M/s. Netambit Value First Services Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1704/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3524 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH CHEDDA
• Keywords: Bonafide belief; Question of law; Non-deduction of tax; Bonafide mistake
• Section: 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES D : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA.NO.1704/DEL./2016 ASSESSMENT YEAR 2011-2012 M/S. NETAMBIT VALUE FIRST SERVICES PVT. LTD., A-47, LOWER GROUND FLOOR, HAUZ KHAS, NEW DELHI 110016 PAN AACCN7778D VS. THE DCIT, CIRCLE-13(1), NEW DELHI. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI VED JAIN, ADVOCATE AND SHRI ASHISH CHEDDA, C.A. FOR REVENUE : SHRI AMIT JAIN, SR. D.R. DATE OF HEARING : 13.02.2018 DATE OF PRONOUNCEMENT : 16.02.2018 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-6, DELHI, DATED 05 TH JANUARY, 2016, FOR THE AY 2011-2012, CHALLENGING THE LEVY OF PENAL TY UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961. 2 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT ASSESSE E- COMPANY DECLARED CURRENT YEARS LOSS AT RS.2.61 CRO RES IN THE RETURN OF INCOME. THE CASE OF THE ASSESSEE-COMPANY WAS SELECTED FOR SCRUTINY. THE A.O. OBSERVED FROM THE B ALANCE SHEET OF THE ASSESSEE-COMPANY THAT IT OBTAINED FRES H UNSECURED LOANS DURING THE YEAR UNDER CONSIDERATION FROM THE NBFC SECTOR COMPANIES. THE ASSESSEE-COMPANY FURNISH ED DETAILS OF INTEREST PAID TO NBFC COMPANIES. IT WAS OBSERVED FROM THE DETAILS FILED BY THE ASSESSEE-COMPANY THAT ASSESSEE- COMPANY HAS FAILED TO DEDUCT THE TAX AT SOURCE ON T HE PAYMENT ON ACCOUNT OF INTEREST PAID TO NBFC COMPANI ES AMOUNTING TO RS.7,71,859. AS PER PROVISIONS OF SECT ION 194A, THE ASSESSEE-COMPANY WAS REQUIRED TO DEDUCT THE TAX ON SUCH PAYMENTS DURING THE YEAR UNDER CONSIDERATION. THUS, THE AMOUNT OF INTEREST WAS DISALLOWED UNDER SECTION 40( A)(IA) OF THE I.T. ACT DUE TO NON-DEDUCTION OF TAX AT SOURCE. THE A.O. INITIATED THE PENALTY PROCEEDINGS FOR FURNISHING IN ACCURATE PARTICULARS OF INCOME. THE A.O. VIDE SEPARATE ORDER LEVIED PENALTY ON THIS ADDITION AGAINST THE ASSESSEE-COMPA NY, THE 3 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. PARTICULARS OF WHICH, THE ASSESSEE-COMPANY HAS CONC EALED WITHIN THE MEANING OF EXPLANATION-1 TO SECTION 271( 1)(C) OF THE I.T. ACT. 3. THE ASSESSEE-COMPANY CHALLENGED THE PENALTY ORD ER BEFORE THE LD. CIT(A). IT WAS SUBMITTED THAT ASSESS EE-COMPANY HAS NOT DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE TO FOUR REPUTED BANKS/NBFC SECTOR COMPANIES AMOUNTING TO RS.7,71,859. THE ASSESSEE-COMPANY WAS UNDER BONAFID E BELIEF THAT THE TDS PROVISIONS ARE NOT ATTRACTED ON INTERE ST PAYMENT TO BANKS AND NBFC COMPANIES UNDER SECTION 194A OF T HE I.T. ACT. IN FACT, SECTION 194A(3)(III) EXEMPTS FROM DED UCTION OF TDS ON INCOME CREDITED OR PAID TO ANY BANKING COMPA NY TO WHICH THE BANKING REGULATION ACT, 1949 APPLIES. IT WAS SUBMITTED