Supack Industries Pvt.Ltd., Rajkot V. The Jt.CIT.,(Intl.Taxn.), Ahmedabad

ITA 1673/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9138 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 21-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SENIOR
• Keywords: Principle of natural justice; Bonafide belief; TDS; Set aside
• Section: 273B; 195

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO.1673/AHD/2009 (ASSESSMENT YEAR: 2005-06) SUPACK INDUSTRIES PVT. LTD., OPP. MOTEL THE VILLAGE, HARIPUR, KALAWAD ROAD, RAJKOT PAN: AACCS 9892 D V/S THE JOINT COMMISSIONER OF INCOME-TAX (INTL. TAXN), AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY :- SHRI SANJAY R SHAH RESPONDENT BY:- SMT. NEETA SHAH, SENIOR DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A) DATED 10- 02-2008, BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- (1) THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE PENALTY OF RS.90,006/- LEVIED BY THE LEARNED AO U/S 271C OF THE ACT. IT IS SUBMITTED THAT THERE IS NO DEFAULT COMMI TTED BY THE APPELLANT IN TERMS OF SECTION 271C AND HENCE SUCH P ENALTY SHOULD NOT HAVE BEEN CONFIRMED. IT IS SUBMITTED THAT IT BE SO HELD NOW AND PENALTY OF RS.90,066/- AS CONFIRMED BY LEARNED CIT( A) BE DELETED. (2) THE LEARNED CIT(A) DID NOT DEAL WITH THE CONTENTION S RAISED BEFORE HIM NOR CONSIDERED THE SUBMISSIONS MADE BEFORE HIM BY THE APPELLANT AND CONFIRMED THE PENALTY WITHOUT PASSING ANY SPEAKING ORDER. YOUR APPELLANT SUBMITS THAT SUCH ORDER IS LI ABLE TO BE QUASHED AND THE PENALTY AS CONFIRMED BY THE LEARNED CIT(A) FOR RS.90,066/- BE DELETED. 2 (3) WITHOUT PREJUDICE TO ANY OF THE FOREGOINGS, THE LEA RNED CIT(A) FAILED TO APPRECIATE THAT EVEN IF THERE WAS A DEFAU LT IN DEDUCTION OF TAX, THE SAME WAS DUE TO REASONABLE & SUFFICIENT CA USE AS ENVISAGED U/S 273B OF THE ACT AND THEREFORE ALSO TH E PENALTY U/S 271C SHOULD NOT HAVE BEEN CONFIRMED. IT IS SUBMITTE D THAT IT BE SO HELD NOW AND PENALTY OF RS.90,066/- AS CONFIRMED BY LEARNED CIT(A) BE DELETED. 2 AT THE OUTSET, IT WAS CONTENDED BY THE LEARNED C OUNSEL FOR THE ASSESSEE THAT THE CIT(A) HAS CONFIRMED THE PENALTY WITHOUT PASSING ANY SPEAKING ORDER AND WITHOUT CONS IDERING THE WRITTEN SUBMISSIONS DATED 09-02-2009 FILED BY THE ASSESSEE BEFORE HIM. IT WAS ALSO CONTENDED THAT THE IT WAS O BLIGATORY FOR THE CIT(A) TO PASS A SPEAKING ORDER DISCUSSING THE MERITS OF CLAIMS MADE BY THE ASSESSEE IN THE APPEAL. THUS, IT WAS SUBMITTED THAT THE CIT(A) HAS PASSED THE EXPARTE OR DERS WITHOUT GIVING ANY OPPORTUNITY OF HEARING TO THE ASSESSEE. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE C IT(A). 3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, AND PERUSED THE MATERIAL ALONG WITH THE ORDER OF TH E TAX AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS FI LED WRITTEN SUBMISSIONS DATED 09-02-2009 BEFORE THE CIT(A) WHIC H ARE REPRODUCED AS UNDER: THE ONLY ISSUE IN THE PRESENT APPEAL IS AGAINST T HE PENALTY IMPOSED FOR A SUM OF RS.90,066/- U/S.271C OF THE ACT BY THE JOINT COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION) , AHMEDABAD VIDE HIS ORDER DATED 24-03-2008. THE RELEVANT FACTS RELATING TO THE SAME ARE ALREADY EXHAUSTIVELY GIVEN IN THE STATEMEN T OF FACTS FILED ALONGWITH THE GROUNDS OF APPEAL BEFORE YOUR HONOUR AND HENCE THEY ARE NOT REPEATED OVER HERE. 2. THE APPELLANT HAD PURCHASED MACHINERY FROM M/S. HUBEI & JINSHAN BRIGHT INDUSTRIAL MACHINERY CO. LTD., CHINA (FOR SHORT AS 3 M/S. HUBEI). AS PER THE ORIGINAL CONTRACT WITH TH E CHINESE COMPANY THE SERVICES OF ERECTION, COMMISSIONING, TRAINING A ND TEST- RUN ON THE MACHINERY WERE FREE AND NO CHARGES WERE TO BE P AYABLE BY THE APPELLANT FOR THE SAME. FOR THIS PURPOSE, THE APPEL LANT IS ENCLOSING HEREWITH THE COPY OF THE CONTRACT ENTERED INTO WITH M/S. HUBEI AT PAGES 4 TO 14. ON GOING THROUGH THE SAME, YOUR HONO UR WILL FIND THAT THE WORK OF ERECTION, COMMISSIONING, TRAINING AND T EST- RUN ON THE MACHINERY, ETC. IS CONSIDERED TO BE AN INTEGRAL PAR T OF THE PURCHASE ORDER BY THE APPELLANT AND THERE WERE NO SEPARATE C HARGES PAYABLE FOR THE SAME. THE APPELLANT THUS BONAFIDE BELIEVED THAT NO CHARGES WERE PAYABLE SEPARATELY FOR ERECTION, COMMISSIONING, TRA INING AND TEST- RUN, ETC. AS PER THE CONTRACT. LATER ON, HOWEVER, W HILE RAISING THE INVOICE, THE SUPPLIER CHINESE COMPANY M/S. HUBEI RA ISED TWO INVOICES (AT PAGES 15 TO 17) BY BIFURCATING UNILATERALLY AMO UNTS INTO TWO PARTS, NAMELY, ONE OF MACHINERY FOR A SUM OF US $ 3,11,800 AND OTHER FOR ERECTION, COMMISSIONING, TRAINING AND TEST- RUN, ET C. FOR A SUM OF US $ 25,000. THERE WAS A SURVEY ULS.133A AT THE BUS INESS PREMISES OF THE APPELLANT BY THE TDS OFFICER. 3. HE RAISED A QUERY THAT ON SUCH AMOUNT FOR ERECTI ON, COMMISSIONING, TRAINING AND TEST- RUN, ETC. CHARGED SEPARATELY BY M/S. HUBEI, THE APPELLANT SHOULD HAVE DEDUCTED TAX U/S. 195 AND SINCE IT HAS NOT BEEN SO DONE, THE APPELLANT HAS VIOLATE D THE PROVISIONS OF SECTION 195 AND ACCORDING PROVISIONS OF PENALTY U/S .271C ARE ATTRACTED. 4. THEREAFTER, A SHOW CAUSE NOTICE DATED 13-03-2008 WAS ISSUED TO THE APPELLANT WHICH WAS RECEIVED BY THE APPELLANT O N 17-03-2008 (PAGE NO.1). THE CONCERNED DIRECTOR OF THE APPELLAN T COMPANY WHO WAS LOOKING AFTER THE TAXATION ASPECTS WAS OUT OF S TATION AND WAS EXPECTED TO ARRIVE ON 24-03-2008. THE APPELLANT COM PANY THEREFORE SOUGHT A SHORT ADJOURNMENT BY MOVING AN APPLICATION BEFORE THE LEARNED ASSESSING OFFICER REQUESTING HIM TO ALLOW T IME UPTO 24-03- 2008. HOWEVER, THE LEARNED JCIT PASSED THE PENALTY ORDER ON 24-03- 2008 STATING THAT NO REPLY WAS RECEIVED FROM THE AP PELLANT. IT WOULD BE WORTHWHILE NOTING OVER HERE THAT EVEN AS PER THE LETTER DATED 13-03- 2008 ISSUED BY JCIT, THE TIME LIMIT UPTO 24-03-2008 WAS AVAILABLE TO THE APPELLANT TO FURNISH ITS REPLY. THE LEARNED JCI T, HOWEVER, DID NOT WAIT TILL THE END OF 24-03-2008 AND PASSED THE ORDE R ON 24-03-2008 ITSELF U/S.271C WITHOUT CONSIDERING THE SUBMISSION MADE BY THE APPELLANT. 5. THE APPELLANT ALSO WISHES TO POINT OUT THAT THER E WAS NO INTENTIONAL OR WILLFUL DEFAULT ON THE PART OF THE A PPELLANT IN FAILING TO 4 DEDUCT AND DEPOSIT THE TDS AMOUNT. THE LEARNED JCIT , HOWEVER, WITHOUT APPRECIATING THE FACTS, LEVIED THE PENALTY U/S.271C IN A ROUTINE MANNER WITHOUT ADEQUATE REASONS TO SHOW AS TO HOW T HE CASE OF THE APPELLANT WAS LIABLE FOR PENALTY. 6. THOUGH APPELLANT HAD RESERVATION ABOUT THE LEGAL ITY OF THE STAND OF THE LEARNED JT. CIT IN ORDER TO PUT END TO LITIG ATION IT BONAFIDE MADE PAYMENT OF TDS WITH INTEREST TOTALING TO RS.1,03,57 6/-, A COPY OF CHALLAN WHEREOF IS ATTACHED AT PAGE 20. 7. THE APPELLANT RESPECTFULLY SUBMITS THAT SINCE AS PER THE CONTRACT, THERE WERE NO SEPARATE CHARGES PAYABLE FOR ERECTION , COMMISSIONING, TRAINING AND TEST- RUN, ETC., THE ENTIRE PRICE PAID BY THE APPELLANT TO M/S. HUBEI IS TOWARDS THE CONTRACT OF PURCHASE AND HENCE THERE IS NO LIABILITY TO DEDUCT TDS U/S. 195 SINCE THE TRANSACT IONS HAVE TAKEN PLACE OUTSIDE INDIA AND HENCE ARE NOT EXIGIBLE TO I NDIAN INCOME-TAX. 8. BESIDES ABOVE, YOUR APPELLANT CONTENDS THAT EVEN IF IT IS HELD THAT THE TAX AS DEDUCTIBLE U/S. 195 ON SUCH AMOUNT OF ERECTION, COMMISSIONING, TRAINING AND TEST- RUN, ETC., THE SA ME WAS NOT DEDUCTED BY THE APPELLANT AS IT WAS UNDER BONAFIDE BELIEF THAT SUCH AMOUNT IS NOT LIABLE TO DEDUCT. 9. THEREFORE, THE APPELLANT RESPECTFULLY SUBMITS TH AT IN TERMS OF PROVISIONS OF SECTION 273B, THERE WAS REASONABLE CA USE ON THE PART OF THE APPELLANT IN NOT DEDUCTING THE TDS FROM THE REM ITTANCES MADE BY IT TO M/S. HUBEI AND THEREFORE, THERE COULD NOT BE ANY PENALTY LEVIED UPON IT U/S.27 1 C OF THE ACT. UNDER THE CIRCUMSTAN CES, YOUR APPELLANT SUBMITS THAT THE PENALTY OF RS.90,066/- LEVIED BY T HE JCIT (INTERNATIONAL TAXATION) BE DIRECTED TO BE DELETED. FOR YOUR HONOURS READY REFERENCE, WE ARE ALSO ENCLOSING HEREWITH A C OPY OF SHOW CAUSE NOTICE RECEIVED FROM THE OFFICE OF JCIT DATED 13-03 -2008 ALONGWITH THE REPLY OF THE APPELLANT DATED 27-03-2008. (PAGES 1 TO 3). WE HOPE YOUR HONOUR WOULD CONSIDER THE AFORESAID SU BMISSION WHILE DISPOSING OF THE APPEAL. OUR AUTHORITY LETTER IS ATTACHED HEREWITH. KINDLY TREAT THESE SUBMISSION AS INTERIM SUBMISSION . THE APPELLANT WOULD LIKE TO FURTHER SUPPORT THE SAME WITH DECIDED CASES. 5 WE FIND THAT THE ISSUE IS COVERED BY THE DECISION O F THE ITAT AHMEDABAD BENCH IN THE CASE OF GUJARAT THEMIS BIOSYN LTD. V. JCIT (2000) 74 ITD 339 (AHD) , WHEREIN THE TRIBUNAL HAS DEALT WITH THE SIMILAR ISSUE IN GREAT DETAIL AND HAS HELD AS UNDER: 3. WE HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS SUBMISSIONS MA DE BEFORE US. THE IMPUGNED ORDER PASSED BY THE CIT(A) IS CLEARLY VIOLATIVE OF THE EXPRESS PROVISIONS OF SECTION 2 50(6), WHICH PROVID ES THAT THE APPELLATE ORDERS OF THE CIT(A) ARE TO STATE THE POI NTS ARISING IN THE APPEAL, THE DECISION OF THE AUTHORITY THEREON AND T HE REASONS FOR SUCH DECISION. THE UNDERLYING RATIONALE OF THE PROVISION IS THAT SUCH ORDERS ARE SUBJECT TO FURTHER APPEAL TO THE APPELLATE TRIB UNAL. SPEAKING ORDER WOULD OBVIOUSLY ENABLE A PARTY TO KNOW PRECIS E POINTS DECIDED IN HIS FAVOUR OR AGAINST HIM. ABSENCE OF THE FORMUL ATION OF THE POINT FOR DECISION FOR WANT OF CLARITY IN A DECISION UNDO UBTEDLY PUTS A PARTY IN QUANDARY. SECTION 250(6) EXPRESSLY EMBODIES THE PRINCIPLES OF NATURAL JUSTICE AND SUCH A PROVISION IS CLEARLY MAN DATORY IN NATURE. THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPE ALS) IN VIOLATION OF THE PROVISIONS OF SECTION 250(6) CANNO T, THEREFORE, BE SUSTAINED. REGARDING THE DECISIONS OF THE DELHI BEN CH OF THE TRIBUNAL IN MULTIPLAN INDIA (P.) LTD.S CASE (SUPRA) CITED B Y THE ID. CIT(A), WE FIND THAT THE SAID DECISION IS CLEARLY DISTINGUISHA BLE. SECTION 254 REFERRING TO THE ORDERS OF THE TRIBUNAL CONFERS PLE NARY JURISDICTION ON THE TRIBUNAL IN THE MATTER OF PASSING ORDERS UNDER SECTION 254(1). THERE IS NO SUCH EXPRESS STIPULATION IN SECTION 254 AS CONTAINED UNDER THE PROVISIONS OF SECTION 250(6) RELATING TO THE OR DERS OF FIRST APPELLATE AUTHORITY. THEREFORE, RELIANCE PLACED BY THE CIT(A) ON MULTIPLAN. INDIA (P.) LTD.S CASE (SUPRA) IS ENTIRE LY MISPLACED. SIMILARLY, THE CASE OF ESTATE OF LATE TUKOJIRAO HOL KAR (SUPRA) CITED BY THE ID. CIT(A) IS DISTINGUISHABLE AND DOES NOT SUPP ORT THE VIEW TAKEN BY THE CIT(A). 4. FOR THE REASONS INDICATED ABOVE, WE HEREBY SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND DIRECT THE CIT(A) TO DISPOSE OF THE APPEAL OF THE ASSESSEE AFRESH AFTER ALLOWING PROPER OPPORTUNITY IN ACCORDANCE WITH LAW. 5. FOR STATISTICAL PURPOSES, THE APPEAL IS TREATED AS ALLOWED. 6 4 IN VIEW OF ABOVE, RESPECTFULLY FOLLOWING THE AFO RESAID DECISION OF THE TRIBUNAL IN THE CASE OF GUJARAT THEMIS BIOSYN LTD. (SUPRA), WE RESTORE THE MATTER TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, PER A SPEAK ING ORDER. 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17-09-2009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 17-09-2009 COPY OF THE ORDER FORWARDED TO : 1. SUPACK INDUSTRIES PVT. LTD., OPP. MOTEL THE VILL AGE, HARIPUR, KALAWAD ROAD, RAJKOT OR SUPACK INDUSTRIES PVT. LTD., PATTANI BUILDING, DHEB AR ROAD, RAJKOT 2. THE JCIT (INTL. TAXN.), AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XXI, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y.R/AR, ITAT, AHMEDABAD