCCURRED. HE F URTHER NOTED THAT THE MISTAKE PERTAINED TO TWO FINANCIAL YEARS AND THE SAME WAS RECTIFIED AFTER A GAP OF MORE THAN ONE YEAR, ONCE THE ASSESSING OFFICER POINTED OUT THE MISTAKE. THE CIT(A) THUS, REJECTED THE PLEA OF ASSESSEE OF REASONABLE CAUSE AND UPHELD THE PENALTY LEVIED UNDER SECTION 271C OF THE ACT. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IT WAS A CASE OF SHORT DEDUCTION OF TAX, WHEREIN BECAUSE OF SOFTWARE H A NDLING ISSUE, OUT OF PAYMENT OF ABOUT RS.6 CRORES, THERE WAS DEFAULT TO THE EXTENT OF RS.3.20 LAKHS IN ASSESSMENT YEAR 2009 - 10 AND OUT OF PAYMENT OF RS.4.86 CRORES, RS.2.65 LAKHS IN ASSESSMENT YEAR 2010 - 11. HE FURTHER POINTED OUT THAT NEW ERP SYSTEMS WERE CODED AND THE CODING WAS DONE WRONGLY AND HENCE, THE DEFAULT IN DEDUCTION OF TDS AND ITS PAYMENT. HE FURTHER STRESSED THAT IT WAS A CASE OF SHORT DEDUCTION OF TAX AND NOT NON - ITA NO S . 1126 & 1127 /PUN/201 6 TATA AUTOCOMP SYSTEMS LTD. 5 DEDUCTION OF TAX. HE FURTHER REFERRED TO THE SUMMARY OF TRANSACTIONS AND POINT ED OUT THAT BECAUSE OF LARGE NUMBER OF TRANSACTIONS, THIS ERROR COULD NOT BE DETECTED. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271C OF THE ACT. THE PROVISIONS OF SAID SECTION ARE ATTRACTED WHEREIN ANY PERSON FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDER THE PROVISIONS OF CHAPTER XVII - B, THEN, SUCH PERSON SHALL BE LIABLE TO PAY BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAIL TO DEDUCT OR PAY AS AFORESAID. FURTHER, VIDE SECTION 273B OF THE ACT, IT IS PROVIDED THAT WHERE THE ASSESSEE HAD REASONABLE CAUSE EXPLAINING THE DEFAULT IN SHORT DEDUCTION OR NON - PAYMENT OF TAX AT SOURCE, THEN NO PENALTY IS TO BE LEVIED UNDER THE REQUISITE SECTION. THE ASSESSEE BEFORE US HAS PLEADED ITS CASE OF REASONABLE CAUSE AND HAS POINTED OUT THAT THERE WAS REASONABLE CAUSE FOR SHORT DEDUCTION AT SOURCE OUT OF CERTAIN PAYMENTS MADE UNDER SECTION 194C, 194I AND 194J OF THE ACT. THE ASSESSEE HAD PUT IN PLACE NEW ERP SYSTEM AND INADVERTENTLY, SOME TDS KEYS WERE NOT ATTACHED TO THE VENDORS CODES PROPERLY AND H ENCE, SHORT DEDUCTION OF TAX. THE MANUAL ERROR HAD CREPT IN OPERATION OF THE SYSTEM BECAUSE OF LACK OF KNOWLEDGE OF SYSTEM BY THE PERSONS HANDLING THE VENDORS PAYMENTS. THE ASSESSEE HAS PLACED ON RECORD THE WORKINGS SHOWING SHORT DEDUCTION OF TAX AT SOU RCE FOR BOTH THE YEARS UNDER APPEAL AT PAGES 1 TO 18 OF THE PAPER BOOK AND HAS STRESSED THAT ITA NO S . 1126 & 1127 /PUN/201 6 TATA AUTOCOMP SYSTEMS LTD. 6 SHORT DEDUCTION WAS IN MANY CASES, WHICH WAS NOT DETECTED BY THE ASSESSEE. THE TOTAL NUMBER OF TRANSACTIONS IN ASSESSMENT YEAR 2009 - 10 WERE 28,715 AND IN ASSESSME NT YEAR 2010 - 11 WERE 11,212. THE NUMBER OF TRANSACTIONS WITH SHORT DEDUCTION WERE 265 AND 259 RESPECTIVELY AND THE NUMBER OF DEDUCTEES WERE 526 AND 467 IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 RESPECTIVELY. THE ASSESSEE HAS FURTHER POINTED OUT THAT ONCE T HE SHORT DEDUCTION WAS DETECTED, THE AMOUNT OF TDS ALONG WITH INTEREST WAS DEPOSITED FOR BOTH THE YEARS UNDER APPEAL. HE HAS PLACED THE DETAILS OF TDS CHALLANS DEPOSITED FOR SHORT DEDUCTION FOR BOTH THE YEARS AT PAGE 19 OF THE PAPER BOOK ALONG WITH COPIES OF CHALLANS AT PAGES 20 TO 25 OF THE PAPER BOOK. HE HAS ALSO PLACED ON RECORD THE MAIL COMMUNICATION EVIDENCING THE IMPLEMENTATION OF ERP SYSTEMS AT PAGES 26 TO 40 OF THE PAPER BOOK. THE ASSESSEE FOR THE ASSESSMENT YEAR 2009 - 10 IN FOUR QUARTERS HAD CUMU LATIVELY PAID TDS OF RS.6.02 CRORES AND IN ASSESSMENT YEAR 2010 - 11 OF RS.4.86 CRORES. THE DEFAULT IN SHORT DEDUCTION OF TAX AT SOURCE IN ASSESSMENT YEAR 2009 - 10 IS RS.3,20,427/ - AND IN ASSESSMENT YEAR 2010 - 11 IS RS.2,65,367/ - . THE PERUSAL OF DETAILS FILE D BY THE ASSESSEE AND IN VIEW OF EXPLANATION OF THE ASSESSEE, WE FIND MERIT IN THE CLAIM OF ASSESSEE THAT DEFAULT IN SHORT DEDUCTION OF TAX WAS BECAUSE OF INADVERTENT ERROR, SINCE THE NEW ERP SYSTEM WAS BEING PLACED IN ORDER . THE ASSESSEE HAS ALREADY MADE GOOD THE SHORT DEDUCTION OF TAX AT SOURCE BY DEPOSITING THE SAID AMOUNT ALONG WITH INTEREST. ACCORDINGLY, WE HOLD THAT THERE WAS REASONABLE CAUSE IN NOT DEDUCTING AND PAYING THE SAID AMOUNT OF TDS IN TIME. IN SUCH CIRCUMSTANCES, THE ASSESSEE CANNOT BE H ELD LIABLE TO LEVY OF PENALTY UNDER SECTION 271C OF THE ACT. ACCORDINGLY, WE HOLD SO AND DIRECT THE ASSESSING OFFICER TO DELETE PENALTY LEVIED UNDER SECTION 271C OF THE ACT AT RS. 3,20,427/ - IN ASSESSMENT YEAR 2009 - 10 AND AT ITA NO S . 1126 & 1127 /PUN/201 6 TATA AUTOCOMP SYSTEMS LTD. 7 RS.2,65,367/ - IN ASSESSMENT YEA R 2010 - 11 . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 1 1 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF AUGUST , 201 7 . SD/ - SD/ - ( D.KARUNAK ARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 30 TH AUGUST , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) , PUNE - 10 ; 4. / THE CIT (TDS), PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE