ADDL CIT (TDS) RG-2, MUMBAI V. MITTAL FABRICS MFG. CO. P. LTD, MUMBAI

ITA 1158/MUM/2011

• Counselvise Citation: 115819914 RSA 2011
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-10-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 08-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B; 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , , BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 1157 /MUM./ 2011 ( / ASSESSMENT YEAR : 200 0 01 ) . / ITA NO. 1158/MUM./2011 ( / ASSESSMENT YEAR : 2000 01 ) ADDL. COMMISSIONER OF INCOME TAX (TDS) RANGE 2, SMT. K.G. MITTAL AYURVEDIC HOSPIT AL BUILDING, CHARNI ROAD MUMBAI 400 002 . . / APPELLANT V/S M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 413 G, BASANT WADI, 5 TH FLOOR KALBADEVI ROAD, MUMBAI 400 002 .. . . / RESPONDENT ./ P ERMANENT ACCOUNT NUMBER AAACM4017E / ASSESSEE BY : NONE / REVENUE BY : SHRI R.N. D SOUZA / DATE OF HEARING 13 . 10 .2014 / DATE OF ORDE R 21.10.2014. / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL S HA VE BEEN PREFERRED BY THE REVENUE, CHALLENGING THE SEPARATE IMPUGNED ORDER S OF EVEN DATE 25 TH NOVEMBER M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 2 2010, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XIV, MU MBAI, FOR THE ASSESSMENT YEAR 2000 01, IN THE MATTER OF PENALTY PROCEEDINGS UNDER SECTION 272A(2)(C) AND 272A(2)(G). SINCE BOTH THESE APPEALS PERTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUES ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, TH EREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. HOWEVER, IN ORDER TO UNDERSTAND THE IMPLICATION, IT WOULD BE NECESSARY TO TAKE NOTE OF THE FACTS OF ONE APPEAL. WE ARE, ACC ORDINGLY, NARRATING THE FACTS, AS THEY A PPEAR IN THE APPEAL IN ITA NO. 1157 /MUM./2011, VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: (I) THE LD. CLT (A) HAS ERRED ON FACTS AND IN LAW IN DELEING PEN A L TY IMPOSED U/S . 272A(2)(C) , WITHOUT PROPERLY APPRECI ATING THE FACTUAL AND LEGE MATRIX OF THE CASE AS CLEARLY BROUGHT OUT IN ORDER U/S. 272A(2) (C) OF THE INCOME TAX ACT , 1 961 . (II) THE LD . CIT (A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT ASSESSEE HAS REASONABLE CAUSE FOR NOT FILING TDS RETURN I G N ORI NG THE FACT THAT THE ASSESSEE HAD MADE PROVISION FOR INTEREST OF RS. 2 , 76,87,612/ - PAYABLE TO M/S. EMTE X INDUSTRIE S ( I ) LTD ON 31.03.2000 AND HAD DEDUCTED THE TAX AT SOURCE AMOUNTING T O RS . 60 , 91 , 655/ - U/S . 194A BUT HAD NOT DEPOSITED THE SAME IN TO G OVERNM EN T ACCOUNT WITHIN THE TIME PROVIDED UNDER THE ACT FOR NO JUSTIFIABLE CAUSE OF REASON . (III) THE LD . CIT (A) FAILED TO APPRECIATE THE FACT THAT ASSESSEE HA D REVERSED THE PROVISION MADE FOR INTEREST ON 31.03 . 2004 I . E . AFTER LAPSE OF PERIOD OF FOUR YEARS A ND THAT TOO WHEN THIS ACT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE : 2 . FACTS IN BRIEF : THE ASSESSEE COMPANY HAD CREDITED PROVISION FOR INTEREST OF ` 2,76,87,612, PAYABLE TO M/S. EMTEX INDUSTRIES INDIA LTD. AND DEDUCTED TAX AT SOURCE AMOUNTING TO ` 60,91, 655 UNDER SECTION 194A. HOWEVER, THE ASSESSEE FAILED TO PAY THE SAID TAX DEDUCTED AT M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 3 SOURCE TO THE CENTRAL GOVERNMENT ACCOUNT AS PER THE PROVISIONS OF CHAPTER XVIIB. THE ASSESSEE S CASE HAD BEEN THAT THE COMPANY WAS INCURRING HEAVY LOSSES AND IT DID NOT H AVE FUNDS TO DEPOSIT THE SAME IN THE GOVERNMENT ACCOUNT. ACCORDINGLY, THE ORDER UNDER SECTION 201(1) R/W 201(1A) DATED 31 ST MAY 2004, WAS PASSED BY THE INCOME TAX OFFICER (TDS), WHO HELD THAT THE ASSESSEE COMPANY WAS IN DEFAULT UNDER SECTION 201(1) IN RESP ECT OF THE SUM OF ` 60,91,655. IN ADDITION TO THAT INTEREST UNDER SECTION 201(1A), WAS ALSO CHARGED TO THE TUNE OF ` 40,20,493. NOT ONLY THAT PENALTY UNDER SECTION 271C WAS ALSO LEVIED BY THE ACIT (TDS), IMPOSING PENALTY OF ` 60,91,665, VIDE ORDER DATED 27 TH JULY 2008. DURING THE COURSE OF THE IMPUGNED PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THERE WAS A REASONABLE CAUSE AS THE ASSESSEE WAS NOT HAVING FUNDS AT ALL TO DEPOSIT THE SAME IN THE GOVERNMENT ACCOUNT AS THE COMPANY HAD INCURRED HEAVY LOSSES . IN SUPPORT RE LIANCE WAS PLACED ON THE DECISION OF ALLAHABAD HIGH COURT IN CIT V/S RAM MEMORIAL EDUCATION PROMOTION SOCIETY, [ 2006 ] 287 ITR 155 (ALL.). HOWEVER, THE ACIT (TDS) REJECTED THE ASSESSEE S CONTENTION AND LEVIED THE PENALTY UNDER SECTION 272A(2) (C). 3 . BEFORE THE LEARNED COMMISSIONER (APPEALS), DETAIL SUBMISSIONS WERE RAISED IN SUPPORT OF THE CONTENTION THAT NO PENALTY IS LEVIABLE UNDER SECTION 272A(2)(C). THE SAID SUBMISSIONS HAVE BEEN INCORPORATED IN PAGES 2 TO 6 OF THE APPELLATE ORDER. THE SUM A ND M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 4 SUBSTANCE OF SUCH SUBMISSIONS ARE THAT ; (I) THE TDS RETURN UNDER SECTION 206 COULD NOT HAVE BEEN FILED BY THE ASSESSEE , SINCE THE TAX DEDUCTED AT SOURCE COULD NOT BE PAID IN THE GOVERNMENT ACCOUNT AND, THEREFORE, THE ASSESSEE COULD NOT HAVE BEEN FILED T HE PARTICULARS LIKE , DATE OF DEPOSIT OF TDS AMOUNT IN THE GOVERNMENT ACCOUNT, CHALLAN NUMBER, ETC., AS PRESCRIBED IN THE RETURN. THUS, THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT NO TDS RETURN UNDER SECTION 206 WAS REQUIRED TO BE FILED; (II) THE PAYMEN T OF INTEREST TO EMTEX INDUSTRIES INDIA LTD. AND DEDUCTION ON TDS WERE MADE ONLY BY BOOK ENTRIES WHICH SUBSEQUENTLY, THE ASSESSEE COMPANY HAD REVERSED THE ENTRY PERTAINING TO TDS ON 31 ST MARCH 2004; (III) IN ASSESSEE S CASE, ALREADY A PENALTY UNDER SECTION 271C HAS BEEN LEVIED TO THE TUNE OF ` 60,91,655 AND ONCE SUCH PENALTY HAS BEEN LEVIED FOR NON DEDUCTING THE TAX AT SOURCE AND NON PAYMENT INTO GOVERNMENT ACCOUNT, THEN THERE COULD NOT ARISE ANY ACTION FOR LEVYING PENALTY UNDER SECTION 272A(2)(C) FOR NON C OMPLIANCE OF PROVISIONS OF SECTION 206. IN SUPPORT OF THIS CONTENTION, RELIANCE