THAT THE PROVISIONS OF BANKING REGULATION ACT, 1949 APPLIES TO KOTAK MAHINDRA BANK LIMITED. THE AUDIT R EPORT OF KOTAK MAHINDRA BANK LIMITED WAS ALSO FILED. IT WAS SUBMITTED THAT THE PROVISIONS OF TDS UNDER SECTION 194A ARE N OT APPLICABLE ON THE INTEREST OF RS.1,75,099 PAID TO K OTAK 4 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. MAHINDRA BANK LIMITED. IT WAS, THEREFORE, SUBMITTED THAT NO PENALTY COULD BE LEVIED. IT WAS ALSO SUBMITTED THAT IN VIEW OF INSERTION OF SECOND PROVISO TO SECTION 40(A)(I)(A), THE ASSESSEE- COMPANY MAY NOT BE TREATED AS ASSESSEE-IN-DEFAULT O F NOT DEDUCTING TAX AT SOURCE BECAUSE THE INTEREST WAS PA ID TO OTHER REPUTED NBFC COMPANIES BY NET BANKING AND THEY ARE BOUND TO FILE THEIR RETURN OF INCOME UNDER SECTION 139 OF THE I.T. ACT. SINCE THE PAYEE HAS PAID THE TAX, THEREFORE, ASSESS EE-COMPANY MAY NOT BE DEEMED TO BE AN ASSESSEE-IN-DEFAULT. THE ASSESSEE-COMPANY RELIED UPON THE DECISION OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD., (2015) 377 ITR 635 (DEL.). IT WA S SUBMITTED THAT ASSESSEE-COMPANY MADE TRUE AND FULL DISCLOSURE , THEREFORE, NO PENALTY BE LEVIED. THE ASSESSEE-COMPA NY RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., 322 ITR 158 IN WHICH IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPT ED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT, BY ITSELF, WOU LD NOT ATTRACT 5 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. THE PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT . THE ASSESSEE-COMPANY ALSO RELIED UPON OTHER DECISIONS W HICH ARE REPRODUCED IN THE IMPUGNED ORDER. THE ASSESSEE-COMP ANY, THEREFORE, PLEADED THAT NO PENALTY BE LEVIED. IT WA S FURTHER SUBMITTED THAT ASSESSEE-COMPANY DID NOT FILE ANY AP PEAL AGAINST THE ADDITION BUT PENALTY PROCEEDINGS ARE DI FFERENT FROM THE ASSESSMENT PROCEEDINGS AND ARE INDEPENDENT. 4. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTION OF ASSESSEE-COMPANY AND HELD THAT PROVIS IONS OF LAW ARE CLEAR AND ASSESSEE-COMPANY IS REQUIRED TO D EDUCT TDS ON INTEREST PAID TO NBFC COMPANIES. IT WAS NOTED TH AT TDS DETAILS ARE NOT SHOWN IN THE TAX AUDIT REPORT. THE CLAIM OF THE ASSESSEE-COMPANY THAT INTEREST PAID TO KOTAK MAHIND RA BANK LIMITED WHICH IS NOT A NBFC COMPANY WAS ALSO NOT AC CEPTED. THE LD. CIT(A) FOLLOWING THE DECISION OF THE HONBL E JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS PVT. LTD., 327 ITR 150 (DEL.) CONFIR MED THE 6 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. LEVY OF PENALTY AND DISMISSED THE APPEAL OF THE ASS ESSEE- COMPANY. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE H AS REFERRED TO PB-14 WHICH IS THE DETAILS OF INTEREST EXPENDITURE DULY REFLECTED IN SCHEDULE-16 OF THE BALANCE SHEET. HE HAS SUBMITTED THAT ASSESSEE-COMPANY HAS ALSO GOT ITS AC COUNTS AUDITED AND NO DISALLOWANCE WITH REGARD TO ANY NON- DEDUCTION OF TAX AT SOURCE ON THESE PAYMENTS WAS MADE BY THE TAX AUDITOR IN THE AUDIT REPORT. COPY OF THE SAME IS FI LED AT PB-23 TO 34. THE DETAILS WITH REGARD TO BIFURCATION OF SA ID INTEREST EXPENDITURE WAS PROVIDED TO THE A.O. THUS, THE ASSE SSEE- COMPANY MADE FULL DISCLOSURE IN THE RETURN OF INCOM E AS WELL AS AT THE ASSESSMENT STAGE. THE ASSESSEE-COMPANY WA S UNDER BONAFIDE BELIEF THAT NO TDS IS REQUIRED TO BE DEDUC TED ON PAYMENTS MADE TO BANKS AND NBFCS. RS.1,75,099 WAS PAYABLE TO KOTAK MAHINDRA BANK LIMITED, ON WHICH, N O TDS IS REQUIRED TO BE DEDUCTED. THE TAX AUDITOR HAS NOT BR OUGHT THIS 7 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. FACT TO THE NOTICE OF THE ASSESSEE-COMPANY. THEREFO RE, THERE IS NO CONCEALMENT OF INCOME OR FURNISHING INACCURATE P ARTICULARS OF INCOME. THE ASSESSEE-COMPANY RELIED UPON THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE P ETRO PRODUCTS PVT. LTD., (SUPRA). HE HAS ALSO RELIED UPO N THE ORDER OF ITAT, AHMEDABAD BENCH IN THE CASE OF ITO VS. SHR I VISHAL MADUSUDANBHAI CHOKSHI 2014 (1) TMI 910 IN WHICH IT WAS HELD AS UNDER : DELETION OF PENALTY U/S 271(1 )(C) OF THE ACT - HE LD THAT:- THE ASSESSING OFFICER HAS NOWHERE ALLEGED THAT THE PAYMENT OF INTEREST MADE TO FINANCE COMPANY ON WHIC H THE TDS WAS DEDUCTABLE IS NON GENUINE OR BOGUS - IT IS ALSO A FACT THAT THERE IS NOTHING ON RECORD OR ALLE GED THAT THE PAYMENT OF INTEREST IS EXCESSIVE OR UNREASONABL E - THE DISALLOWANCE HAS BEEN MADE FOR NON-DEDUCTION OF TDS IN VIEW OF PROVISIONS OF SECTION 40(A)(IA) - THE LEGAL FICTION CREATED BY SECTION 40(A)(IA) WILL NOT ATTRACT PENAL TY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME BECA USE THERE IS NO INACCURATE PARTICULARS IN THE RETURN OF INCOME. 8 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. 5.1. HE HAS ALSO RELIED UPON THE DECISION OF THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M/S. VENU S ENGINEERS 2011 (8) TMI 1163 (GUJ.) (HC) IN WHICH IN PARAS 4 TO 6 IT IS HELD AS UNDER : 4. ON HEARING LEARNED COUNSEL MRS.MAUNA M. BHATT AND ON EXAMINING THE ORDERS OF ADJUDICATING AUTHORITIES , IT CAN BE SEEN THAT TRIBUNAL WAS OF THE OPINION THAT D UE TO IGNORANCE OF THE PROVISION CONTAINING IN SECTION 40 (A)(IA) OF THE ACT, THE ASSESSEE DID NOT DEDUCT TDS FROM TH E PAYMENT MADE TO LABOUR, TRANSPORT AND CARTING EXPENSES. THE TRIBUNAL WAS ALSO ACTUATED BY THE FAC T THAT THE C.A. WHO AUDITED THE ACCOUNTS OF THE ASSES SEE UNDER SECTION 44AB DID NOT POINT OUT ANY INFIRMITY ON ACCOUNT OF NON-DEDUCTION OF IDS., OTHERWISE, ALL TH E RELEVANT ACCOUNTS WERE ADDUCED BEFORE THE ASSESSING OFFICER. THUS, WHEN THE TAX AUDIT REPORT ALSO DID N OT POINT OUT THE TDS DEFAULT TO THE ASSESSEE, THE TRIB UNAL CONCLUDED THAT THE MISTAKE MADE BY ASSESSEE WAS BONAFIDE AND THE EXPLANATION WAS FOUND GENUINE. 5. THE TRIBUNAL DREW SUPPORT FROM THE ORDER OF CIT(A) THAT THERE WAS NO CONCEALMENT NOR WAS THIS IS A CASE OF FURNISHING OF INACCURATE PARTICULARS. 9 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. 