ITO (TDS), Patiala V. Sh. Tarsem Lal, Mandi Gobindgarh

ITA 1311/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5144 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 08-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH DR SHRI N K SAINI
• Keywords: Bonafide belief; Reasonable cause
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 1311 /CHD/2016 (ASSESSMENT YEAR: 2012-13) THE INCOME TAX OFFICER(TDS), VS. SH.TARSEM LAL PROP. PATIALA. M/S B.T. STEELS (INDIA), AMLOH ROAD, MANDI GOBINDGARH. TAN NO. PTLT11152B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR SHRI N.K. SAINI RESPONDENT BY : DATE OF HEARING : 20.04.2017 DATE OF PRONOUNCEMENT : 19.05.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAIN ST THE ORDER OF LD. CIT (APPEALS), PATIALA DATED 28.9. 2016 FOR ASSESSMENT YEAR 2012-13, DELETING THE PENALTY LEVIE D UNDER SECTION 271CA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR DEFAULT IN COLLECTING TAX AT SOURCE ON FURTHER SALES IN COMPLIANCE WITH THE PROVISIONS OF SECTION 206C(1) OF THE ACT. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS : (I) THE LD.CIT(A) IS ERRED IN DELETING PENALTIES U/S 2 71CA R.W.S. 274 OF THE I.T. ACT, 1961 FOR THE A. Y. 2012- 13 EVEN THE LD. CIT(A) HIMSELF HOLD THAT GOODS SOLD BY 2 THE APPELLANT ARE COVERED IN THE DEFINITION OF SCRAP IN THE TERMS OF THE EXPLANATION (B) TO THE SECTION 20 6C OF THE I.T. ACT, 1961 AND ITS SALE IS LIABLE FOR TCS NOT ONLY AT THE FIRST STAGE BUT ALSO AT EACH STAGE OF SA LE AS PROVIDED IN SECTION 206C OF THE I. T. ACT, 1961. (II) THE LD.CIT(A) IS ERRED IN DELETING PENALTIES 271C A R.W..S. 274 OF THE I.T. ACT, 1961 IGNORING THAT THE ASSESSEE HAD NOT COMPLIED STATUTORY PROVISIONS EITHER BY COLLECTING TAX OR BY COLLECTING FORM NO. 27C FROM THE BUYER IN THE DUPLICATE AT THE TIME OF SALE AND DEPOSITED TO THE INCOME TAX DEPARTMENT ON OR BEFORE 7 TH DAY OF NEXT MONTH IN WHICH SALE OF SCRAP WAS MADE. (III) THE LD.CIT(A) IS ERRED IN DELETING THE PENALTY U/S 271CA FOR NON-COLLECTION TAX AT SOURCE U/S 206C IGNORING THE FACT THAT THE ASSESSEE HAS COMMITTED DEFAULT FOR NON COLLECTION OF TAX AT SOURCE AS REQU IRED UNDER THE PROVISIONS OF SECTION 206 OF THE I.T. ACT, 1961. (V) THE LD.CIT(A) IS ERRED IN DELETING THE PENALTY U/S 271CA IGNORING THAT THE ASSESSEE CONTINUOUSLY DENYING FROM THE START TO THE END THAT HE HAD PURCHASED SCRAP EVEN IN THE AUCTION SELLERS HAS CLASSIFIED THE MATERIAL AS SCRAP. (VI) THE LD. CIT(A)'S FINDINGS THAT WHERE THE PURCHASER HAS PAID THE TAX ON HIS INCOME, THE REVENUE CAN ONLY CHARGE INTEREST ON THE TAX NOT SO COLLECTED U/S 206C (7) IS ERRONEOUS AS HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P.) LIMITED VS. COMMISSIONER OF INCOME TAX HAS HELD THAT WHERE TAX DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE, IT WILL NOT ALTER THE LIABILITY OF CHARGE INTEREST UNDER SEC TION 201(1 A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXE S BY 3 THE DEDUCTEE ASSESSEE OR THE LIABILITY FOR PENALTY U/S 271C OF THE INCOME TAX ACT. 3. THE ONLY GRIEVANCE OF THE REVENUE IN THE PRESEN T APPEAL IS AGAINST THE ACTION OF THE CIT (APPEALS) I N DELETING THE PENALTY LEVIED UNDER SECTION 271CA OF THE INCOME TAX ACT, 1961 FOR DEFAULT IN COLLECTION OF T AX AT SOURCE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL. HE IS RUNNING THE BUSINESS OF PUR CHASE AND SALE OF OLD IRON SCRAP. THOUGH ON PURCHASE OF T HE SCRAP, THE TAX WAS BEING COLLECTED BY THE PARTIES F ROM WHOM THE ASSESSEE HAD MADE PURCHASES, YET ON THE SA LE OF THIS SCRAP, THE ASSESSEE HAD NEITHER COLLECTED TAX AT SOURCE NOR DEPOSITED THE SAME INTO GOVERNMENT ACCOU NT, AS REQUIRED UNDER SECTION 206C(1) OF THE I. T. ACT, 1961. THEREFORE, PENALTY PROCEEDINGS UNDER SECTION 271CA R..W.S. 274 OF THE I.T. ACT, 1961 WERE INITIATED. T HE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE ON AS T O WHY PENALTY UNDER SECTION 271CA OF THE INCOME TAX ACT M AY NOT BE IMPOSED AS THE ASSESSEE HAD FAILED TO COLLEC T TCS ON SALE OF SCRAP DURING THE FINANCIAL YEAR 2011-12 AS REQUIRED UNDER THE PROVISIONS OF SECTION 206C OF TH E ACT. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE FILED HIS REPLY AND RELIED ON A JUDGEMENT IN THE CASE OF WIPR O GE MEDICAL SYSTEMS LTD (2005) 24 CCH 0001 BANGALORE TRIBUNAL GIVEN BY HONBLE I.T.A.T. THE ASSESSING OF FICER DID NOT ACCEPT THE SAID JUDGMENT FOR THE REASON THA T THE 4 SAME HAD NOT REACHED FINALITY AND CHOSE TO FOLLOW C BDT LETTER F.NO.275/17/2013-IT(B) DATED 16.7.2013 WITH REGARD TO THE APPLICATION OF SECTION 206C. SINCE T HE ASSESSEE-DEDUCTOR HAD NOT COLLECTED TCS AT THE RATE OF 1% ON SALES OF RS.18,18,35,801/- AS REQUIRED UNDER THE PROVISIONS OF CHAPTER XVII BB OF THE INCOME TAX ACT , 1961 AND ALSO FAILED TO SUBMIT ANY REASONABLE CAUSE FOR NON COLLECTION OF TAX AT SOURCE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS LIABLE TO PAY, BY WAY OF PENALTY U NDER SECTION 271CA, A SUM EQUAL TO THE AMOUNT OF TAX WH ICH HE FAILED TO COLLECT AT SOURCE. 5. AGGRIEVED BY THE SAME, THE MATTER WAS CARRIED I N APPEAL BEFORE THE LD. CIT (APPEALS). DETAILED ARGU MENTS WERE MADE BY THE ASSESSEE WHICH ARE REPRODUCED AT P ARA 6.2 OF THE CIT (APPEALS)S ORDER. 6. THE LD. CIT (APPEALS) REJECTED ASSESSEES CONTENTION THAT THE GOODS SOLD DID NOT QUALIFY AS S CRAP AND THAT THE ASSESSEE HARBOURED A BONAFIDE BELIEF THAT THE GOODS WERE NOT SCRAP AND HENCE NOT EXIGIBLE TO TCS BUT AT THE SAME TIME THE LD. CIT (APPEALS) AGREED W ITH THE ASSESSEES CONTENTION THAT THERE WAS A REASONABLE C AUSE FOR NON LEVYING OF PENALTY. THE LD. CIT (APPEALS) RELIED UPON THE JUDGMENT OF THE I.T.A.T., BANGALORE BENCH IN THE CASE OF WIPRO GE MEDICAL SYSTEM LTD. (2005) 24 CCH 001 (BANG TRIB.) AND HELD THAT SINCE TAXES HAD BEEN PAI D BY THE BUYERS NO LOSS HAD BEEN CAUSED TO THE EXCHEQUER ON ACCOUNT OF ASSESSEES DEFAULT IN NOT COLLECTING TCS AND 5 THIS CONSTITUTED REASONABLE CAUSE FOR NOT LEVYING P ENALTY. THUS, THE LD. CIT (APPEALS) DELETED THE PENALTY LEV IED BY THE ASSESSING OFFICER. 7. AGGRIEVED BY THE SAME, THE REVENUE HAS FILED TH E PRESENT APPEAL BEFORE US. 8. DURING THE COURSE OF HEARING BEFORE US, IT WAS BROUGHT TO THE NOTICE OF THE BENCH THAT ON IDENTICA L SET OF FACTS IN THE OWN CASE OF THE ASSESSEE, THIS TRIBUNA L HAS UPHELD THE ORDER OF THE CIT(APPEALS) DELETING THE P ENALTY LEVIED U/S 271CA OF THE ACT VIDE ORDER DATED 30.12. 2016 PASSED IN ITA NO.560/CHD/2016 RELATING TO ASSESSMEN T YEAR 2011-12. WE HAVE GONE THROUGH THE ORDER OF TH E TRIBUNAL DATED 30.12.2016. WE FIND THAT THE TRIBUN AL WHILE DELETING THE PENALTY IN THE OWN CASE OF THE A SSESSEE HAS FOLLOWED THE ORDER OF THE COORDINATE BENCH OF T HE TRIBUNAL IN THE CASE OF ITO(TDS), PATIALA VS. SHRI OM PRAKASH GUPTA(HUF) IN ITA NOS.341 & 342/CHD/2016 DATED 20.6.2016. THE OPERATIVE PART OF THE SAID ORD ER IS REPRODUCED AS UNDER: 11. WE FIND THAT THE BELIEF HARBOURED BY THE ASSESSEE, CONSIDERING THE FACTS NARRATED ABOVE CONSTITUTED A REASONABLE BELIEF WHICH AN ORDINARY PERSON IN THE PREVAILING CIRCUMSTANCES WOULD HAVE HARBOURED. IT IS NOT THE CASE THAT THE ASSESSEE WAS FOUND LIABLE TO COLLECT TAX AT SOURCE ON THE GOODS SOLD BY IT SINCE THE GOODS WERE CATEGORICALLY FOUND TO QUALIFY AS SCRAP AS SUCH, AS PROVIDED IN THE DEFINITION OF THE SAME IN THE EXPLANATION TO SECTION 206C. IN FACT THE 6 ASSESSEE WAS FOUND LIABLE TO COLLECT TAX AT SOURCE SINCE THE ASSESSEE HAD ACCEPTED THE SAME AS SCRAP HAVING PAID TAXES ON THE SAME WHILE PURCHASING THE GOODS AND HAVING NOT CATEGORICALLY ESTABLISHED THAT THE GOODS WERE NOT IN THE NATURE OF SCRAP. IN SUCH CIRCUMSTANCES, WHERE AS A MATTER OF FACT IT HAS NOT BEEN CATEGORICALLY ESTABLISHED THAT THE GOODS WERE SCRAP AND WASTE AS SUCH WHICH COULD NOT BE USED FURTHER, THE FACTS NARRATED BY THE ASSESSEE , WHICH WE FIND HAD NOT BEEN CONTROVERTED BY THE REVENUE, REVEAL THAT THE ASSESSEE HARBOURED AN HONEST BELIEF BASED ON REASONABLE GROUNDS THAT THE GOODS SOLD WERE NOT SCRAP. THE SAME CONSTITUTED REASONABLE CAUSE FOR NOT COLLECTING TAX AT SOURCE EVEN THOUGH THE LD. CIT( APPEAL) DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE ON MERIT. THE HONBLE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNOR INDIA PRIVATE LIMITED VS CIT AND OTHERS 253 ITR 745 HAS DEFINED REASONABLE CAUSE AS FOLLOWS: 'REASONABLE CAUSE' AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDI NARY PRUDENCE. IT CAN BE DESCRIBED AS A PROBABLE CAUSE. IT MEANS AN H ONEST BELIEF FOUNDED UPON REASONABLE GROUNDS, OF THE EXISTENCE O F A STATE OF CIRCUMSTANCES, WHICH ASSUMING THEM TO BE TRUE, WOUL D REASONABLY LEAD ANY ORDINARILY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT SA ME WAS THE RIGHT THING TO DO. THE CAUSE SHOWN HAS TO BE CONSIDERED A ND ONLY IF IT IS FOUND TO BE FRIVOLOUS, WITHOUT SUBSTANCE OR FOUNDAT ION, THE PRESCRIBED CONSEQUENCES FOLLOW. 12. IN VIEW OF THE SAME WE AGREE WITH THE LD.CIT(A) THAT THE ASSESSEE HAD REASONABLE CAUSE FOR NOT COLLECTING TAX AT SOURCE ,THE ABSENCE OF WHICH IS ESSENTIAL FOR LEVYING PENALTY AS HELD BY THE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNOR (SUPRA).WE THEREFORE UPHOLD THE ORDER OF THE LD. CIT(APPEALS) DELETING THE LEVY OF PENALTY UNDER SECTION 271CA OF THE ACT. 7 THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 9. RESPECTFULLY FOLLOWING THE PRECEDENT, WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE REVENUE AND THE SAM E IS ACCORDINGLY DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.5.2017. (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 19 TH MAY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH