Asst.CIT,Circle-15(2), Hyderabad V. M/s Good Health Plan Limited, Hyderabad

ITA 155/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5533 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMASEKHAR REDDY
• Keywords: Question of law; Initiation of penalty proceedings; Non-deduction of tax; Reasonable cause; Non compliance; Ignorance of law
• Section: 273B; 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 155/HYD/2013 ASSESSMENT YEAR 2009-10 ASST. CIT, CIRCLE-15(2), HYDERABAD. VS. M/S. GOOD HEALTH PLAN LIMITED, HYDERABAD. PAN:AABCG8036G [APPELLANT] [RESPONDENT] APPELLANT BY: SRI SOMASEKHAR REDDY RESPONDENT BY: SRI K.C. DEVDAS DATE OF HEARING: 09-12-2013 DATE OF PRONOUNCEMENT: 22.01.2014 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 1-11-2012 OF CIT (A) II, HYDERABAD PERTAININ G TO ASSESSMENT YEAR 2009-10. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS BEFORE US:- 1. WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) WAS CORRECT IN ADMITTING THE ADDITIONAL GROUNDS FILED BEFORE HER, WITHOUT CITING ANY REASONS. 2. WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) WAS JUSTIFIED IN DELETING THE PENALTY LEVIED U/S 271C OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS FUNCTIONING AS THIRD PARTY ADMINISTRATOR (TPA) AND HAS OBTAINED LICENCE FROM INSURANCE REGULATORY DEVELOPMENT AUTHORITY (IR DA) FOR THIS PURPOSE. AS LICENSED TPA, THE ASSESSEE IS RENDERIN G ALL THE SERVICES IN ACCORDANCE WITH HEALTH INSURANCE BUSINESS MAKING PAYMENTS TO HOSPITALS ON BEHALF OF THE INSURANCE COMPANIES FOR THE TREATMENT OF THE ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 2 POLICY HOLDERS. THERE WAS A SURVEY U/S 133A OF IT ACT ON 20/10/2009 AND IT WAS FOND THAT NO TDS HAS BEEN MADE ON SUCH P AYMENTS TO HOSPITALS. AFTER CONSIDERING ALL THE FACTS, THE AS SESSING OFFICER FINALISED THE ORDER U/S 201(1) AND 201(1A) RAISING A DEMAND O F RS. 19,66,218/- U/S 201(1A) OF I T ACT. SUBSEQUENTLY, THE PENALTY P ROCEEDINGS U/S 271C WERE INITIATED BY THE ASSESSING OFFICER AND LEVIED PENALTY OF RS. 3,27,70,364/- WHICH IS A SUM EQUAL TO THE AMOUNT OF TAX WHICH THE ASSESSEE FAILED TO DEDUCT U/S 194J OF I T ACT. 4. AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A), T HE ASSESSEE RAISED THE ADDITIONAL GROUND WHICH WAS ADMITTED BY THE CIT (A) FOR ADJUDICATION. AGAINST THIS ADMISSION, THE LEARNED D R SUBMITTED THAT THE CIT (A) SHOULD NOT HAVE ADMITTED THE ADDITIONAL GRO UND. THE ADDITIONAL GROUND READS AS FOLLOWS:- 1. THE APPELLANT BEGS TO PLACE BEFORE THE HONBLE CIT(A) FOLLOWING ADDITIONAL GROUNDS IN ADDITION TO THE GROUNDS ALREADY MENTIONED IN THE GROUNDS OF APPEAL: A. THE ACTION OF THE ADDL. CIT, RANGE- 15, HYDERABAD IN ASSUMING JURISDICTION FOR LEVY OF PENALTY U/S 271 C OF IT ACT CANNOT BE HELD AS LEGAL IN VIEW OF THE FACT OF CLEAR OBSERVATION BY THE ASSESSING OFFICER THAT THE ASSES SEE WAS NOT TREATED AS DEFAULTER FOR THE PURPOSE OF SECTION 201 (1) OF THE IT ACT. B. WITHOUT PREJUDICE TO THE ABOVE, TILE ACTION OF THE ADD!. CIT, RANGE- 15, HYDERABAD IN INITIATION OF PENALTY PROCEEDINGS BY ISSUING SHOW CAUSE NOTICE DATED 21.3.2011 HELD TO BE INVALID AS THE SAME WERE BARRED BY LIMITATION. C. WITHOUT PREJUDICE TO THE ABOVE, THE ACTION OF THE ADDL. CIT, RANGE-15, HYDERABAD IF AT ALL EMPOWERED TO LEVY PENALTY HE OUGHT TO HAVE FINALIZED THE PROCEED INGS WITHIN SIX MONTHS FROM THE END OF THE MONTH (NOVEMB ER 2009) IN WHICH THE ORDER U/S 201 (1) & 201 (1 A) WAS PASSED. D. THE ADDL. CIT, RANGE-15, HYDERABAD OUGHT TO HAVE OBSERVED THAT THE PROVISIONS OF SECTION 275(1)(A) OR (B) WOULD NOT BE APPLICABLE TO THE CASE UNDER CONSIDERA TION AND TIME LIMIT STIPULATED U/S 275(1 )(E )WOULD ONLY APPLY. ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 3 IN SUCH SITUATION PENDING OF APPEAL AGAINST LEVY OF INTEREST U/S 201 (1A ) WOULD NOT BE RELEVANT FACTOR AND OUGHT TO HAVE FINALIZED THE PENALTY PROCEEDINGS (IF AT ALL APPLICABLE), WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER U/S 271 C WAS PASSED. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO THE SUBMISSIONS ALREADY MADE IN THE GROUNDS OF APPEAL F ILED EARLIER. 3. IT IS SUBMITTED TILE ABOVE GROUNDS GO TO THE ROOT OF TILE MATTER IN DECIDING THE CASE. 4. IT IS FURTHER SUBMITTED THAT TO ADJUDICATE THE A BOVE GROUNDS NO FRESH ENQUIRY IS REQUIRED TO BE MADE. IT IS REQUESTED THAT CIT(A) MAY KINDLY PERMIT THE A PPELLANT TO RAISE THE ABOVE LEGAL GROUNDS WHICH ARE IN ACCOR DANCE WITH THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION 229 ITR 383-387. 5. IT IS SUBMITTED THAT FAILURE TO MENTION TILE GRO UNDS WAS NEITHER WILFUL NOR UNREASONABLE AND SECTION 250(5) OF THE IT ACT EMPOWERS THE APPELLATE AUTHORITY TO ADMIT AN Y NEW GROUNDS' 5. AFTER CONSIDERING THE ABOVE, THE CIT (A) ADMITTE D THE ADDITIONAL GROUND. AFTER GOING THROUGH THE ORDER OF THE CIT (A) AND FACTS ON THIS ISSUE, WE HOLD THAT THE CIT (A) IS CORRECT IN ADMI TTING THE ADDITIONAL GROUND RAISED BEFORE HIM FOR ADJUDICATION AS THIS ADDITIONAL GROUND RAISED BY THE ASSESSEE GOES TO THE ROOT OF THE MATT ER IN DECIDING THE CASE. THE ASSESSING OFFICER HAS BEEN REQUESTED TO S UBMIT HIS COMMENTS ON THE ADDITIONAL GROUND RAISED. FURTHER, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE HAS BEEN ADMITTED BY THE CIT (A) IN VIEW OF THE HONBLE SUPREME COURTS DECISION IN THE CASE OF NTPC VS. CIT 229 ITR 383-387. AFTER GOING THROUGH THE ORDER OF THE CIT (A) AND CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTA NCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT (A) FOR ADMITTING THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. BEING SO , WE CONFIRM THE ORDER OF THE CIT (A) ON THIS ISSUE. 6. WITH REGARD TO SECOND GROUND, THE LEARNED DR SUB MITTED THAT THE CIT (A) SHOULD NOT HAVE DELETED THE PENALTY LEV IED U/S 271C OF THE ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 4 ACT. IT IS SUBMITTED THAT THE ASSESSEE DID NOT PLAC E ANY MATERIAL TO SHOW THAT THERE WAS REASONABLE CAUSE FOR NOT DEDUCT ING TDS EXCEPT STATING THAT AS PER THEIR OPINION, NO TAX WAS DEDU CTIBLE. IF THIS REASON HAS TO BE CONSIDERED AS REASONABLE CAUSE, THEN THER E IS NO RELEVANCE OF PENALTY U/S 271C. ACCORDING TO THE LEARNED DR, THE STATEMENT MADE BY THE ASSESSEE IS GENERAL IN NATURE AND SHOULD NOT BE CONSIDERED. FURTHER, HE SUBMITTED THAT THE CBDT CIRCULAR NO. 8 OF 24 TH NOVEMBER, 2009 CLARIFIED THE POSITION AND NOT LAID DOWN ANY N EW OBLIGATION ON THE PART OF THE ASSESSEE. BEING SO, ACCORDING TO HIM T HE ASSESSEE IS DUTY BOUND TO DEDUCT TDS FROM THE PAYMENTS MADE TO THE P ARTIES. IN SUPPORT OF THE SAME, HE RELIED UPON CIRCULAR NO. 8 OF CBDT DATED 24 TH NOVEMBER, 2009 WHICH READS AS FOLLOWS:- 3.1. IN VIEW OF ABOVE, ALL SUCH PAST TRANSACTIONS BETWEEN TPAS AND HOSPITALS FALL WITHIN PROVISIONS OF SECTI ON 194J AND CONSEQUENCE OF FAILURE TO DEDUCT TAX OR AFTER DEDUCTING TAX FAILURE TO PAY ON ALL SUCH TRANSACTIO NS WOULD MAKE THE DEDUCTOR (TPAS) DEEMED TO BE AN ASSESSEE I N DEFAULT IN RESPECT OF SUCH TAX AND ALSO LIABLE FOR CHARGING OF INTEREST U/S 201(1A) AND PENALTY U/S 271C. 7. HENCE, THE LEARNED DR SUBMITTED THAT THERE IS NO REASONABLE CAUSE WHICH PREVENTED THE ASSESSEE FROM DEDUCTING T AX AT SOURCE ON PAYMENT MADE TO HOSPITALS. THE LEARNED DR RELIED ON THE DECISION OF KARNATAKA HIGH COURT IN CASE OF MEDI ASSIST TPA VS. DCIT (324 ITR 356) WHEREIN THE KARNATAKA HIGH COURT HELD THAT THI RD PARTY ADMINISTRATOR WHO IS ENGAGED IN HEALTH INSURANCE CL AIM SERVICES UNDER VARIOUS HEALTH INSURANCE POLICIES ISSUED BY SEVERAL INSURANCE COMPANIES AND WHO IS THE AUTHORITY OR THE PERSON TO PAY THE AMOUNTS CLAIMED. IN CASE OF DEDICATED HEALTH CARE SERVICES TPA (INDIA) PVT. LTD., AND OTHERS VS. ACIT (324 ITR 345 (BOM)] WHERE IN IT HELD THAT CIRCULAR NO. 8 OF 2009 DATED 24-9-2009 TO THE EXTEN T THAT FAILURE TO DEDUCT TAX ON PAYMENTS MADE BY TPAS TO HOSPITALS UN DER SECTION 194J WOULD NECESSARILY ATTRACT A PENALTY U/S 271C OF THE ACT WHICH IS IN VIOLATION OF THE RESTRAINTS IMPOSED UPON IT BY TH E PROVISIONS OF SUB- SECTION (1) OF SECTION 119 OF THE ACT. THEREFORE, T HE LEARNED ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 5 DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT TO THAT EXTENT, THE CIRCULAR THAT WAS ISSUED BY THE BOARD WOULD HAVE TO BE SET A SIDE. THE LEARNED DR FURTHER SUBMITTED THAT THERE IS NO REASONABLE C AUSE THAT PREVENTED THE ASSESSEE FROM DEDUCTING TAX AT SOURCE ON PAYMEN T TO HOSPITALS. THE CASE LAWS RELIED ON THE ASSESSEE ARE NOT RELEVA NT TO THE FACTS OF THE INSTANT CASE, AS THE DEFAULT WAS ON ACCOUNT OF THE NEGLIGENCE OF THE ASSESSEE COMPANY AND THE FAILURE TO DEDUCTION U/S 194J IS AN OBVIOUS DEFAULT AND THEREFORE THE ASSESSEE SHOULD HAVE ADHE RED TO THE PROVISIONS OF TDS. 8. ON THE OTHER HAND, THE LEARNED AR DREW OUR ATTEN TION TO THE ORDER PASSED BY THE ASSESSING OFFICER U/S 201(1) A ND 201(1A) OF THE ACT, 1961 DATED 11-11-2009 AT THE CONCLUSION PARA SPECIFICALLY HELD AS FOLLOWS:- THUS, THE ASSESSEE IS NOT TREATED AS ASSESSEE IN DEFAULT FOR THE PURPOSE OF SECTION 201(1) OF THE ACT 9. THE ASSESSING OFFICER PLACING RELIANCE ON THE JU DGEMENT OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE PVT. LTD. VS. CIT (163 TAXMAN 365) WHEREIN IT WAS O BSERVED THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX U/S 201(1A) WHICH IS MANDATORY IN NATURE AND TREATED THE ASSESSEE AS ASSESSEE IN DEF AULT IN RESPECT OF TDS AMOUNT LIABLE FOR DEDUCTION. ACCORDING TO THE LEARNED AR UNTIL AND UNLESS THE ASSESSEE IS TREATED AS ASSESSEE IN D EFAULT, 271C PENALTY CANNOT BE LEVIED. FURTHER, HE SUBMITTED T HAT SECTION 271C PENALTY FOR DEFAULT IN DEDUCTING TAX SHOULD BE LEVI ED, A SUM EQUAL TO THE AMOUNT OF TAX WITH SUCH PERSON FAILED TO DEDUCT TDS . ACCORDING TO THE LEARNED AR THE ASSESSEE WAS NOT TREATED AS A DEFAUL TER IN RESPECT OF DEDUCTION OF TDS ITSELF. BEING SO, THERE IS NO SCO PE FOR LEVYING ANY PENALTY U/S 271C OF THE ACT FOR NOT DEDUCTING TDS. FURTHER, HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CAS E OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD. (293 ITR 226) WHEREIN IT WAS HELD THAT THE ASSESSEE CANNOT BE TREATED AS DEFAULTER IF THE RECIPIENT OF THE INCOME HAS ALREADY PAID TAX ON SUCH INCOME AND THER E WAS NO ISSUE ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 6 FOR CONSIDERATION BEFORE HONBLE SUPREME COURT WITH REGARD TO LEVY OF PENALTY U/S 271C OF THE ACT. IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT TREAT THE ASSESSEE AS THE ASSESSEE IN DEFAU LT SO FAR AS SECTION 201(1) OF THE ACT IS CONCERNED. PENALTY U/S 271C IS ONLY CONSEQUENTIAL IN NATURE FOR THE DEFAULT COMMITTED U/S 201(1) OF T HE ACT. BEING SO, IT IS REASONABLE TO INTERPRET THE PROVISIONS OF SECTIO N 271C OF THE ACT, THEN NO PENALTY COULD BE LEVIED ON THE ASSESSEE. HE SUB MITTED THAT WHEN THE ASSESSEE IS IN DEFAULT FOR FAILURE TO DEDUCT OR PAY TAX AT SOURCE, NATURALLY, THERE CANNOT ANY QUESTION OF IMPOSING PE NALTY U/S 271C FOR THE REASON THAT THE VERY BASIS OF SUCH PENALTY IS T HE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT OR PAY AS PER LA W AND WHEN THERE IS NO SUCH AMOUNT IN EXISTENCE, THE POSSIBILITY OF IMP OSING PENALTY WILL AUTOMATICALLY BE RULED OUT. THE ASSESSING OFFICER RELIED UPON CIRCULAR NO. 8 OF 24-11-2009 WHICH READS AS UNDER:- '3.1 : IN VIEW OF ABOVE, ALL SUCH PAST TRANSACTIONS BETWEEN TPAS AND HOSPITALS FALL WITHIN PROVISIONS OF SECTION 194J AND CONSEQUENCE OF FAILURE TO DEDUCT' TAX OR AFTER DEDUCTING TAX FAILURE TO PAY ON ALL SUCH TRANSACTIONS WOULD MAKE THE DEDUCTOR (TPAS) DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX AND ALSO LIABLE FOR CHARGING OF INTEREST UNDER SECTION 201(LA) AND PENALTY UNDER SECTION 271C.' IT MAY BE MENTIONED THAT ALL THE HIGH COURTS WHICH RENDERED DECISIONS WITH REGARD TO APPLICABILITY OF 194J TO TPAS SET ASIDE THE CBDT CIRCULAR TO THE EXTENT IT P ROVIDES FOR LEVYING OF PENALTY U/S. 271C OF THE IT ACT IN C ASE OF FAILURE TO WITHHOLD TAX U/S. 194J OF THE IT ACT. IN THE CASE OF DEDICATED HEALTH CARE SERVICES TPA P VT LTD & ORS VS ACIT & ORS (324 ITR 345) THE HON'BLE BOMBAY HIGH COURT OBSERVED AS UNDER:- 'THE BOARD HAS BY THE CIRCULAR NO. 8 OF 2009, DT. 24TH NOV., 2009 TAKEN THE VIEW THAT PAYMENTS WHICH ARE M ADE BY TPAS TO HOSPITALS FALL WITHIN THE PURVIEW OF S. 194J. NO EXCEPTION CAN BE TAKEN TO THE CIRCULAR TO THAT EXTE NT, CONSISTENT WITH THE INTERPRETATION PLACED ON THE PR OVISIONS OF S. 194J IN THE COURSE OF THIS JUDGMENT. THE VICE IN TH E CIRCULAR THAT HAS BEEN ISSUED BY THE CBDT LIES IN T HE DETERMINATION WHICH HAS BEEN MADE BY THE BOARD THAT A ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 7 FAILURE TO DEDUCT TAX ON PAYMENTS MADE BY TPAS TO HOSPITALS UNDER S. 194J WILL NECESSARILY ATTRACT A PENALTY UNDER S. 271 C. BESIDES INTERFERING WITH THE QUASI JUDICIAL DISCRETION OF THE ASSESSING OFFICER OR, AS THE CASE MAY BE, THE APPELLATE AUTHORITY THE DIRECTION WHICH HAS BEEN ISSUED BY THE BOARD WOULD FORECLOSE THE DEFENCE WHI CH IS OPEN TO THE ASSESSEE UNDER S. 273B. BY FORECLOSING A RECOURSE TO THE DEFENCE STATUTORILY AVAILABLE TO TH E ASSESSEE UNDER S. 273B, THE BOARD HAS BY ISSUING SUCH A DIRECTION ACTED IN VIOLATION OF THE RESTRAINTS IMPO SED BY THE PROVISIONS OF SUB-SEC. (1) OF S. 119. TO THAT EXTENT, THEREFORE THE CIRCULAR WOULD HAVE TO BE SET ASIDE A ND IS ACCORDINGLY SET ASIDE. IN MAKING ASSESSMENTS OR, AS THE CASE MAY BE, M PASSING ORDERS ON APPEALS FILED UNDE R THE ACT, THE AOS AND THE CIT(A)S SHALL DO SO INDEPENDENTLY AND SHALL NOT REGARD THE EXERCISE OF THEIR QUASI JUDICIAL POWERS AS BEING FORECLOSED BY THE IS SUANCE OF THE CIRCULAR .' IN THE CASE OF VIPUL MEDICORP TPA PVT LTD & ORS VS CSDT & ANR (245 ITR 125) THE HON'BLE DELHI HIGH COU RT OBSERVED AS UNDER:- 'HOWEVER, THE CIRCULAR PROCEEDS TO POSTULATE THAT A LIABILITY TO PAY A PENALTY UNDER S. 271C WILL BE NECESSARILY ATTRACTED FOR A FAILURE TO MAKE A DEDUCTION UNDER S. 194J. TO THIS EXTENT, THE IMPUGNED CIRCULAR IS LIABLE TO BE SET ASIDE AND IS ACCORDINGLY SET ASIDE. FURTHER, ON THE SAID ASPECTS THE AO AND THE APPELLATE AUTHORITIES SHALL INDEPENDENTLY APPLY THEIR MINDS IN EXERCISE OF THEI R QUASI JUDICIAL POWERS WITHOUT BEING TIED DOWN BY THE CIRC ULAR.--' THEREFORE, THE ABOVE PART OF THE CIRCULAR RELIED UP ON BY THE ADDL.CIT FOR LEVYING PENALTY IS NOT VALID IN LA W. THEREFORE, THE PENALTY LEVIED BY THE ADDL. CIT BAS ING ON THAT PART OF THE CIRCULAR CANNOT BE UPHELD. 10. HE SUBMITTED THAT THE FOLLOWING REASONS SHOW TH AT THERE IS EXISTENCE OF REASONABLE CAUSE ON THE PART OF THE AS SESSEE NOT TO DEDUCT TDS:- 1. THE ASSESSEE IS A TPA CAME INTO EXISTENCE IN 200 3 AND RENDERING SERVICES. 2. THERE ARE 27 SUCH TPAS THROUGHOUT THE COUNTRY RENDERING SAME SORT OF SERVICES. ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 8 3. IN 2008 THE DEPARTMENT PURSUED THE TPAS WITH REG ARD TO THEIR LIABILITY U/S. 194J OF THE IT ACT. 4. MUCH DEBATE TOOK PLACE WITH REGARD TO STAND TAKE N BY THE DEPARTMENT WITH REGARD TO THE LIABILITY OF TPAS U/S. 194J OF THE IT ACT. 5. THE SITUATION NECESSITATED THE BOARD TO ISSUE A DETAILED CIRCULAR CLARIFYING THE POSITION IN NOVEMB ER 2009. 6. THE MATTER WENT FOR CONSIDERATION OF VARIOUS HON 'BLE HIGH COURTS. THE HON'BLE HIGH COURTS RENDERED DECISIONS IN FAVOUR OF REVENUE. ALL THOSE DECISIONS WERE RENDERED IN 2010 AND SUBSEQUENTLY. 7. THE HON'BLE HIGH COURTS STRUCK DOWN A PART OF T HE CIRCULAR 8/2009 AND HELD THAT THE ASSESSING OFFICER WAS ONLY THE COMPETENT PERSON TO JUDGE WHETHER THE ASSESSEE WAS LIABLE FOR PENALTY U/S. 271C OF THE IT ACT. 8. IN THE ASSESSEE'S CASE ORDER U/S. 201(1) & 201(L A) WAS PASSED FOR THE ASST. YEAR 2008-09 AND A SPECIFI C OBSERVATION WAS RECORDED BY THE ASSESSING OFFICER REGARDING INITIATION OF PENALTY PROCEEDINGS U/S. 27 1C OF THE IT ACT. NOTICES U/S. 271C OF THE IT ACT DATE D 06.03.2009 AND 31.03.2010 CALLING FOR EXPLANATION O F THE ASSESSEE. 9 THE ASSESSEE SUBMITTED A DETAILED EXPLANATION AND THERE WAS NO FURTHER COMMUNICATION FROM THE DEPARTMENT AND THE OBVIOUS CONCLUSION IS THAT THE PENALTY PROCEEDINGS U/S. 271C OF THE IT ACT WERE DROPPED BY THE DEPARTMENT IN THE LIGHT OF EXPLANATI ON OFFERED. 10 FOR THE ASST. YEAR 2009-10, IN ORDER U/S. 201(1) & ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 9 201(LA) DATED 11.11.2009 THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT IN DEFAULT AS FAR AS SECT ION 200(1) IS CONCERNED. 11 IN THE ORDER THE ASSESSING OFFICER DID NOT MENTION ANYTHING WITH REGARD TO PENALTY PROCEEDINGS U/S. 27 1C OF THE IT ACT. THUS THE AO DID NOT RECORD ANY SATISFACTION WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS U/S. 271C OF THE IT ACT. 12 HOWEVER, THE ADDL. CIT IN THE PENALTY ORDER U/S. 27 1C OF THE IT ACT DATED 29.9.2011 OBSERVED THAT THE ASSESSING OFFICER HAD PROPOSED FOR INITIATION OF PE NALTY PROCEEDINGS U/S. 271C OF THE IT ACT BUT THE ORDER U /S 201 & 201(LA) DOES NOT LEND SUPPORT FOR SUCH ASSERTION IN THE ABSENCE OF ANY SUCH RECORDING. 13 IN THE ABSENCE OF RECORDING OF ANY SATISFACTION OR INDICATION WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS U/S. 271C OF THE IT ACT IN THE ORDER U/ S 201 & 201(LA) FOR THE ASST. YEAR 2009-10, IT CANNOT BE SAID THAT THE PROCEEDINGS WERE INITIATED VALIDLY. 14 AS THE FACTS AND CIRCUMSTANCES ARE SIMILAR FOR BOTH THE ASST, YEARS 2008-09 AND 2009-10 THERE IS NO SCOPE F OR PERSUASION OF PROCEEDINGS U/S. 271C FOR THE ASST. Y EAR 2009-10 FOR THE REASONS MENTIONED IN DETAIL. 15 THE ADDL. CIT, RANGE 15, HYDERABAD ISSUED SHOW CAUSE NOTICE U/S. 271C OF THE IT ACT ON 21.03.2011. 16 THE ADD!. CIT, RANGE 15, HYDERABAD PASSED ORDER U/S. 271C OF THE IT ACT ON 29.09.2011. 17 IN VIEW OF SECTION 275(1)(C) OF THE IT ACT THE SHOW CAUSE NOTICE ISSUED ON 21.03.2011 U/S. 271C IS BARRED BY LIMITATION. 18 IN VIEW OF DETAILED SUBMISSIONS MADE THE ORDER ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 10 PASSED U/S. 271C OF THE IT ACT IS INVALID. 19 WITHOUT PREJUDICE TO ALL THE ABOVE, IN VIEW OF THE DETAILED SUBMISSIONS THERE IS REASONABLE CAUSE FOR THE ASSESSEE FOR NON COMPLIANCE WITH THE PROVISIONS OF SECTION 271C OF THE IT ACT. 11. FURTHER, HE RELIED ON THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF WOODWARDS GOVERNOR INDIA PVT. LTD. VS. CIT (253 ITR 745) WHEREIN HELD AS FOLLOWS:- 'SEC. 273B STARTS WITH A NON OBSTANTE CLAUSE AND PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN SEVERAL PROVISIONS ENUMERATED THEREIN INCLUDING S. 271C, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO M THE SAID PROVISIONS, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. A CLAUSE BEG INNING WITH 'NOTWITHSTANDING ANYTHING' IS SOMETIMES APPEND ED TO A SECTION IN THE BEGINNING WITH A VIEW TO GIVE THE ENACTING PART OF THE SECTION IN CASE OF CONFLICT AN OVERRIDING EFFECT OVER THE PROVISION OR ACT MENTION ED IN THE NON OBSTANTE CLAUSE. THEREFORE, IN ORDER TO BRI NG IN APPLICATION OF S. 271 C IN THE BACKDROP OF S. 273B, ABSENCE OF REASONABLE CAUSE, EXISTENCE OF WHICH HAS TO BE ESTABLISHED BY THE ASSESSEE, IS THE SINE QUA NON . LEVY OF PENALTY UNDER S. 271 C IS NOT AUTOMATIC BEFORE LEVYING PENALTY, THE CONCERNED OFFICER IS REQUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAILURE REFERRED TO IN THE CO NCERNED PROVISION THE SAME WAS WITHOUT A REASONABLE CAUSE. THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT THER E EXISTED REASONABLE CAUSE WHICH WAS THE REASON FOR T HE FAILURE REFERRED TO IN THE CONCERNED PROVISION. THE REAFTER THE OFFICER DEALING WITH THE MATTER HAS TO CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE OR THE PERSON, AS THE CASE MAY BE AS REGARDS THE REASON FOR FAILURE, WAS ON ACCOUNT OF REASONABLE CAUSE. 'REASONABLE CAUSE' AS APPLIED TO HUMAN ACTION IS THAT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE. IT CAN BE DESCRIBED AS A PROBABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED UPON REASONABLE GROUNDS, OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES, WHICH ASSUMING THEM TO BE TRUE, WOUL D REASONABLY LEAD ANY ORDINARY PRUDENT AND CAUTIOUS M AN, . PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT SAME WAS THE RIGHT THING TO DO. THE CAUSE SHOWN HAS TO BE CONSIDERED AND ONLY IF IT IS FOUND ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 11 TO BE FRIVOLOUS, WITHOUT SUBSTANCE OR FOUNDATION, T HE PRESCRIBED CONSEQUENCES FOLLOW. ............. 12. IN THE CASE OF CIT VS. VS. VISHWAPRIYA FINANCIA L SERVICES & SECURITIES LTD. (303 ITR 122) THE MADRAS COURT HELD AS UNDER:- ' THE REASONABLE CAUSE INVOLVED M THE PRESENT CASE IS THAT THE ASSESSEE ACTED IN A BONA FIDE MANNER ON THE BASIS OF THE OPINION OBTAINED FROM SENIOR COUNSEL BEFORE DEV ISING THE SCHEME THAT THE ASSESSEE NEED NOT DEDUCT TAX AT SOURCE. ON THIS CONSIDERATION, THE TRIBUNAL HELD TH AT IT IS NOT A FIT CASE FOR LEVYING PENALTY. THE TRIBUNAL HAS ACCEPTED THE EXPLANATION AND GIVEN A FINDING THAT THERE IS A REASONABLE CAUSE FOR NOT DEDUCTING THE TAX AT SOURC E. THE FINDING THAT THERE IS A REASONABLE CAUSE IS ONLY A QUESTION OF FACT AND ALSO IT IS NOT PERVERSE. HENCE, THE TRI BUNAL IS JUSTIFIED IN DELETING THE PENALTY LEVIED UNDER S. 271C' 13. IN THE CASE OF CIT VS CADBURY INDIA LTD (55 DTR 318) THE HON'BLE HIGH COURT OF DELHI HELD AS UNDER:- 'IT IS A SETTLED LAW THAT WHAT WOULD CONSTITUTE REASONABLE CAUSE CANNOT BE LAID DOWN WITH PRECISION AND THAT T HE QUESTION AS TO WHETHER THERE WAS REASONABLE CAUSE OR NOT FOR THE ASSESSEE NOT TO DEDUCT TAX AT' SOURCE AT AL LL OR UNDER SOME PARTICULAR PROVISION THAN PRESCRIBED WAS A QUESTION OF FACT WHICH HAD TO BE SEEN IN THE FACTS AND CIRCUMSTANCES OF EACH CASE..... . 14. IN THE CASE OF CIT VS JAPAN RADIO COMPANY LTD ( 286 ITR 682) THE HON'BLE HIGH COURT OF DELHI HELD AS UNDER: 'EXISTENCE OF CONFUSION REGARDING THE LIABILITY OF THE COMPANY TO DEDUCT TAX AT SOURCE FROM PAYMENTS MADE BY IT TO EXPATRIATE EMPLOYEES CONSTITUTED A REASONABLE CAUSE FOR THE ASSESSEE COMPANY NOT TO MAKE SUCH DEDUCTION S OF TAX; PENALTIES UNDER S. 271C WERE NOT LEVIABLE AND NO / SUBSTANTIAL QUESTION OF LAW ARISES. ' 15. IN THE CASE OF AZADI BACHAHO ANDOLAN VS UNION O F INDIA (252 ITR 471) THE HON'BLE HIGH COURT OF DELHI HELD AS UN DER: 'REASONABLE CAUSE, AS APPLIED TO HUMAN ACTION IS THAT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE. THE EXPRESSION REASONABLE' IS N OT SUSCEPTIBLE OF A CLEAR AND PRECISE DEFINITION; FOR AN ATTEMPT TO GIVE A SPECIFIC MEANING TO THE WORD 'REASONABLE IS TRYING TO COUNT WHAT IS NOT NUMBER AND MEASURE WHAT IS NOT ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 12 SPACE. IT CAN BE DESCRIBED AS RATIONAL ACCORDING TO THE DICTATES OF REASONS AND IS NOT EXCESSIVE OR IMMODER ATE. THE WORD 'REASONABLE' HAS IN LAW THE PRIMA FACIE ME ANING OF REASONABLE WITH REGARD TO THOSE CIRCUMSTANCES OF WHICH THE ACTOR, CALLED ON TO ACT REASONABLY, KNOWS OR OU GHT TO KNOW' [SEE RE. A SOLICITOR (1945) KB 368]. REASONABLE CAUSE CAN BE REASONABLY SAID TO BE A CAUSE WHICH PREVENTS A MAN OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE, ACTING UNDER NORMAL CIRCUMSTANCES, WITHOU T NEGLIGENCE OR INACTION OR WANT OF BONA FIDES. ' 16. IN THE CASE OF KCT PES JOINT VENTURE VS ADDL. C IT, HYDERABAD IN THEIR ORDER DATED 04.05.2012 (ITA NO. 39 & 40/HY D/2010) OBSERVED THAT THE ORDER U/S.201(1)& 201(LA) WERE PASSED ON 2 9.11.2002 WHEREAS PENALTY PROCEEDINGS U/S. 271C WERE INITIATED ON 01. 09.2006 AND PENALTY WAS LEVIED. THE HON'BLE ITAT, HYDERABAD FUR THER OBSERVED THAT THE DIFFERENCE IN PERCEPTION OF THE PROVISIONS OF L AW BASED ON THE OPINION' OF PRACTICING CHARTERED ACCOUNTANT LEA D TO THE BONA FIDE BELIEF FOR NON PAYMENT OF TDS AND HENCE THE CONDUCT OF THE ASSESSEE DOES NOT APPEAR TO BE CONTUMACIOUS FOR LEVY OF PENA LTY U/S. 271C OF THE IT ACT AND HENCE DELETED THE PENALTY. 17. IN THE CASE OF CIT VS ELI LILLY & CO INDIA PVT LTD (312 ITR 225) THE HON'BLE SUPREME COURT HELD AS UNDER: SEC. 271C INTER ALIA STATES THAT IF ANY PERSON FAI LS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY THE PROVISIONS OF CHAPTER XVII-8 THEN SUCH PERSON SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT. T HUS S. 271C(1)(A) MAKES IT CLEAR THAT THE PENALTY LEVIABLE SHALL BE EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAI LED TO DEDUCT. THIS PROVISION CANNOT BE HELD TO BE MANDATO RY OR COMPENSATORY OR AUTOMATIC BECAUSE UNDER S. 273B PARLIAMENT HAS ENACTED THAT PENALTY SHALL NOT BE IM POSED IN CASES FALLING THERE UNDER. SEC. 271C FALLS IN TH E CATEGORY OF SUCH CASES. THEREFORE, THE LIABILITY TO LEVY OF PENALTY CAN BE FASTENED ONLY ON THE PERSONS WHO DO NOT HAVE GOOD AND SUFFICIENT REASON FOR NOT DEDUCTING T AX AT SOURCE. ONLY THOSE PERSONS WILL BE LIABLE TO PENALT Y WHO DO NOT HAVE GOOD AND SUFFICIENT REASON FOR NOT DEDU CTING THE TAX. THE BURDEN, OF COURSE, IS ON THE PERSON TO PROVE SUCH GOOD AND SUFFICIENT REASON. IN THE INSTANT CAS ES NON- ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 13 DEDUCTION OF TAX AT SOURCE TOOK PLACE ON ACCOUNT OF CONTROVERSIAL ADDITION. THE CONCEPT OF AGGREGATION OR CONSOLIDATION OF THE ENTIRE INCOME CHARGEABLE UNDER THE HEAD 'SALARIES' BEING EXIGIBLE TO DEDUCTION OF TAX AT SOURCE UNDER S. 192 WAS A NASCENT ISSUE. IT HAS NOT BEEN CONSIDERED BY THIS COURT BEFORE. FURTHER, IN MOST OF THESE CASES, THE TAX DEDUCTOR- ASSESSEE HAS NOT CLAIMED DEDUCTION UNDER S.40(A)(III)IN COMPUTATION OF ITS B USINESS INCOME. THIS IS ONE MORE REASON FOR NOT IMPOSING PE NALTY UNDER S. 271C BECAUSE BY NOT CLAIMING DEDUCTION UND ER S. 40 (A)(III) , IN SOME CASES, HIGHER CORPORATE TAX HAS BEEN PAID TO THE EXTENT OF RS. 906 52 LACS. IN SOME OF THE CASES, IT IS UNDISPUTED THAT EACH OF THE EXPATRIATE EMPLOYEES HAVE PAID DIRECTLY THE TAXES DUE ON THE F OREIGN SALARY BY WAY OF ADVANCE TAX/SELF-ASSESSMENT TAX. T HE TAX-DEDUCTOR-ASSESSEE WAS UNDER A GENUINE AND BONA- FIDE BELIEF THAT IT WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAX AT SOURCE FROM THE HOME SALARY PAID BY THE FORE IGN COMPANY/HEAD OFFICE AND, CONSEQUENTLY, IN NONE OF T HE CASES PENALTY WAS LEVIABLE UNDER S. 271 C AS THE RESPONDENT IN EACH CASE HAS DISCHARGED ITS BURDEN O F SHOWING REASONABLE CAUSE FOR FAILURE TO DEDUCT TAX AT SOURCE' FROM THE ABOVE DECISIONS IT IS CLEAR THAT THE ASSES SING OFFICER HAS TO CONSIDERED THE MATTER IN DETAIL TO F IND OUT WHETHER THERE WAS REASONABLE CAUSE AS CLAIMED BY TH E ASSESSEE BEFORE LEVYING PENALTY. AS OBSERVED BY THE JUDICIAL AUTHORITIES 'REASONABLE CAUSE' AS APPLIED TO HUMAN ACTION IS THAT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE. FURTHER AN HONEST BELIEF FOUND UPON REASONABLE GROUNDS, OF THE EXISTENCES OF THE STATE OF CIRCUMSTANCES WHICH ASSUMING THEM TO BE PROVE WOULD REASONABLY LEAD ANY ORDINARY PRUDENT AND CONSCIOUS MAN PLACED IN THE POSITION OF THE CONCERNED TO COME TO THE CONCLUSION THAT SAME WAS R IGHT THING TO DO. IN THE PRESENT CASE, IN THE FACTS AND CIRCUMSTANCES ALREADY SUBMITTED IN DETAIL, THE ASSE SSEE WAS UNDER THE BONA FIDE AND HONEST BELIEF THAT THEY WERE NOT LIABLE FOR DEDUCTION OF TAX U/S. 194J OF THE IT ACT. THE DEVELOPMENTS IN THE MATTER ALSO PROVE THAT THE BELI EF OF THE ASSESSEE WAS GENUINE. HENCE THERE IS NO SCOPE T O MENTION THAT THERE WAS NO REASONABLE CAUSE FOR THE ASSESSEE FOR THEIR NON COMPLIANCE WITH THE PROVISIO NS OF SECTION 194J OF THE IT ACT.' 18. FOR THE ASSESSMENT YEAR 2008-09, PENALTY PROCEE DINGS WERE INITIATED BY THE DEPARTMENT HOWEVER WERE DROPPED AN D IT WAS SHOWN ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 14 THAT THE ASSESSEE WAS NOT LIABLE TO TDS. HE SUBMIT TED THAT THE ISSUE IS VERY MUCH DEBATABLE AND THE BENEFIT OF DOUBT TO BE GIVEN TO THE ASSESSEE. IN SUPPORT OF SUCH SUBMISSIONS, THE LE ARNED AR FOR THE ASSESSEE RELIED ON THE FOLLOWING CASE-LAWS. I) JAGRAN PRAKASHAN LIMITED VS. DCIT (345 ITR 288) (ALL) II) CIT VS. I EXCEL INDUSTRIES LIMITED (358 ITR 295 )(SC) III) NO CITATION (118 ITD 326 AT 329) IV) UNION OF INDIA AND OTHERS VS. GODFREY PHILIPS I NDIA LTD. AND OTHERS (158 ITD 574) V) CIT VS. ELI LILLY AND CO. (I) PVT. LTD. (312 ITR 225) (SC) 19. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL ON RECORD AND ORDERS OF THE AU THORITIES BELOW. ACCORDING TO THE ASSESSEE'S COUNSEL, THE ASSESSEE I S UNDER THE BONA- FIDE BELIEF THAT PROVISIONS OF SECTION 194J OF THE ACT WERE NOT APPLICABLE TO IT AND IT WAS ONLY AFTER THE CBDT CAME OUT WITH CIRCULAR NO. 8 OF 2009 DATED 24.11.2009 REGARDING APPLICABILITY OF TH E SAID CIRCULAR TO TPAS THAT IT BECAME AWARE OF THE APPLICABILITY OF T HE PROVISIONS TO IT. IN OUR OPINION, WE FIND FORCE IN THE ARGUMENT OF THE A SSESSEE'S COUNSEL. AS SEEN FROM THE PREAMBLE OF THE CIRCULAR NO. 8 OF 2009 DATED 24.11.2009, WHEREIN THE CBDT CLARIFIED APPLICABILIT Y OF THE PROVISIONS OF SECTION 194J TO THE CASE OF TPAS WHICH IS AS FOLLOW S: 'A NUMBER OF REPRESENTATIONS HAVE BEEN RECEIVED FRO M VARIOUS STAKEHOLDERS REGARDING APPLICABILITY OF THE PROVISIONS U/S. 194J OF THE INCOME-TAX ACT, 1961, O N PAYMENTS MADE BY THIRD PARTY ADMINISTRATORS (TPAS) TO HOSPITALS ON BEHALF OF THE INSURANCE COMPANIES FOR SETTLING THE MEDICAL/INSURANCE CLAIM, ETC., WITH TH E HOSPITALS.' 20. AS EVIDENT FROM THE ABOVE, THERE IS A CONFUSION AMONG THE TPAS REGARDING APPLICABILITY OF PROVISIONS OF SECTION 19 4J RELATING TO PAYMENT MADE BY TPAS TO HOSPITALS. EVEN THIS CIRCULAR IS S UBJECT MATTER OF LITIGATION BEFORE VARIOUS HIGH COURTS, VIZ., THE KA RNATAKA HIGH COURT IN THE CASE OF MEDI ASSIST TPA VS. DCIT (324 ITR 356) AND DEDICATED HEALTH CARE SERVICES TPA (INDIA) PVT. LTD. & OTHERS VS. ACIT & OTHERS, ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 15 324 (2010) ITR 345 (MUM.). THEREFORE, IN OUR CONSI DERED OPINION, BONA-FIDE BELIEF IN NON-DEDUCTION OF TDS WOULD CONS TITUTE A REASONABLE CAUSE. IGNORANCE OF LAW MAY BE NO EXCUSE BUT SIMUL TANEOUSLY IT IS ALSO TRUE THAT THERE IS NO PRESUMPTION THAT EVERYON E KNOWS THE LAW. WHAT IS IMPORTANT IS THE FACT THAT A PERSON COMES T O KNOW THAT HE HAS COMMITTED A MISTAKE AND BEING A PERSON OF REASONABL E INTELLIGENCE AND ORDINARY PRUDENCE, IF HE TAKES CORRECTIVE MEASURES RECTIFYING THE SAME, THEN IT CANNOT BE SAID THAT HE HAS ACTED DELIBERATE LY WITH COMPLETE DISREGARD TO LAW. THERE IS FORCE IN THE CONTENTION OF THE ASSESSEE'S COUNSEL THAT THE ASSESSEE HELD THE REASONABLE BELIE F NOT TO DEDUCT TDS ON THE PAYMENT MADE TO HOSPITALS ON BEHALF OF I NSURANCE COMPANIES. 21. FURTHER THE AO QUANTIFIED THE AMOUNT U/S. 201(1 ) AT RS. 3,27,70,364 AND INTEREST U/S. 201(1A) AT RS. 19,66, 218 AS EVIDENCED BY THE ORDER PASSED BY THE DCIT-15(2) (TDS), HYDERA BAD U/S. 201(1) AND 201(1A) OF THE IT ACT, 1961 DATED 11.11.2009. HE HAS ALSO OBSERVED THAT THE ASSESSEE SUBMITTED EVIDENCE FROM HOSPITALS WHEREIN THE PAYMENT RECEIVED WAS REFLECTED IN THEIR INCOMES AND PAID TAX ACCORDINGLY. THUS, THE ASSESSEE IS NOT TREATED AS AN ASSESSEE IN DEFAULT FOR THE PURPOSE OF SECTION 201(1) OF THE AC T. AS PER THE DECISION OF THE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE PVT. LTD. VS. CIT (163 TAXMAN 365), INTEREST U/S. 201(1A) IS MANDATORY AND IS REQUIRED TO BE CHARGED. ACCORDINGLY, THE AO CHARGED INTEREST U/S. 201(1A) AT RS. 19,66,018. THEREFORE, IT IS EV IDENT FROM THE ASSESSMENT ORDER THAT THE ASSESSEE WAS NOT TREATED AS AN ASSESSEE IN DEFAULT U/S. 201(1) OF THE ACT. 22. WHEN THE AO HIMSELF TREATED THE ASSESSEE AS AN ASSESSEE NOT IN DEFAULT IN RESPECT OF THE AMOUNTS OF TDS TO BE D EDUCTED, THEN THERE CANNOT BE ANY SCOPE FOR LEVYING PENALTY U/S. 271C O F THE ACT. AS IN THIS CASE THE AMOUNT OF TAX HAS BEEN PAID BY THE RECIPIE NT OF THE INCOME. BEING SO, THE PROVISIONS OF SECTION 271C CANNOT BE APPLIED TO THE ASSESSEE'S CASE AS THESE PROVISIONS CLEARLY STATE T HAT IF ANY PERSON ITA NO. 155/HYD/2013 M/S GOOD HEALTH PLAN LIMITED ======================== 16 FAILS TO DEDUCT WHOLE OR ANY PART OF THE TAX AS REQ UIRED UNDER THE PROVISIONS OF CHAPTER XVII-B, THEN SUCH PERSON SHAL L BE LIABLE TO PAY BY WAY OF PENALTY AN AMOUNT EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT OR PAY AS ABOVE SAID. BEIN G SO, IN THE PRESENT CASE THE ASSESSEE BEING NOT IN DEFAULT IN RESPECT O F THE AMOUNT OF TAX ITSELF, THERE CANNOT BE ANY LEVY OF PENALTY U/S. 27 1C, MORE SO, WHERE THERE WAS A REASONABLE CAUSE FOR NOT DEDUCTING THE TDS ON THE PAYMENT MADE BY THE ASSESSEE. CONSIDERING THE CUMU LATIVE EFFECT OF ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO CONFIRM DELETION OF PENALTY BY THE CIT(A). 23. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2014. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 22 ND JANUARY, 2014 JMR*/TPRAO COPY FORWARDED TO: 1. THE ASST. CIT, CIRCLE-15(2), 4 TH FLOOR, 'D' BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. M/S. GOOD HEALTH PLAN LTD., PLOT NO. 49, NAGARJU NA HILLS, PUNJAGUTTA, HYDERABAD. 3. THE CIT(A)-II, HYDERABAD. 4. THE CIT (TDS), HYDERABAD. 4. THE DR BENCH 'A', ITAT, HYDERABAD