OF THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT WAS PLACED IN SHRI RAM IMMEMORIAL EDUCATION PROMOTION SOCIETY. BESIDES THIS, VARIOUS OTHER ARGUMENTS WERE RAISED WITH REGARD TO THE DISTINCTION MADE BY THE ACIT ON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT. 4 . THE LEARNED COMMISSIONER (APPEALS) DULY APPRECIATED THE ASSESSEE S CONTENTION AND HELD THAT THE ACIT HAS NOT ASCRIBED ANY M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 5 REASON AS TO HOW THE EXPLANATION OF THE AS SESSEE IS NOT TENABLE AND ALSO HE HAS NOT MADE OUT A CASE , WHETHER THE ASSESSEE HAD ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF ANY CONTUMACIOUS CONDUCT OR DISHONESTY. HE APPRECIATED THE ASSESSEE S BONAFIDE REASON THAT FOR FILING OF THE RETURN O F INCOME UNDER SECTION 206, THE REQUISITE PARTICULARS HAD TO BE FULFILLED AND WHEN THE ASSESSEE HAS NOT PAID THE TAX TO THE GOVERNMENT ACCOUNT, THEN HE WAS IN NO POSITION TO FILE THE RETURN OF INCOME. THUS, THERE WAS A BONAFIDE BELIEF THAT NO TDS RETURN UN DER SECTION 206, WAS REQUIRED TO BE FILED. HE ALSO TOOK NOTE OF THE FACT THAT ALREADY PENALTY UNDER SECTION 217C HAS ALREADY BEEN LEVIED FOR NON DEDUCTION OF TAX AT SOURCE OR FOR NOT DEPOSITING INTO GOVERNMENT ACCOUNT THEN THERE WOULD NO ACTION TO LEVY PEN ALTY UNDER SECTION 272A(2)(C). THUS, HE DELETED THE PENALTY IN TERMS OF SECTION 273B. 5 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IT IS A TECHNICAL DEFAULT AS PER THE STATUE AND, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY IMPOSED P ENALTY UNDER SECTION 272A(2)(C). HE THUS, STRONGLY RELIED UPON THE PENALTY ORDER PASSED BY THE ACIT (TDS). 6 . BEFORE US, WHEN THE CASE WAS CALLED FOR HEARING, NEITHER THE RESPONDENT ASSESSEE NOR ANY OF ITS AUTHORISED REPRESENTATIVE APPEARED DESPITE SERVICE O F NOTICE. M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 6 7 . AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ON PERUSAL OF THE IMPUGNED PENALTY ORDER AS WELL AS THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT THE PENALTY UNDER SECTION 272A(2)(C), HAS BEEN LEVIED ON ACCOUNT O F FAILURE TO FURNISH RETURN OF INCOME UNDER SECTION 206 WITHIN DUE DATE. AS CULLED OUT FROM THE IMPUGNED ORDERS, THE ASSESSEE HAS NOT DEPOSITED THE TDS AMOUNT IN THE GOVERNMENT ACCOUNT ON THE GROUND THAT IT HAD NO FUNDS DUE TO HEAVY LOSS ES. DUE TO NON DEPO SIT OF TDS IN THE GOVERNMENT ACCOUNT, THE ASSESSEE HAS ALREADY BEEN SUBJECTED TO HEAVY INTEREST UNDER SECTION 201( 1A ) FOR SUM S AMOUNTING TO ` 40,20,493 AND FURTHER PENALTY OF ` 60,91,665 UNDER SECTION 271C. THE ORDER UNDER SECTION 201(1) AND 201(1A) HAS AL READY BEEN CONFIRMED BY THE TRIBUNAL. ONCE , ALREADY A PENALTY UNDER SECTION 271C HAS BEEN LEVIED FOR NON PAYMENT OF TDS AMOUNT TO THE GOVERNMENT ACCOUNT, THEN THE ASSESSEE HAD A BONAFIDE REASON THAT THE RETURN OF INCOME UNDER SECTION 206 , GIVING PARTICULAR S OF TDS DEPOSITED AND CHEQUE NUMBER WAS NOT REQUIRED TO BE FILED , BECAUSE THE REQUISITE DETAILS AND PARTICULARS WERE NOT THERE WITH THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE AGREE WITH THE FINDINGS AND THE CONCLUSION OF THE LEARNED COMMISSIONER (APPEALS ) THAT TH ERE WAS A REASONABLE CAUSE WITHIN THE MEANING OF 273B FOR NOT IMPOSING PENALTY. THE REASONING AND THE CONCLUSION GIVEN BY THE LEARNED COMMISSIONER (APPEALS) IS THUS AFFIRMED AND ACCORDINGLY, THE M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 7 PENALTY DELETED BY THE LEARNED COMMISSIONER (APPEALS ) IS UPHELD. CONSEQUENTLY, THE GROUNDS RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 8 . 8. IN THE RESULT, REVENUE S APPEAL IS DISMISSED. WE NOW TAKE UP REVENUE S APPEAL IN ITA NO.1158/MUM./2011, AND THE ONLY EFFE CTIVE GROUND RAISED BY THE REVENUE IS IMPOSITION OF PENALTY UNDER SECTION 272A(2)(G). 9 . THE FACTS AND THE ASSESSEE S EXPLANATION BEFORE THE AUTHORITIES BELOW WERE SAME AS GIVEN IN THE AFORESAID APPEAL. THE ASSESSEE S MAIN CONTENTION WAS THAT THE TDS CERTIFI CATE COULD NOT HAVE BEEN ISSUED TO THE TAX DEDUCT EE, SINCE THE TAX DEDUCTED AT SOURCE COULD NOT BE PAID TO THE GOVERNMENT ACCOUNT AND, THEREFORE, THE ASSESSEE COULD NOT HAVE FILED THE PARTICULARS LIKE DATE OF DEPOSIT OF TDS, AMOUNT IN GOVERNMENT ACCOUNT AN D CHEQUE NUMBER, ETC., WHICH IS REQUIRED TO BE MENTIONED IN THE CERTIFICATE. THE ASSESSEE COMPANY WAS NOT SUPPOSED TO ISSUE INCOMPLETE CERTIFICATE BECAUSE NO CREDIT COULD HAVE BEEN RECEIVED BY THE DEDUCTEE. A FALSE CERTIFICATE COULD NOT HAVE BEEN ISSUED. T HE OTHER EXPLANATIONS WERE EXACTLY THE SAME AS GIVEN IN RELATION TO THE PENALTY PROCEEDINGS UNDER SECTION 272A(2)(C). THE LEARNED COMMISSIONER (APPEALS) HAS DELETED THE SAID PENALTY ON THE SIMILAR REASON HOLDING M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 8 THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT ONCE THE TAX HAS NOT BEEN DEPOSITED TO THE GOVERNMENT ACCOUNT THEN NO CERTIFICATE UNDER SECTION 203 COULD HAVE BEEN ISSUED AND SUCH A BONAFIDE BELIEF FALLS WITHIN THE AMBIT OF SECTION 273B, WHICH ENVISAGES THAT NO PENALTY IS LEVIABLE IF THE ASSESSEE H AS BONAFIDE REASONS. 10 . SINCE THE FACTS AND CIRCUMSTANCES ARE EXACTLY SIMILAR, AS MENTIONED IN REVENUE S APPEAL IN ITA NO.1157/MUM./2011, THEREFORE, THE FINDINGS GIVEN THEREIN WILL APPLY MUTATIS MUTANDIS HERE ALSO. ACCORDINGLY, WE AFFIRM THE FINDINGS AND THE CONCLUSION OF THE LEARNED COMMISSIONER (APPEALS) DELETING THE PENALTY. CONSEQUENTLY, THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL ARE ALSO DISMISSED. 11 . 12. IN THE RESULT, REVENUE S APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 21 ST OCTOBER, 2014. SD/ - SD/ - . . B.R. BASKARAN ACCOUNTANT MEMBER SD/ - SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 21.10.2014. / COPY OF THE ORDER FORWARDED TO : M/S. MITTAL FABRICS MFG. CO. PVT. LTD. 9 ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI