Sun N Silver Inn Pvt.Ltd., Ahmedabad V. The Income tax Officer,TDS-1, Ahmedabad

ITA 1144/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6721 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Reasonable cause; Ignorance of law
• Section: 273B; 133A

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI T.K. SHARMA, JM AND A. K. GARODIA, AM SUN N SILVER INN (P) LTD.,HOTEL PRESIDENT BUILDING, CG ROAD, AHMEDABAD 380009. VS. I.T.O. TDS-1, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI GAURAV NAHTA, AR RESPONDENT BY:- SHRI R. K. DHANESTA, SR. D.R. O R D E R PER T.K. SHARMA, JUDICIAL MEMBER. . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 27.11.2009 CONFIRMING THE PENALTY OF RS.1,29, 600/- LEVIED BY THE ADDL. CIT, TDS RANGE, AHMEDABAD FOR ASST. YEAR 2005 -06. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF SURVEY U/S 133A OF THE IT ACT, 1961, CARRIED OUT ON 1.3.2005, IT WAS FOUND THAT NO TDS ON RENT PAYMENT OF RS.864000/- WA S MADE BY THE COMPANY. SUBSEQUENTLY THE ADDL.CIT, TDS RANGE, AHME DABAD VIDE ORDER DATED 16.3.2009 LEVIED THE PENALTY OF RS.1,29 ,600/- U/S 271(1)(C) REJECTING THE EXPLANATION OF THE ASSESSEE THAT THER E WAS BONA FIDE BELIEF THAT TDS CAN BE DEDUCTED IN THE MONTH OF MARCH. ON APPEAL, ASSESSEE PLEADED THAT THERE WAS A DELAY BUT TDS HAS BEEN PAI D DURING THE FY ALONG WITH INTEREST OF RS.7272/- ON 4.3.2005. IT WA S ALSO PLEADED THAT DUE ITA NO.1144/AHD/2010 ASST. YEAR 2005-06 ITA NO.1144/AHD/2010 ASST. YEAR 2005-06 2 TO IGNORANCE OF THE ASSESSEE AND NO SOONER THE ASSE SSEE REALIZED THE STATUTORY REQUIREMENTS TO PAY TDS, IT WAS PAID IMME DIATELY FROM ASSESSEES OWN FUNDS ALONG WITH INTEREST. THIS PLEA WAS REJECTED BY THE CIT(A) ON THE GROUND THAT PROVISIONS CONTAINED IN S ECTION 271(10(C) ARE ABUNDANTLY CLEAR THAT ASSESSEE IS REQUIRED TO DEDUC T TDS WHILE MAKING THE RENT PAYMENT OF RS.864000/-. SINCE THIS WAS DET ECTED DURING THE COURSE OF SURVEY ONLY AND THE ASSESSEE HAS ALSO FAI LED TO JUSTIFY THIS LATE PAYMENT ON ITS PART WITH REASONABLE CAUSE, THE PENA LTY U/S 271(1)(C) IS RIGHTLY LEVIED. AGGRIEVED, THE ASSESSEE IS IN APPEA L. 3. AT THE TIME OF HEARING ON BEHALF OF ASSESSEE SHR I GAURAV NAHTA APPEARED AND CONTENDED THAT ASSESSEE HAS PAID RENT TO SIX PARTIES TOTAL OF WHICH WORKS OUT TO RS.864000/-. AS PER PROVISIONS C ONTAINED IN SECTION 194-I OF THE IT ACT, 1961 TDS IS REQUIRED TO BE DED UCTED ONLY IF PAYMENT EXCEEDS RS.1,20,000/-. THE SURVEY WAS CONDUCTED ON 1.3.2005 AND TILL THE DATE OF SURVEY THE TOTAL RENT PAID TO ONE INDIVIDUA L WAS LESS THAN RS.1,20,000/-. THEREFORE, THE ASSESSEE WAS OF THE B ONA FIDE BELIEF THAT ENTIRE TDS CAN BE DEDUCTED ON OR BEFORE 31 ST MARCH. HE FURTHER PLEADED THAT ON KNOWING THE REQUIREMENT TO DEDUCT TDS FROM RENT EVERY MONTH, ASSESSEE PAID THE ENTIRE AMOUNT OF TDS ALONG WITH I NTEREST ON 4.3.2005. HE PLEADED THAT THERE WAS A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B, THEREFORE, BOTH THE DEPARTMENTAL AUTH ORITIES SHOULD HAVE TAKEN A LENIENT VIEW IN RESPECT OF PENAL PROVISIONS CONTAINED IN SECTION 271(1)(C) OF IT ACT, 1961. 4. ON THE OTHER HAND, SHRI R. K. DHANESTA, SR. DR A PPEARING ON BEHALF OF THE REVENUE SUPPORTED THE ORDER OF CIT(A) . THE LD. DR POINTED OUT THAT ASSESSEE WAS FULLY AWARE THAT DURING THE Y EAR RENT TO ONE INDIVIDUAL IS LIKELY TO EXCEED RS.1,20,000/-, THERE FORE, ASSESSEE WAS ITA NO.1144/AHD/2010 ASST. YEAR 2005-06 3 REQUIRED TO DEDUCT TDS EVERY MONTH. SINCE THIS WAS NOT DONE, PENALTY U/S 271(1)(C) IS RIGHTLY LEVIED AND CONFIRMED BY THE CI T(A) IN THE IMPUGNED ORDER. WITH REGARD TO THE PLEA OF THE ASSESSEE THAT IT WAS UNDER BONA FIDE BELIEF THAT TAX CAN BE DEDUCTED IN THE MONTH OF MAR CH ITSELF FOR ENTIRE RENT PAID DURING THE YEAR, HE PLEADED THAT IGNORANCE OF LAW IS NO EXCUSE. 5. IN REJOINDER THE COUNSEL OF THE ASSESSEE POINTED OUT THAT ASSESSEE COMPANY WAS A REGULAR COMPANY WHO WAS DEPOSITING TH E PAYMENT REGULARLY IN RESPECT OF ALL OTHER PAYMENTS AND WAS UNDER THE IMPRESSION THAT IN RESPECT OF RENT PAYMENT TDS CAN BE DEPOSITE D IN THE MONTH OF MARCH. THERE WAS NO INTENTION OF NOT DEDUCTING TDS. HE FURTHER POINTED OUT THAT THERE WAS NO PENDING LITIGATION AGAINST TH E COMPANY AND NO DEFAULT WAS THERE IN NOT DEDUCTING THE TDS IN THE P AST. THIS WAS THE FIRST YEAR WHEN TDS BECAME APPLICABLE ON RENT, THEREFORE DUE TO THE CONFUSION OF ACCOUNTANT AND ASSESSEE IT WAS UNDER THE IMPRESS ION THAT TDS FROM RENT IS REQUIRED TO BE DEDUCTED AT THE END OF MARCH . IT WAS FURTHER POINTED OUT THAT NO TDS WAS DEDUCTED BY THE ASSESSEE COMPAN Y IN THE EARLIER MONTH AND, THEREFORE, THERE WAS NO MALA FIDE INTENT ION IN NOT DEDUCTING TDS. THE COUNSEL OF THE ASSESSEE ALSO RELIED ON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH-C IN THE CASE OF INDIAN P ETROCHEMICALS CORPN. LTD. VS. JT. CIT 123 ITD 293 WHEREIN IT WAS HELD THAT IN CASE OF BONA FIDE BELIEF PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE. 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOT E THAT TILL THE DATE OF SURVEY THE TOTAL RENT PAID TO AN INDIVIDUAL PARTY W AS LESS THAN RS.1,20,000/-. THE CASE OF THE ASSESSEE IS THAT IT WAS UNDER BONA FIDE BELIEF THAT TDS ON RENT RENT CAN BE DEDUCTED IN THE MONTH OF MARCH IN RESPECT OF ENTIRE RENT DURING THE FY 2004-05. SECTI ON 194-I IS INSERTED BY ITA NO.1144/AHD/2010 ASST. YEAR 2005-06 4 FINANCE ACT, 1994 W.E.F. 1.6.1994. THIS WAS THE FIR ST YEAR WHEN THE ASSESSEE WAS REQUIRED TO DEDUCT TDS U/S 194 IN RESP ECT OF RENT PAID TO SIX PARTIES. WE ARE, THEREFORE, OF THE VIEW THAT PLEA O F THE ASSESSEE THAT TDS CAN BE DEDUCTED IN THE MONTH OF MARCH THOUGH IT IS NOT CORRECT POSITION OF LAW LOOKING TO THE FACT THAT THIS WAS THE FIRST YEA R, THE SAID PLEA OF THE ASSESSEE CONSTITUTE REASONABLE CAUSE WITHIN THE MEA NING OF SECTION 273B OF IT ACT, 1961. IN OUR OPINION BOTH THE DEPARTMENT AL AUTHORITIES ERRED IN NOT ACCEPTING THE PLEA OF THE ASSESSEE. WE, THEREFO RE, CANCEL THE PENALTY OF RS.1,29,600/- LEVIED U/S 271(1)(C) OF IT ACT, 19 61. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 29/04/11. SD/- SD/- (A.K. GARODIA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMB ER AHMEDABAD, DATED : 29/04/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.1144/AHD/2010 ASST. YEAR 2005-06 5 1.DATE OF DICTATION 29/04/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 29/04/2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..