ACIT (TDS), Chandigarh V. State Bank of Patiala, Chandigarh

ITA 1129/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86189 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Bonafide belief; Question of law; Non-deduction of tax; Reasonable cause
• Section: 273B; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 1129/CHD/2014 ASSESSMENT YEAR: 2011-12 THE ACIT (TDS), VS THE STATE BANK OF PATIALA, 2 ND FLOOR, CR BUILDING, SCO 3A, SECTOR 7-C, SECTOR 17-E, CHANDIGARH. CHANDIGARH. PAN: PTLSI2979B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI VISHAL MOHAN DATE OF HEARING : 26.2.2015 DATE OF PRONOUNCEMENT : 27.2.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS), CHANDIGARH DATED 30.10.2014 FOR ASSES SMENT YEAR 2011-12 CHALLENGING THE CANCELLATION OF PENALTY UND ER SECTION 271C OF THE ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE PERSO N RESPONSIBLE (PR) HAD NOT DEDUCTED TAX AT SOURCE ON PAYMENTS OF INTEREST TO THE FOLLOWING FOUR SOCIETIES : 1. HARYANA RURAL ROADS AND INFRASTRUCTURE DEVELOPMENT AGENCY (HARRIDA) 2. PUNJAB ICT EDUCATION SOCIETY (DIRECTOR GENERAL SCHOOL EDUCATION PUNJAB) 3. HARYANA STATE COUNCIL FOR SCIENCE & TECHNOLOGY 4. SHRI AUROBINDO SOCIETY 2 3. THE ASSESSEE EXPLAINED THE REASONS FOR NON DEDUC TION OF TAX AT SOURCE BUT THE ASSESSING OFFICER REJECTED TH E CLAIM AND CREATED DEMAND UNDER SECTION 201(1) AND (1A) OF THE ACT. PENALTY PROCEEDINGS UNDER SECTION 271C WERE ALSO IN ITIATED AND VIDE SEPARATE ORDER, THE ASSESSING OFFICER HELD THA T PERSON RESPONSIBLE WAS LIABLE FOR PENALTY UNDER THE ABOVE PROVISIONS. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFORE LD. CIT(APPEALS) AND FILED THE WRITTEN SUBMISSIONS WHIC H WERE TAKEN INTO CONSIDERATION AND THE LD. CIT(APPEALS) CANCELL ED THE PENALTY. HIS FINDINGS IN PARA 3.3 TO 4 OF THE APPE LLATE ORDER ARE REPRODUCED AS UNDER : 3.3 I HAVE CONSIDERED FACTS OF THE CASE. FOR THE SAK E OF READY REFERENCE, PROVISIONS OF SECTION 194A(3)(III)(F) ARE REPRODUCED BELOW: '194A. INTEREST OTHER THAN 'INTEREST ON SECURITIES'. (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APPLY- ------------------- (III) TO SUCH INCOME CREDITED OR PAID TO- ------------------- F) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR C LASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENTRAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITING, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE; THE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT U /S 194A MENTIONS VARIOUS SOCIETIES AND ENTRY AT S.NO. 40 (NOTIFICATION NO. SO 3489 DATED 22.10.1970) IS AS UNDER: 'ANY UNDERTAKING OR BODY INCLUDING A SOCIETY REGIST ERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (XXI OF 1890 ) FINANCED WHOLLY BY THE GOVERNMENT' IT HAS BEEN POINTED OUT IN THE APPELLATE PROCEEDING S THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TAX AT SOURC E ON INTEREST PAID TO THE FOLLOWING THREE SOCIETIES, DETAILS O F WHICH ARE AS UNDER: I) HARYANA RURAL ROADS AND INFRASTRUCTURE DEVELOPMENT AGENCY (HARRIDA), FORMED AS A SOCIETY REGISTERED UNDER SOCIETIES REGISTRATION ACT 1860, FOR THE PURPOSE OF IMPLEMENTING INFRASTRUCTURE PROJECTS ESP ECIALLY ROADS UNDER PRADHAN MANTRI GRAM SARAK YOJNA. 3 II) PUNJAB ICT EDUCATION SOCIETY (DIRECTOR GENERAL SCHO OL EDUCATION PUNJAB), A NON PROFIT ORGANIZATION REGIST ERED UNDER SOCIETIES REGISTRATION ACT 1860 WITH AN AIM T O PROVIDE COMPUTER EDUCATION IN .ALL DISTRICTS OF PUN JAB COVERING GOUT. SCHOOLS. HI) HARYANA STATE COUNCIL FOR SCIENCE &, TECHNOLOGY INCORPORATED IN 1986 UNDER SOCIETIES REGISTRATION ACT 1 860 TO PROMOTE SCIENCE & TECHNOLOGY AND ITS UTILIZATION FOR ACHIEVEMENT OF SOCIO-ECONOMIC OBJECTIVES IN THE STATE O F HARYANA.' 3.3.1 THE LD. COUNSEL HAS SUBMITTED THAT ALL THE ABOVE SOCIETIES HAD DECLARED THESE FUNDS RECEIVED AS GRANT S AND SO TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE ON INTEREST ON THESE FUNDS IN VIEW OF THE PROVISIONS OF SECTION 194A(3)(III)(F) READ WITH THE AFORESAID NOTIFICATIO N NO. SO 3489 DATED 22.10.1970, SINCE THESE SOCIETIES WERE REG ISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 AND FINANCE D WHOLLY BY THE GOVERNMENT; AS HELD BY HONBLE ITAT, CHANDIGARH IN THE CASE OF STATE BANK OF PATIALA, KUSUMPTI, SHIMLA, VIDE ORDER DATED 20.05.2014 IN ITA NO. 269- 271/CHD/2014. IT WAS ALSO HELD BY HONBLE TRIBU NAL IN THIS CASE THAT IF THE ASSESSEE HAD GENUINE BELIEF T HAT IT WAS NOT REQUIRED TO DEDUCT TAX, PENALTY U/S 271C WAS NO T LEVIABLE. 3.3.2 REGARDING SHRI AUROBINDO SOCIETY, THE APPELLANT HAS FILED A COPY OF CERTIFICATE NO. 547-49 DATED 26.04.20 06 ISSUED BY DIRECTOR OF INCOME TAX (EXEMPTION) KOLKATA FROM F.NO. DIT(E)/86/8E/7/61-62 REGARDING EXEMPTION U/S 80G(5 )(VI) OF THE ACT VALID FOR A.Y. 2011-12. THE APPELLANT HAS ALSO FILED A COPY OF RETURN OF INCOME OF SHRI AUROBINDO SOCIETY FOR A.Y. 2012- 13 AS PER WHICH THE TOTAL INCOME WAS 'NIL'. IN AN Y CASE, THE APPELLANT WAS UNDER BONAFIDE BELIEF THAT IT WAS N OT REQUIRED TO DEDUCT TAX ON PAYMENT MADE TO THIS SOCIET Y AND SO PENALTY U/S 271C WAS NOT LEVIABLE IN VIEW OF THE DECISION OF HON'BLE ITAT, CHANDIGARH IN TH E CASE OF STATE BANK OF PATIALA, KUSUMPTI, SHIMLA (SUPR A). 3.3.3 THE LD. COUNSEL HAS POINTED OUT THAT APPEAL WAS NOT FILED BY THE APPELLANT AGAINST ORDER U/S 201(1)/(1A ) OF THE ACT BECAUSE THE RECIPIENTS OF INTEREST HAD CLAIMED REFU ND OF THE AMOUNTS DEDUCTED BY THE APPELLANT. 3.3.4 IN VIEW OF ABOVE DISCUSSION, IT IS HELD THAT THE PR WAS NOT LIABLE FOR PENALTY UNDER SECTION 271C OF THE ACT. TH E PENALTY LE VIED IS ACCORDINGLY CANCELLED. GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE ALLOWED. 4. IN THE RESULT, THE APPEAL IS ALLOWED. 4. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. THE LD. DR RELIED 4 UPON ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS RELIED UPON ORDER OF ITA T CHANDIGARH BENCH IN ITA NO. 267 TO 271/CHD/2014 IN THE CASE OF ITO VS STATE BANK OF PATIALA, KUSUMPTI, SHIMLA (SUPRA) AND RELIED UPON JUDGEMENT OF HON'BLE HIMACHAL PRADESH IN THE CASE O F CIT (TDS) CHANDIGARH VS STATE BANK OF PATIALA, SHIMLA IN ITA NO. 17/2014 DATED 31.12.2014. 5. ON CONSIDERATION OF THE FACTS OF THE CASE, IN TH E LIGHT OF THE FINDINGS OF LD. CIT(APPEALS) AND THE ABOVE DECISION S, WE DO NOT FIND ANY MERIT IN THE APPEAL OF REVENUE. THE LD. C IT(APPEALS) FOUND THAT IN CASE OF THREE OF THE SOCIETIES, THE A SSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. IN THE CASE OF SHR I AUROBINDO SOCIETY, THE EXEMPTION CERTIFICATE UNDER SECTION 80 G(5)(VI) WAS ALSO FILED. IT WOULD, THEREFORE, PROVE THAT ASSESS EE HAD A REASONABLE CAUSE FOR FAILURE TO DEDUCT TAX AT SOURC E UNDER SECTION 201(1) OF THE ACT. IN THE CASE OF STATE BAN K OF PATIALA, KUSUMPATI, SHIMLA (SUPRA), ITAT CHANDIGARH BENCH DI SMISSED THE DEPARTMENTAL APPEAL CONFIRMING THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY UNDER SECTION 271C OF THE ACT. THE FACTS ARE IDENTICAL IN THE CASE OF STATE BANK OF PATIALA, SHIMLA (SUPRA). HON'BLE HIMACHAL PRADESH HIGH COURT DISMISSED DEPARTMENTAL APPEAL FINDING NO SUBSTANTIAL QUESTION OF LAW. THESE FACTS WOULD CLEARLY SUPPORT THE FINDINGS OF L D. CIT(APPEALS) THAT ASSESSEE HAD A GENUINE BELIEF THA T IT WOULD NOT REQUIRE TO DEDUCT TAX AT SOURCE. THE CASE OF THE A SSESSEE, THEREFORE, SQUARELY FALLS UNDER THE PROVISIONS OF S ECTION 273B OF 5 THE ACT AND PENALTY IS NOT LEVIABLE BECAUSE ASSESSE E IS ABLE TO PROVE THAT THERE WAS A REASONABLE CAUSE FOR THE SAI D FAILURE. 6. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUM STANCES, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS ACCORDINGLY, DISMISSED. 7. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH FEBRUARY,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH