Khodidas Family Trust, Ahmedabad V. The Addl.CIT.,TDS Range, Ahmedabad

ITA 1478/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2253 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Question of law; Non-deduction of tax; Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA NO.1478/AHD/2009 [ASSTT. YEAR : 2004-2005] DICTATED ON: 17-01-2011 KHODIDAS FAMILY TRUST 53, TIRTHNAGAR SOCIETY SOLA ROAD, GHATLODIA AHMEDABAD. PAN : AABTK 2549 M VS. THE ACIT, TDS RANGE AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N.SOPARKAR REVENUE BY : SHRI K. MADHUSUDAN O R D E R PER BHAVNESH SAINI, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A )-X, AHMEDABAD DATED 30-3- 2009 FOR ASSESSMENT YEAR 2004-2005 CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271C OF THE INCOME TAX ACT, 1961. 2. WE HAVE HEARD LEARNED REPRESENTATIVE OF BOTH THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A TRUST AND IT WAS NOTICED BY THE AO THAT DURING THE RELEVANT PERIOD, IT HAD PAID RS.2,40,000/- AS GODOWN RENT TO ONE KHODIDAS REGHUANDANDAS FAMILY TR UST WITHOUT DEDUCTION OF TAX AT SOURCE. IN VIEW OF THIS, THE AO ISSUED S HOW CAUSE NOTICE AS TO WHY THE PENALTY UNDER SECTION 271C SHOULD NOT BE LEVIED ON IT FOR NON-DEDUCTION OF TAX AT SOURCE. THE ASSESSEE EXPLAINED THAT IT HAD PAID RENT TO KHODIDAS RAGHUNANDANDAS FAMILY TRUST. THE SAID TRUST WAS A PRIVATE TRUST THROUGH A WILL FOR THE BENEFIT OF BENEFICIARIES SPECIFIED IN THE WILL. SINCE, THE PROPERTY WAS JOINTLY HELD BY CO-OWNERS I.E. BENEFICIARIES OF THE TRUST, THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT IN SPIRIT OF PROVIS IONS OF SECTION 26 OF THE IT ITA NO.1478/AHD/2009 -2- ACT, SHARE OF PAYMENT OF EACH INDIVIDUAL BENEFICIAR Y NEEDED TO BE CONSIDERED SEPARATELY. AS THE SHARE OF EACH INDIVIDUAL BENEFI CIARY IN SUCH PAYMENT DID NOT EXCEED TO MAXIMUM AMOUNT AS ENVISAGED UNDER SECTION 194(I) OF THE IT ACT, IT DID NOT DEDUCT TAX AT SOURCE. IT WAS ALSO SUBMITTE D THAT THE SAID TRUST HAD ALREADY PAID TAXES ON THE AMOUNT UNDER REFERENCE, T HEREFORE, THERE WAS NO LOSS TO REVENUE AND THE ASSESSEE WAS NOT LIABLE FOR PENA LTY UNDER SECTION 271C OF THE ACT. THE AO HOWEVER DID NOT ACCEPT THE CONTENT IONS OF THE ASSESSEE AND IMPOSED PENALTY FOR NON-DEDUCTION OF THE TDS. 4. THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEF ORE THE LEARNED CIT(A) AND IT WAS SUBMITTED THAT THERE WAS NO CONSCIOUS DI SREGARD ON THE PART OF THE ASSESSEE FOR ITS OBLIGATION OR CONTRAVENTION OF LAW BY IT. IT WAS POINTED OUT THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE ON INTEREST PAID TO THE TRUST BUT AS REGARDS THE PAYMENT OF RENT, IT WAS UNDER BONA FIDE BELIEF THAT THE RENT WAS PAID FOR THE BENEFIT OF BENEFICIARIES WHO WERE MORE THAN ONE BENEFICIARIES, THEREFORE, THE PROVISIONS OF LAW WOULD NOT APPLY IN THE CASE O F ASSESSEE. THE LEARNED CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND CONFIRMED THE PENALTY ORDER AND DISMISSED THE APPEAL OF THE A SSESSEE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND ALSO REFERRED TO T HE PENALTY ORDER TO SHOW THAT THE ASSESSEE SPECIFICALLY EXPLAINED THAT DUE TAXES WERE ALREADY PAID BY THE PAYEE AND FURTHER THE INTEREST LEVIED UNDER SECTION 201(1A) WAS ALSO PAID, THEREFORE, NO PENALTY IS TO BE LEVIED IN THE MATTER . HE ALSO REFERRED TO THE DETAILS OF THE TAXES PAID BY THE PAYEE, WHICH IS RE PRODUCED AT PAGE NO.3 OF THE PENALTY ORDER. THE LEARNED COUNSEL FOR THE ASSESSE E THEREFORE SUBMITTED THAT THE ASSESSEE HAS REASONABLE CAUSE FOR FAILURE TO COMPLY WITH THE PROVISIONS OF LAW. ON THE OTHER HAND, THE LEARNED DR, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. SECTION 273B OF THE IT ACT PROVIDES THAT N O PENALTY BE IMPOSED UNDER ITA NO.1478/AHD/2009 -3- SECTION 271C OF THE IT ACT ON THE PERSON OR THE ASS ESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. THE REASON ABLE CAUSE MEANS THAT WHICH PREVENTS A REASONABLE MAN OF ORDINARY PRUDENCE TO A CT UNDER NORMAL CIRCUMSTANCES, WITHOUT NEGLIGENCE OR INACTION OR WA NT OF BONA FIDE. IT WAS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNOR INDIA P. LTD. VS. CIT, 253 ITR 745 AS UNDER: LEVY OF PENALTY UNDER SECTION 271C OF THE INCOME-T AX ACT, 1961, FOR FAILURE TO DEDUCT TAX AT SOURCE, IS NOT AUTOMATIC. IN ORDER TO BRING IN APPLICATION OF SECTION 271C, IN THE BACKDROP OF THE OVERRIDING NON OBSTANTE CLAUSE IN SECTION 273B, ABSENCE OF REASONA BLE CAUSE, EXISTENCE OF WHICH HAS TO BE ESTABLISHED, IS A SINE QUA NON. BEFORE LEVYING PENALTY, THE CONCERNED OFFICER IS REQUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAILURE TO DEDUCT TAX AT SOURCE, T HE SAME WAS WITHOUT REASONABLE CAUSE. THE INITIAL BURDEN IS ON THE ASSE SSEE TO SHOW THAT THERE EXISTS REASONABLE CAUSE WHICH WAS THE REASON FOR THE FAILURE. THEREAFTER, THE OFFICER HAS TO CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE OR OTHER PERSON AS REGARDS THE REAS ON FOR FAILURE, WAS ON ACCOUNT OF REA-SONABLE CAUSE. AND IN THE CASE OF CIT VS. ITOCHU CORPORATION, 268 ITR 172 (DEL) HELD THAT THE QUESTION WHETHER THERE WAS REASONABLE CAUSE OR NOT FOR THE ASSESSEE NOT TO DEDUCT TAX AT SOURCE IS A QUESTION OF FACT. THE ASSESSEE FILED ITS ANNUAL RETURN OF SALARY IN F ORM NO. 24 AND THE SALARIES PAID IN INDIA TO ITS EXPATRIATE EMPLOYEES WERE SHOW N. THE COMPANY USED TO MAKE PAYMENT TO THESE EMPLOYEES OUTSIDE INDIA. HOWE VER, THE SAME WAS NOT REFLECTED IN THE RETURN NOR WERE THE TAXES DEDUCTED AT SOURCE. ON NOTICE BEING ISSUED, THE ASSESSEE FILED REVISED COMPUTATION FOR DIFFERENT PERIODS SHOWING THE AMOUNT PAID TO THE EMPLOYEES IN JAPAN. THE ASSE SSEE ALSO PAID SHORT DEDUCTION OF TAX. THEREAFTER, PROCEEDINGS UNDER SEC TION 271C OF THE INCOME- TAX ACT, 1961, WERE INITIATED. THE TRIBUNAL FOUND T HAT THE ASSESSEE HAD PAID THE TAX ALONG WITH INTEREST VOLUNTARILY AND THERE E XISTED A BONA FIDE BELIEF THAT TAX WAS NOT DEDUCTIBLE AT SOURCE. ON APPEAL: HELD T HAT THE FINDING OF THE TRIBUNAL WAS A FINDING OF FACT. THE TRIBUNAL WAS JU STIFIED IN DELETING PENALTY. NO SUBSTANTIAL QUESTION OF LAW AROSE FROM ITS ORDER . CONSIDERING THE FACTS OF THE CASE, IN THE LIGHT OF THE ABOVE DECISIONS, WE DO NOT FIND IT TO BE A FIT CASE FOR LEVY OF PENALTY. IT IS AN ADMITTED FACT THAT DUE TAXES ITA NO.1478/AHD/2009 -4- WERE ALREADY PAID BY THE PAYEE AS PRE-PAID TAXES. THE DETAILS OF THE TAXES ALSO NOTED IN THE PENALTY ORDER, ON WHICH THE AO HAS NOT ADVERSELY COMMENTED. THE ASSESSEE ALSO EXPLAINED THAT THE INTEREST LEVIE D UNDER SECTION 201(1A) WAS ALSO PAID. THEREFORE, THERE IS NO LOSS TO THE REVE NUE AND IT WAS ONLY A TECHNICAL BREACH OF THE PROVISIONS OF THE LAW FOR NON-DEDUCTI ON OF THE TDS IN THE MATTER. THE ASSESSEE CLAIMED THAT SINCE RENT WAS PAID TO TH E FAMILY TRUST, WHICH HAS LARGE NUMBER OF BENEFICIARIES, THE ASSESSEE WAS UND ER BONA FIDE BELIEF THAT IF THE SHARE OF PAYMENT TO EACH INDIVIDUAL BENEFICIARY IS CONSIDERED, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS. THE ABOVE FACTS SH OW THAT THE ASSESSEE HAD A REASONABLE CAUSE FOR FAILURE TO COMPLY WITH THE PRO VISIONS OF LAW. THE BELIEF OF THE ASSESSEE WAS BASED UPON THE FACTUAL THING AND U LTIMATELY, THE REVENUE IS COMPENSATED BY PAYING THE INTEREST AS WELL AS DUE T AXES BY THE PAYEE. THEREFORE, THERE IS NO LOSS TO THE REVENUE IN THE M ATTER. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AN D CANCEL THE PENALTY. 7. IN RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 ST JANUARY, 2011 SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 21-01-2011 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DEPARTMENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD