Addl. CIT (TDS), Panchkula V. M/s Haryana State Counseling Society, Panchkula

ITA 1155/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6856 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TEJ MOHAN
• Assessee Lawyers: C CHANDRAKANTA
• Keywords: Initiation of penalty proceedings; Non-deduction of tax; Reasonable cause
• Section: 143(3); 201(1); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NOS. 1153 TO 1155/CHD/2016 ASSESSMENT YEARS: 2008-09 TO 2010-11 ADDL. CIT(TDS) VS. M/S HARYANA STATE COUNSELING PANCHKULA SOCIETY, BAY NO. 7-12, SECTOR-4 PANCHKULA PAN NO. RTKH03001F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TEJ MOHAN RESPONDENT BY : SMT. C. CHANDRAKANTA DATE OF HEARING : 30/08/2017 DATE OF PRONOUNCEMENT : 21/09/2017 ORDER PER BENCH: ALL THE ABOVE APPEALS FILED BY THE REVENUE ARE DIRE CTED AGAINST THE COMMON ORDERS OF LD. CIT(A), PANCHKULA, DT. 31/08/2 016 FOR ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-11. SINCE THE GROUNDS RAI SED AND ISSUES INVOLVED ARE IDENTICAL THEREFORE THE APPEALS ARE BEING HEARD AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS OF APPEAL AND FACTS ARE REFERRED FRO M A.Y. 2008-09 AND CONSIDERED FOR ADJUDICATION WHICH ARE IDENTICAL FOR OTHER ASSESSMENT YEARS 2009- 10 AND 2010-11: 1. THE CIT(A) ERRED BY NOT DISCUSSING THE PROVISIONS O F SECTION 275(L)(C) OF THE ACT, BUT HAS ONLY RELIED UPON THE CASE LAW OF SUBOD H KUMAR BARGAVA 309 ITR 31. THE FACTS AND CIRCUMSTANCES OF SUBODH KUMAR BARGAVA 309 ITR 31 ARE DISTINGUISHABLE FROM THE FACTS AND CIRCUMSTANCES OF THE INSTANCE CASE, THE RELIED UPON CASE WAS ADJUCATED ON SECTION 271B AND WHEREAS , IN THE PRESENT CASE, THE ISSUE INVOLVED IS LEVY OF PENALTY U/S 271C OF THE I T ACT. FURTHER, THE CIT(A) ERRED IN HOLDING THAT THE CASE HAS BEEN DECIDED BEYOND TIME LIMIT WHEREAS AS PER THE PROVISION OF SECTION 275(1)(C) OF THE IT ACT, 1961, THE CASE WAS DECIDED WELL WITHIN THE TIME LIMIT AS MENTIONED THEREIN. THE PROVISIONS OF SECTION 275(1)(C ) ARE READ AS BELOW: 2 'IN ANY OTHER CASE, AFTER THE EXPIRY OF THE FINANCI AL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIO D EXPIRES LATER.' IN THIS CASE, PENALTY PROCEEDINGS WERE INITIATED ON 10.07.2014 AND THE ORDER IMPOSING PENALTY WAS PASSED ON 11.03.2015, WHEREAS AS PER THE PROVISION OF SECTION, THE TIME LIMITATION EXPIRES ON 31.03.2015, THEREFORE, THE PENALTY ORDER WAS PASSED WELL WITHIN TIME AS PROVIDED U/S 275(1)(C ) OF THE ACT.. 2. THE CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 27 1C BY OBSERVING THAT THE SAID PAYMENTS WERE SECRET PAYMENTS FOR CONDUCTI NG ENTRANCE TESTS, MAKING AND PRINTING OF QUESTION PAPERS ETC. IN THE PENALTY ORDER, THE JCIT HAS CLEARLY ESTABLISHED THAT THE PAYMENTS ARE NOT OF SECRETIVE IN NATURE AS THE ORDER SANCTIONING ADVANCE PAYMENTS WITH RESPECT TO THE IN CURRED EXPENDITURES WAS ENDORSED TO FOUR DIFFERENT AUTHORITIES. IT IS ALSO WORTHY TO NOTE THAT APPELLANT HAS NOT TAKEN THE SECRETIVE NATURE OF PAYMENTS AS GROUN D FOR NON DEDUCTION TDS BEFORE CIT(A) IN APPEAL FOR QUANTUM ADDITION U/S 14 3(3) IN APPEAL NO. 129/PKL/10-11. THE CIT(A) ALSO RELIED ON THE JUDGMENT OF THE HON'B LE SUPREME COURT OF INDIA IN ELI LILLY & COMPANY(LNDIA) PVT. LTD.. THE FACT OF THE CASE RELIED UPON ARE ENTIRELY DIFFERENT, WHERE THE JUDGMENT DEALS WITH T AX DEDUCTION AT SOURCE ON THE HOME SALARY/ SPECIAL ALLOWANCE(S) PAYMENT MADE BY F OREIGN COMPANY/HO TO ITS EMPLOYEES (EXPATRIATES TO INDIA ) OUTSIDE INDIA IN FOREIGN CURRENCY. THE CIT(A) ERRED BOTH IN LAWS AND FACTS. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2008-09 WHICH WERE CONCLUDED ON 27/12/2010, THE ITO, WARD-3, PANCHKULA NOTED THAT NO TDS WAS MADE BY THE ASSESSEE ON THE PAYMENT OF RS.3,34,92,686/- ON VARIOUS ACCOUNTS AS LISTED IN THE ORDER AND DISALLOWANCE U/S 40(A)(IA) OF RS.3,34,92,686/- WAS MADE BY THE AO. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) V IDE ORDER DATED 19.12.2011 IN APPEAL NO. 129/PKL/10-11 HELD THAT THE APPELLANT IS LIABLE TO DEDUCT TDS ON PAYMENTS MADE TO NATIONAL INFORMATICS CENTRE (NIC) AND DIPLOMA ENTRANCE TEST EXPENSES AND PRINTING BROCHURE EXPENSES AS WEL L AS ADVERTISEMENT AND PUBLICITY EXPENSES OF RS.3,34,92,686/-. THE CIT(A) DELETED THE DISALLOWANCES U/S 40(A)(IA) WITH THE OBSERVATION THAT DISALLOWANCE U/ S 40(A)(IA) IS NOT WARRANTED IN VIEW OF GRANT OF EXEMPTION U/S 10(23C)(IV) TO THE A SSESSEE, HOWEVER, THE PENALTY PROCEEDINGS MAY BE INITIATED BY CIT(TDS) FOR DEFAUL T IN DEDUCTION OF TDS. 4. THE PENALTY PROCEEDINGS U/S 271C WAS REFERRED B Y THE AO TO THE JCIT ON 19.05.2014 FOR NON DEDUCTION OF TDS. A SHOW CAUSE N OTICE U/S 271C R.W.S. 274 WAS ISSUED BY THE JCIT-TDS ON 10/07/2014 AND THE AS SESSEE FILED A REPLY ON 24/12/2014 AND PENALTY ORDER UNDER SECTION 271C WAS PASSED ON 11/03/2015 LEVYING PENALTY OF RS. 22,67,451/-. 3 5. DURING PROCEEDINGS BEFORE THE LD. CIT(A), T HE APPELLANT SUBMITTED THAT THE APPELLANT SOCIETY WAS CONSTITUTED WITH MAIN OBJECTI VE TO ACT AS A SINGLE WINDOW AGENCY FOR ADMISSIONS/COUNSELING IN VARIOUS TECHNIC AL INSTITUTIONS IN DIPLOMA/UG/PG LEVEL PROGRAMS. THE RETURN OF THE APP ELLANT WAS TAKEN UP FOR SCRUTINY DURING THE AY 2008-09 AND AN ADDITION OF R S.3,34,92,686/- WAS MADE VIDE ORDER DATED 27.12.2010 APPLYING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT FOR NON-DEDUCTION OF TAXES ON THE AMOUNTS MENTIONED IN THE SUBMISSION. THE APPELLANT FURTHER SUBMITTED THAT NO PROCEEDINGS WER E INITIATED UNDER SECTION 271C BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER. FURTHER, NO PROCEEDINGS HAVE BEEN INITIATED UNDER SECTION 201/201(A) OF THE ACT TREATING THE ASSESSEE TO BE ASSESSEE IN DEFAULT. THE LD. CIT(A) DELETED THE ADDITION MADE UNDER SECTION 40(A)(IA) VIDE ORDER DATED 19.12.2011. LATER PENALT Y PROCEEDING U/S 271C OF THE ACT WAS REFERRED BY THE AO VIDE HIS LETTER DATED 19 .05.2014 TO ADDL.CIT(TDS) AND THEREAFTER SHOW CAUSE NOTICE DATED 10.07.2014 WAS I SSUED BY THE ADDL.CIT (TDS) KARNAL AND LEVIED PENALTY ON 11/03/2015. 6. THE LD. CIT(A) DELETED THE PENALTY LEVIED INVOKI NG THE JUDGMENTS IN THE CASE OF CIT VS. SATLUJ JAL VIDYUT NIGAL LTD. 345 IT R 552 (H.P.), CIT VS. U.B. ELECTRONIC INSTRUMENTS LTD. 371 ITR 314 (AP), M/S JET LITE (IN DIA) LTD 379 ITR 185 (DEL.) AND SUBODH KUMAR BHARGAVA 309 ITR 31 ON THE GROUNDS THA T THE PENALTY IMPOSED ON 11/03/2015 IS BEYOND FOUR YEARS. 7. AGGRIEVED THE REVENUE PREFERRED APPEAL BEFORE US . 8. THE MAIN CONTENTION OF THE REVENUE WAS THAT THE PENALTY PROCEEDINGS WERE INITIATED ON 10/07/2014 AND THE PENALTY ORDER WAS PASSED ON 11/03/2015 WHEREAS THE LIMITATION EXPIRES ON 31/03/2015 AS PER THE PROVISIONS UNDER SECTION 275(1)(C) OF THE INCOME TAX ACT. THE REVENUE FURTHE R CONTENDED THAT THE CASE OF SUBODH KUMAR BHARGAWA 309 ASSESSING OFFICER 31 W AS DISTINGUISHABLE IN RELATION TO SECTION 271(1)(C) , 271C AND 271B AS TH E CASE DEALT WITH PROVISIONS UNDER SECTION 271B. REVENUE HAS TAKEN ARGUMENT THAT THE CASE OF ELI LILLY AND COMPANY INDIA PVT. LTD. IS ALSO NOT APPLICABLE TO T HE APPEAL IN QUESTION. 9. THE ASSESSING OFFICER. AR RELIED ON THE ORDER OF THE ASSESSING OFFICER. CIT(A). 4 10. WE HAVE GONE THROUGH THE MATERIAL BEFORE US. PARTICULARS DATE REMARKS DATE OF ASSESSMENT UNDER SECTION 143(3) 27/12/2010 ASSESSING OFFICER NEITHER INITIATED ANY ACTION UNDER SECTION 271C NOR SATISFACTION RECORDED DATE OF ORDER OF CIT(A) 19/12/2011 HELD, ASSESSEE IS LIABLE FOR PENALTY UNDER SECTION 221 REFERENCE TO ADDL. CIT-TDS BY ASSESSING OFFICER 19/05/2014 INITIATION OF PENALTY PROCEEDINGS 271C 10/07/2014 NOTICE ISSUED TO ASSESSEE DATE OF PASSING OF ORDER 11/03/2015 11. THE LD. CIT(A) HELD THAT SINCE THERE IS NO TIME PERIOD PRESCRIBED IN THE ACT FOR INITIATING AND IMPOSITION OF PENALTY U/S 271C, THE REASONABLE TIME PERIOD AS HAS BEEN HELD BY VARIOUS COURTS TO BE 4 YEARS FROM THE END OF FINANCIAL YEAR IN WHICH THE DEFAULT OCCURRED. IN THE INSTANT CASE, TH E NOTICE HAS BEEN ISSUED BEYOND THE PERIOD OF 4 YEARS AND AS THE SAME IS TIM E BARRED. THE LD. CIT(A) RELIED ON VARIOUS DECISIONS IN CIT VS. SATLUJ JAL V IDYUT NIGAL LTD. 345 ITR 552 (H.P.), IN CIT VS. U.B. ELECTRONIC INSTRUMENTS LTD. 371 ITR 314 (AP), M/S JET LITE (INDIA) LTD 379 ITR 185 (DEL.) AND IN CASE OF SUBODH KUMAR BHAR GAVA 309 ITR 31 AND CIT VS. IKEA TRADING HONG KONG LIMITED 333 ITR 565 FOR DETE RMINATION OF TIME LIMIT. THUS THE NOTICE ISSUED BY THE JCIT-TDS AND THE PENALTY O RDER PASSED ARE BARRED BY LIMITATION. 12. FURTHER, NO ORDER HAS BEEN PASSED U/S 201(1) OR 201(1A) AND AS SUCH THE ASSESSEE IS NOT IN DEFAULT. SINCE THE ASSESSEE IS N OT IN DEFAULT, THERE IS NO QUESTION OF LEVY OF PENALTY U/S 271C ESPECIALLY WHEN NO SUCH INITIATION/SATISFACTION HAS BEEN RECORDED DURING THE COURSE OF PASSING OF ORDER U/S 143(3). THUS, ON ALL SCORES, NO PENALTY IS LEVIABLE. THE COORDINATE BENC H OF ITAT, IN THE CASE OF H.P. STATE ELECTRICITY BOARD VS. ADDL.CIT, 177 TTJ 18 (C HANDIGARH) HELD THAT PENALTY UNDER SECTION 271C IS NOT LEVIABLE ON AN ASSESSEE WHO IS NOT TREA TED AS AN ASSESSEE IN DEFAULT AS PER SECTION 201 OF THE ACT MORE SO WHEN THERE WAS A REASONABLE CAUSE FOR NOT DEDUCTING TAX ON PAYMENT M ADE BY THE ASSESSEE. 13. PERTAINING TO THE REVENUES OBJECTION THAT THE CASE OF ELI LILLY AND COMPANY (INDIA) PVT. LTD. IS NOT APPLICABLE TO THE PRESENT CASE, WE HAVE GONE THROUGH THE RATIO OF THAT CASE AND FOUND THAT THE H ONBLE SUPREME COURT HAS HELD THAT NO PENALTY IS LEVIABLE IF THE ASSESSEE PR OVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. IN THE INSTANT CASE THE ASSESSEE HAS SHOWN REASONABLE CAUSE FOR NON DEDUCTION OF TAX AT SOURCE AS THE PAY MENTS WERE MADE AS SECRET 5 PAYMENT UNDER RULE 35 OF APPENDIX -15 OF PUNJAB FI NANCIAL RULES WHICH CAN BE TAKEN AS A DEFAULT BEING TECHNICAL AND VENIAL IN NA TURE. 14. THUS, OWING TO THE LEVY OF PENALTY UNDER SECTIO N 271 IN THE ABSENCE OF ORDER UNDER SECTION 201, DELAY IN LEVYING OF PENALT Y, AND THE ASSESSEE PROVING THAT THERE WAS REASONABLE CAUSE FOR THE FAILURE, WE DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A) 15. IN RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SD/- SD/- (DIVA SINGH) (DR. B.R. R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21/09/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR