M/s Amartex Industries Ltd., Chandigarh V. Addl. CIT (TDS), Chandigarh

ITA 1284/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4546 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Non-deduction of tax
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS. 1283 & 1284/CHD/2012 ASSESSMENT YEARS : 2010-11 & 2007-08 M/S AMARTEX INDUSTRIES LTD., VS ADDL. CIT (TDS), SCO 18-19, SECTOR 9-D, CHANDIGARH. CHANDIGARH. PAN : AABCA2243H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARIKSHIT AGGARWAL, CA RESPONDENT BY : SHRI MANJEET SINGH. DATE OF HEARING : 30.12.2013 DATE OF PRONOUNCEMENT : 31.12.2013 O R D E R PER SUSHMA CHOWLA, JM THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 1.10.2012 RELATING TO ASSESSMENT YEARS 2007-08 AND 2010-11 AG AINST THE ORDER PASSED UNDER SECTION 271C AND 272A(2)(K) OF THE IN COME TAX ACT, 1961. 2. BOTH THESE APPEALS RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED BY THIS CONSOLIDATE D ORDER FOR THE SAKE OF CONVENIENCE. 2 3. THE LEARNED A.R. FOR THE ASSESSEE HAS SOUGHT WIT HDRAWAL OF APPEAL IN ITA NO.1284/CHD/2012. THE LEARNED D.R. FOR THE R EVENUE HAS NO OBJECTION TO THE SAME. THE APPEAL IN ITA NO.1284/C HD/2012 IS DISMISSED AS WITHDRAWN. 4. THE ASSESSEE IN ITA NO.1283/CHD/2012 HAS RAISED THE FOLLOWING GROUND OF APPEAL: THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, WORTHY CIT(A), VIDE PARA 4.2 OF HIS ORDER HAS ERRED IN CONFIRMING THE PENALTY OF RS. 9,23,640/- IMPOSED BY LD. ASSESSING OFFICER U/S 271C OF THE INCOME TAX ACT, 1 961. 5. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST PENALTY LEVIED UNDER SECTION 271C OF THE ACT FOR FAILURE TO DEDUCT TAX AT SOURCE OUT OF SALARY PAYMENTS. THE LEARNED A.R. FOR THE A SSESSEE POINTED OUT THAT SURVEY AT THE PREMISES OF THE ASSESSEE WAS CAR RIED OUT UNDER SECTION 133A OF THE ACT BY TDS DEPARTMENT ON 14.1.2010. TH E ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON AVERAGE BASIS FROM SALARY PAID TO THE DIRECTORS THOUGH ALL THE TAXES WERE PAID IN THE MONTH OF JANU ARY, 2010. BOTH THE ASSESSING OFFICER AND THE CIT (APPEALS) HELD THE AS SESSEE TO BE IN DEFAULT AND LEVIED PENALTY UNDER SECTION 271C OF TH E ACT AT RS.9,23,640/- IT WAS CONTENDED BY THE LEARNED A.R. FOR THE ASSESS EE THAT WHEN THERE IS NO DEFAULT UNDER SECTION 192(3) OF THE ACT, PENALTY UNDER SECTION 271C CANNOT BE LEVIED. RELIANCE WAS PLACED ON THE SERIE S OF THE DECISIONS AND MAIN RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE UTTRAKHAND HIGH COURT IN CIT VS. ENRON EXPAT SERVIC ES INC. REPORTED IN 330 ITR 496 (UTTRAKHAND) FOR THE PROPOSITION THAT W HERE TAX HAD BEEN DEDUCTED AND PAID BEFORE THE CLOSE OF THE FINANCIAL YEAR, NO INTEREST WAS CHARGEABLE FOR THE SAID DEFAULT UNDER SECTION 201(1 A) OF THE ACT. 3 6. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THE ASSESSEE HAD FAILED TO FILE ANY REPLY BEFORE THE ASSESSING OFFIC ER OR THE CIT (APPEALS). FURTHER RELIANCE WAS PLACED ON THE ORDE R OF THE CIT (APPEALS) IN UPHOLDING LEVY OF PENALTY UNDER SECTIO N 271C OF THE ACT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OU T AT THE BUSINESS PREMISES OF THE ASSESSEE ON 14.1.2010 BY THE ITO(TD SD)-II, CHANDIGARH. THE ASSESSEE HAD NOT CORRECTLY DEPOSITED THE TAX DU E ON THE SALARY PAID TO THE DIRECTORS AND THE ASSESSING OFFICER COMPUTED NON-DEDUCTION OF TDS AS PER TDS DETAILS PLACED AT PAGE-1 OF THE ORDE R OF PENALTY PASSED UNDER SECTION 271C OF THE ACT. THE ASSESSEE WAS F OUND TO HAVE DEFAULTED IN CORRECT DEDUCTION OF TAX AT SOURCE AND CONSEQUENTLY PENALTY UNDER SECTION 271C OF THE ACT WAS LEVIED AT RS.9,23 ,640/-. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER . ON THE PERUSAL OF THE RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, IT IS APPARENT THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE OUT OF THE SALA RY PAYABLE TO THE DIRECTORS. HOWEVER, THERE WAS SOME DEFAULT IN THE SAID DEDUCTION OF TAX AT SOURCE TOTALING RS.9,23,640/-, WHICH WAS MADE GO OD BY THE ASSESSEE BY DEPOSITING THE SAID DEMAND BEFORE THE CLOSE OF T HE FINANCIAL YEAR. THE ISSUE ARISING IN THE PRESENT APPEAL IS WHETHER IN SUCH CIRCUMSTANCES THE ASSESSEE WAS LIABLE TO LEVY OF PENALTY UNDER SE CTION 271C OF THE ACT. 8. UNDER THE PROVISIONS OF SECTION 192 OF THE ACT D EDUCTION OF TAX AT THE TIME OF PAYMENT OF SALARY IS PROVIDED. UNDER S ECTION 192(3) OF THE ACT IT IS FURTHER PROVIDED THAT WHERE A PERSON IS R ESPONSIBLE FOR DEDUCTING TAX AT SOURCE, AT THE TIME OF MAKING ANY DEDUCTION, INCREASE OR REDUCE THE AMOUNT TO BE DEDUCTED, UNDER THE SECTION , FOR ADJUSTING ANY EXCESS OR DEFICIENCY ARISING OUT OF ANY PREVIOUS DE DUCTION OR FAILURE TO 4 DEDUCT, DURING THE FINANCIAL YEAR. THE HON'BLE UTR AKHAND HIGH COURT IN CIT VS. ENRON EXPAT SERVICES INC. (SUPRA) WHILE INT ERPRETING PROVISIONS OF SECTION 192(1) AND 192(3) OF THE ACT AND ITS CON SEQUENTIAL EFFECT ON CHARGING OF INTEREST FOR THE DELAYED PAYMENT OF THE TAX DEDUCTED AT SOURCE UNDER SECTION 201(1A) OF THE ACT HELD AS UND ER: 4. IT IS TRUE THAT SUB-S. (1) OF S. 192 OF THE ACT CONTEMPLATES DEDUCTION OF INCOME- TAX AT THE TIME OF PAYMENT AND AT THE SAME TIME, 20 1(LA) DEALS WITH A SITUATION WHEN TAX IS NOT DEDUCTED, BUT SUB-S. 3 OF S. 192 IS A PA RT OF S. 192 REQUIRED TO BE READ WITH SUB-S. THEREOF, FOR NOTHING HAS BEEN EXPRESSED IN T HE ACT TO TREAT SUB-S. (3) AS A SEPARATE PROVISION. THE OBJECT AND PURPOSE OF SUB-S . I IS TO PERMIT THE PERSON OBLIGED TO DEDUCT TO MAKE ADJUSTMENTS. SUB-S. (3) DOES NOT STOP WHILE AUTHORISING ADJUSTMENT IN CASE OF EXCESS OR DEFICIENT DEDUCTION, BUT ALSO AUTHORISES ADJUSTMENT IN CASE OF TOTAL FAILURE TO DEDUCT DURING THE FINANCIAL YEAR. SUB-S. (3), THEREFORE, MAKES IT ABUNDANTLY CLEAR THAT IF THERE IS A FAILURE TO DEDUCT IN A FIN ANCIAL YEAR, THE SAME CAN BE DEDUCTED BY WAY OF ADJUSTMENT DURING THE FINANCIAL YEAR. IN THOSE CIRCUMSTANCES, THE OBLIGATION TO DEDUCT AT THE TIME OF PAYMENT, WH ICH IS THE MANDATE OF SUB-S. (1) OF S. 192, STANDS EXTENDED UPTO THE END OF THE FINA NCIAL YEAR BY VIRTUE OF THE PROVISIONS CONTAINED IN SUB-S. (3) OF S. 192 OF TH E ACT. THE RIGHT TO ADJUST, GRANTED BY SUB-S. (3), DOES NOT EXTEND BEYOND THE FINANCIAL YE AR. 5.THE LEARNED COUNSEL FOR THE APPELLANTS SUBMITTED THAT IN VIEW OF THE PRONOUNCEMENT AS ABOVE, THE PROVISIONS OF S. 201(1A ) OF THE ACT WOULD BECOME OTIOSE. WE DO NOT THINK SO. SEC. 201(1A) APPLIES ON LY WHEN DURING THE FINANCIAL YEAR WHOLE OR ANY PART OF THE TAX DEDUCTIBLE HAS NOT BEEN DEDUCTED. WE ACCORDINGLY, CONCLUDE THE MATTER AND ANSWER THE QUESTION, AS ABO VE, IN FAVOUR OF THE ASSESSEE, WHILE DISMISSING THE APPEAL. 10. THE HON'BLE HIGH COURT HAS LAID DOWN THE PROPOS ITION THAT IN THOSE CIRCUMSTANCES, THE OBLIGATION TO DEDUCT AT THE TIME OF PAYMENT, WHICH IS THE MANDATE OF SUB-S. (1) OF S. 192, STANDS EXTENDED UPTO THE END OF THE FINANCIAL YEAR BY VIRTUE OF THE PROVISIONS CONTAINED IN SUB-S. (3) OF S. 192 OF TH E ACT. THE RIGHT TO ADJUST, GRANTED BY SUB-S. (3), DOES NOT EXTEND BEYOND THE FINANCIAL YEAR. APPLYING THE ABOVE SAID PRINCIPLE TO THE FACTS OF THE PRESENT CASE WHERE THE ASSESSEE HAD DEPOSITED THE TAX DUE ON THE SALARY PAYMENT BEFORE THE CLOSE OF THE F INANCIAL YEAR, THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT AND CONSEQ UENTLY THERE IS NO MERIT IN LEVYING THE PENALTY UNDER SECTION 271C OF THE ACT WHICH IS 5 ATTRACTED BOTH WHERE THE ASSESSEE FAILED TO DEDUCT WHOLE OR ANY PART OF THE TAX REQUIRED BY OR UNDER THE PROVISIONS OF CHAP TER-XVIIB, THEN SUCH PERSON IS LIABLE TO PAY THE PENALTY EQUIVALENT TO T HE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT OR PAY. WE FIND NO ME RIT IN THE LEVY OF PENALTY UNDER SECTION 271C OF THE ACT. WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS ALLOWED. 11. IN THE RESULT, THE APPEAL IN ITA NO.1283/CHD/20 12 IS ALLOWED AND THE APPEAL IN ITA NO.1284/CHD/2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF DECEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST DECEMBER, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH