DSL Enterprises Pvt. Ltd., Nashik V. ACIT, Range-1, Nashik

ITA 1342/PUN/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 66866 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 01-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: SANJAY DHARDE
• Keywords: Reasonable cause
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS. 1339 TO 1342/PN/2011 (ASSESSMENT YEAR: 2002-03) DSL ENTERPRISES PVT. LTD. ( SUCCESSOR IN THE INTEREST OF DATAR SWITCHGEAR LTD. ) F-8, DROAD, AMBAD MIDC NASHIK 422 010 PAN : AABCD 0179 K . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX RANGE 1, NASHIK . RESPONDENT APPELLANT BY : MR. SANJAY DHARDE RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 01-04-2013 DATE OF PRONOUNCEMENT : 23-04-2013 ORDER PER G. S. PANNU, AM IN ALL THE CAPTIONED APPEALS, THE SOLITARY ISSUE R ELATES TO PENALTY IMPOSED UNDER SECTION 271C OF THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT) FOR THE FAILURE OF THE ASSESSEE TO DEPOSIT THE TAX DEDUCTED AT SOURCE WITHIN THE TIME PERIOD PRESCRIBED IN LAW PERTAINING TO THE ASS ESSMENT YEAR 2002-03. AS THE FACTS AND CIRCUMSTANCES ARE COMMON IN ALL THE A PPEALS, ITA.NO.1339/PN/2011 IS CONSIDERED AS THE LEAD CASE. ITA NO. 1339/PN/2011 IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, NASHIK DATED 16.08.2011 WHICH HAS ARISEN FROM THE PENALTY, IMPOSED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE- 1, NASHIK UNDER SECTION 271C OF THE ACT AMOUNTING T O RS. 5,24,377/- VIDE ORDER DATED 16.03.2005. THE CIT(A) HAS UPHELD THE PENALTY, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS. 1339 TO 1342/PN/2011 DSL ENTERPRISES PVT. LTD. A.Y. 2002-03 2. BEFORE WE PROCEED TO ENUMERATE THE SPECIFIC PLEA RAISED BY THE ASSESSEE, IT COULD BE APPROPRIATE TO GIVE THE FOLLO WING BACKGROUND. ON 16.03.2005 THE ADDITIONAL COMMISSIONER OF INCOME TA X, RANGE-1, NASHIK IMPOSED THE PENALTY UNDER SECTION 271C OF THE ACT O F RS. 5,24,377/- ON THE GROUND THAT THE PERSON RESPONSIBLE FOR DEDUCTION OF TAX, WITHOUT REASONABLE CAUSE, FAILED TO DEPOSIT TAX DEDUCTED AT SOURCE OF RS. 5,24,377/- WITHIN THE TIME PERIOD PRESCRIBED IN RULE 30 OF THE RULES. THE ASSESSEE WAS FOUND TO HAVE DEDUCTED TAX AT SOURCE OF RS. 5,24,377/- FROM SALARIES WHICH WAS NOT DEPOSITED IN THE GOVERNMENT ACCOUNT WITHIN THE PRES CRIBED PERIOD. THE ASSESSEE HAD CHALLENGED THE LEVY IN APPEAL BEFORE T HE CIT(A) WHO VIDE HIS ORDER 12.08.2005 UPHELD THE LEVY OF PENALTY. NOT BE ING SATISFIED WITH THE ORDER OF THE CIT(A), THE ASSESSEE HAD CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS CONSOLIDATED ORD ER IN ITA NOS. 1713 TO 1716/PN/2005 DATED 28.03.2008 RESTORED THE MATTER B ACK TO THE FILE OF THE CIT(A) WITH CERTAIN DIRECTIONS. IN PURSUANCE TO THE ORDER OF THE TRIBUNAL DATED 28.03.2008 (SUPRA) THE IMPUGNED ORDER DATED 16.08.2 011 HAS BEEN PASSED BY THE CIT(A) SUSTAINING THE LEVY OF PENALTY, WHICH IS THE SUBJECT MATTER BEFORE US. 3. BEFORE US, THE SHORT POINT RAISED BY THE ASSESSE E IS THAT IT WAS DECLARED A SICK COMPANY IN TERMS OF SECTION 3(1)(O) OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (IN SHORT SICA) AN D IN TERMS OF THE SCHEME SANCTIONED BY THE BOARD FOR INDUSTRIAL AND FINANCIA L RECONSTRUCTION (IN SHORT BIFR) THE IMPUGNED PENALTIES ARE UNTENA BLE. AS PER THE ASSESSEE, THE REVIVAL SCHEME SANCTIONED BY THE BIFR EXEMPTED IT FROM LEVY OF IMPUGNED PENALTIES AS THE MATTERS RELATE TO PERIOD PRIOR TO THE EFFECTIVE DATE OF THE SCHEME WHICH IS 14.09.2006. A COPY OF THE SANCTIONE D SCHEME HAS BEEN PLACED BEFORE US AND THE RELEVANT CLAUSE OF THE SCH EME I.E. CLAUSE 9.2 (E) HAS BEEN POINTED OUT BY THE ASSESSEE, WHICH READS AS UN DER :- (E) IN RESPECT OF MATTERS PERTAINING TO INCOME TAX ACT, 1961, TO EXEMPT THE DE-MERGED COMPANY, RESULTING COMPANY (TO THE EXTENT THEY ITA NOS. 1339 TO 1342/PN/2011 DSL ENTERPRISES PVT. LTD. A.Y. 2002-03 RELATE TO THE DE-MERGED COMPANY) AND TRANSFEREE COM PANY (TO THE EXTENT THEY RELATE TO THE DE-MERGED COMPANY) AND THE PROMO TERS, GUARANTORS, DIRECTORS AND OTHER OFFICERS OF THE RESULTING COMPA NY AND TRANSFEREE COMPANY (SAVE AND EXCEPT THE PROMOTERS, GUARANTORS, DIRECTORS AND OTHER OFFICERS OF THE DE-MERGED COMPANY THAT CONTINUE IN THE TRANSFEREE COMPANY) FROM PENAL/DEFAULT INTEREST, PENAL ACTION, PROCEEDI NGS, PENALTIES AND SUCH OTHER LEVIES (AS APPLICABLE) IN RESPECT OF MATTERS PERTAINING TO THE DE-MERGED COMPANY PRIOR TO THE EFFECTIVE DATE. 4. AS PER THE APPELLANT, THE AFORESAID CLAUSE OF TH E SANCTIONED SCHEME PROTECTS THE ASSESSEE FROM LEVY OF PENALTY INASMUCH AS THE MATTERS IN QUESTION PERTAIN TO FINANCIAL YEAR 2001-02 RELEVANT TO THE ASSESSMENT YEAR 2002-03, WHICH IS PRIOR TO THE EFFECTIVE DATE OF TH E SCHEME I.E. 14.09.2006. IT IS FURTHER CONTENDED THAT SECTION 32(1) OF THE SICA PR OVIDES, INTER-ALIA, THAT SCHEME MADE UNDER SICA SHALL HAVE EFFECT NOTWITHSTA NDING ANYTHING INCONSISTENT CONTAINED IN ANY OTHER LAW EXCEPT THE PROVISIONS OF THE FOREIGN EXCHANGE REGULATION ACT, 1973 (46 OF 1973) AND THE URBAN LAND (CEILING AND REGULATION) ACT, 1976 (33 OF 1976). IT WAS THUS CON TENDED THAT ON THIS POINT OF LAW, IMPUGNED PENALTY LEVIED UNDER SECTION 271C OF THE ACT IS UNTENABLE. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS POINTED OUT THAT THE AFORESAID PLEA WAS NOT ACCEPTED BY THE CIT(A) IN THE IMPUGNED ORDER PRIMARILY FOR THE REASON THAT THE APPEALS OF THE ASSESSEE WERE LIABLE TO BE DISPOSED OF ONLY IN TERMS OF THE DIRECTIONS OF THE TRIBUNAL CONTAINED IN ITS ORDER DATED 28.03.200 8 (SUPRA) WHEREBY THE CIT(A) WAS REQUIRED TO EXAMINE THE ASSESSEES PLEA THAT THERE WAS A BONA- FIDE REASON OF FINANCIAL CRISIS FOR THE DEFAULT IN DEPO SITING THE TAX DEDUCTED WITHIN THE PRESCRIBED PERIOD, AND THE NEW PLEA BASE D ON THE EFFECT OF SECTION 32(1) OF THE SICA CANNOT BE NOW RAISED BY THE ASSES SEE. ITA NOS. 1339 TO 1342/PN/2011 DSL ENTERPRISES PVT. LTD. A.Y. 2002-03 6. IN SO FAR AS THE OBJECTION OF THE REVENUE THA T THE SAID PLEA CANNOT BE RAISED BY THE ASSESSEE AT THE PRESENT STAGE IS CONC ERNED THE SAME, IN OUR VIEW IS FLAWED INASMUCH AS THE PLEA IN QUESTION IS A POINT OF LAW AND THE ASSESSEE CAN SETUP SUCH PLEA AT ANY STAGE OF THE PR OCEEDINGS PROVIDED, IT IS RAISED ON BONA-FIDE GROUNDS WITH THE RELEVANT MATERIAL BEING ON RECORD . SECTION 32(1) OF THE SICA WHICH IS RELEVANT, READS AS UNDER :- 32. EFFECT OF THE ACT ON OTHER LAWS.(1) THE PROV ISIONS OF THIS ACT AND OF ANY RULES OR SCHEMES MADE THEREUNDER SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW E XCEPT THE PROVISIONS OF THE FOREIGN EXCHANGE REGULATION ACT, 1973 (46 OF 1973), AND THE URBAN LAND (CEILING AND REGULATION) ACT, 1976 (33 OF 1976) FOR THE TIME BEING IN FORCE OR IN THE MEMORANDUM OR ARTICLES OF ASSOCIATION OF AN IND USTRIAL COMPANY OR IN ANY OTHER INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT. 7. THE SAID SECTION PROVIDES THAT PROVISIONS OF SIC A OR ANY RULES OR SCHEMES MADE THEREUNDER SHALL HAVE EFFECT NOTWITHST ANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW, EXCEPTION BEING THE PROVISIONS OF FOREIGN EXCHANGE REGULATION ACT, 1973 (46 OF 1973) AND THE URBAN LAND (CEILING AND REGULATION) ACT, 1976 (33 O F 1976). OSTENSIBLY, THE LEGISLATIVE MANDATE ENSHRINED IN SECTION 32(1) OF S ICA IMBIBES THE SCHEMES SANCTIONED BY BIFR WITH OVERRIDING EFFECT QUA THE P ROVISIONS OF ANY OTHER LAW. A PERUSAL OF SECTION 32(1) OF SICA, SO FAR AS IT IS RELEVANT FOR OUR PURPOSE, REVEALS THAT ONCE A SCHEME IS SANCTIONED UNDER SICA , THE SAME WOULD HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREW ITH CONTAINED IN ANY OTHER LAW. IN OTHER WORDS, EVEN IF UNDER THE INCOME TAX A CT, 1961, IT WAS OPEN TO THE INCOME-TAX AUTHORITIES TO CHARGE AND IMPOSE THE IMP UGNED PENALTY, SO, HOWEVER, CONSIDERING THE SCHEME AS SANCTIONED (IN L IGHT OF CLAUSE 9.2(E) OF THIS SCHEME AS REPRODUCED EARLIER), IT IS NOT PERMI SSIBLE FOR THE INCOME-TAX AUTHORITIES TO IMPOSE THE PENALTY WHICH IS CONTRARY TO THE SANCTIONED SCHEME. QUITE CLEARLY CLAUSE 9.2 (E) PROTECTS THE ASSESSEE FROM IMPOSITION OF PENALTY UNDER THE ACT IN RESPECT OF MATTERS PERTAINING TO P ERIOD PRIOR TO THE EFFECTIVE ITA NOS. 1339 TO 1342/PN/2011 DSL ENTERPRISES PVT. LTD. A.Y. 2002-03 DATE OF THE SCHEME WHICH IS 14.09.2006, AS EVIDENT FROM THE COPY OF THE SCHEME PLACED ON RECORD. THE PENALTY PROCEEDINGS IN QUESTION BEFORE US, RELATE TO PERIOD PRIOR TO 14.09.2006; AND, THEREFOR E IN OUR CONSIDERED OPINION HAVING REGARD TO CLAUSE 9.2 (E) OF THE SANCTIONED S CHEME READ WITH SECTION 32(1) OF SICA, THE IMPUGNED PENALTY IS UNTENABLE AN D IS LIABLE TO BE SET ASIDE. 8. BEFORE CONCLUDING WE MAY ALSO STATE THAT OUR UND ERSTANDING OF THE OVERRIDING EFFECT OF THE SCHEME SANCTIONED BY BIFR ON ACCOUNT OF SECTION 32(1) OF SICA IS SUPPORTED BY THE FOLLOWING JUDGMEN TS - (I) COMMISSIONER OF INCOME TAX-1 VS. M/S TUBE INVES TMENTS OF INDIA, TAX CASE (APPEALS) NOS. 519 AND 521 OF 2005 DATED 04.01 .2012 (MADRAS HIGH COURT). (II) COMMISSIONER OF INCOME TAX VS. J.K. CORPORATIO N LTD., ITR NO. 1 OF 2000 DATED 05.10.2010 (CALCUTTA HIGH COURT). (III) VADILAL DAIRY INTERNATIONAL LTD. VS. STATE OF MAHARASHTRA, SALES TAX APPLICATION NO. 68 OF 2009 IN R.A. NO. 129 OF 2008, DATED 24.07.2009 (BOMBAY HIGH COURT). 9. IN CONCLUSION, THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, NASHIK TO DELETE THE PENALTY OF RS. 5,24,377/- IMPOSED UNDER SECTION 27 1C OF THE ACT FOR FAILURE TO DEPOSIT THE TAX AT SOURCE WITHIN THE TIME PRESCRIBE D IN RULE 30 OF THE RULES. 10. IN THE RESULT, APPEAL OF THE ASSESSEE I.E. ITA NO. 1340/PN/2011 IS ALLOWED. 11. SINCE IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES IN THE OTHER THREE CAPTIONED APPEALS STAND ON SIMILAR FOOTING AS IN ITA NO. 1340/PN/2011, OUR DECISION IN ITA NO. 13 40/PN/2011 WOULD APPLY MUTATIS MUTANDIS IN OTHER THREE APPEALS ALSO. ITA NOS. 1339 TO 1342/PN/2011 DSL ENTERPRISES PVT. LTD. A.Y. 2002-03 12. RESULTANTLY, ALL THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 23 RD APRIL, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT(TDS), PUNE; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY I.T.A.T., PUNE