6. THE REASONINGS GIVEN BY BOTH THE ADJUDICATING AUTHORITIES CONCURRENTLY CANNOT BE HELD AS PERVERSE NOR ARE THERE ANY GROUNDS MADE OUT BY THE REVENUE TO DISLODGE THE FINDINGS. RESULTANTLY, WHEN THERE IS NO CONCEALMENT N OR ANY OCCASION OF FURNISHING INACCURATE PARTICULARS T O BONAFIDE MISTAKE, TRIBUNAL RIGHTLY UPHOLD THE ORDER OF CIT(A), DELETING THE PENALTY, THEREFORE, THIS TAX A PPEAL MERITS NO CONSIDERATION AS QUESTION OF LAW IS TO BE DETERMINED. HENCE, SAME IS DISMISSED.. 5.2. LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT PENALTY IS NOT LEVIABLE. 6. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ONLY SM ALL PERCENTAGE OF RETURNS ARE TAKEN-UP FOR SCRUTINY. IF THE ASSESSEE-COMPANY MAKES A CLAIM, WHICH IS NOT ONLY I NCORRECT, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLAN ATION FURNISHED BY THE ASSESSEE-COMPANY FOR MAKING SUCH C LAIM, IS NOT FOUND TO BE BONAFIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WAS STILL NOT LIABLE TO PENALTY UNDER SECTION 271(1 )(C) OF THE I.T. 10 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. ACT. IN SUPPORT OF THIS CONTENTION, HE HAS RELIED U PON DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD., (SUPRA). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. LEARNED COUNSEL FOR THE ASSESSEE POINTED-OUT THE DETAILS IN THE AUDIT REPOR T, IN WHICH, ASSESSEE-COMPANY IN SCHEDULE-16, HAS DECLARED COMPL ETE FACTS OF INTEREST AND FINANCING CHARGES ON LOANS, I N A SUM OF RS.7,71,859. HE HAS ALSO REFERRED TO PB 33 AND 34 O F THE PAPER BOOK TO SHOW THAT THE AUDITOR HAS GIVEN COMPLETE DE TAILS OF TDS UNDER VARIOUS APPLICABLE SECTIONS BUT THE SAID AUDITOR HAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE-COMPA NY NON- DEDUCTION OF TDS ON INTEREST PAID TO BANKS AND NBFC S. THE ASSESSEE-COMPANY PLEADED THAT PART OF THE INTEREST WAS PAID TO THE BANK WHICH IS EXEMPT ON WHICH NO FINDING HAVE B EEN GIVEN BY THE LD. CIT(A). IT IS CLEAR FROM THESE FAC TS THAT ASSESSEE-COMPANY MADE FULL DISCLOSURE OF THE INCURR ING OF THE INTEREST EXPENDITURE OF THE AMOUNT IN QUESTION ON A CCOUNT OF 11 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. FRESH UNSECURED LOAN OBTAINED FROM BANKS AND NBFC. THE AUDITOR HAS GIVEN DETAILS OF TDS IN THE AUDIT REPOR T BUT THE AUDITOR WHO AUDITED THE ACCOUNTS OF THE ASSESSEE-CO MPANY DID NOT POINT-OUT ANY INFIRMITY ON ACCOUNT OF NON-D EDUCTION OF TDS ON THE AMOUNT OF INTEREST PAID TO THE BANKS AND NBFC, OTHERWISE, ALL THE RELEVANT ACCOUNTS WERE PRODUCED BEFORE A.O. THE AUDITOR, THEREFORE, DID NOT POINT-OUT THE TDS D EFAULT TO THE ASSESSEE-COMPANY. IT IS NOT IN DISPUTE THAT PAY MENT OF INTEREST MADE TO BANK AND NBFC WERE GENUINE AND NOT EXCESSIVE OR UNREASONABLE INTEREST WAS FOUND. THESE FACTS CLEARLY SHOW THAT IT IS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE A.O. LEVIED THE PENALTY MERELY BECAUSE OF NON-DEDUCTION OF TDS ON INTEREST PAYMENT S. THEREFORE, THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASES OF ITO VS. SHRI VISHA L MADHUSHDNANHAI CHOKSHI AND CIT VS. M/S. VENUS ENGIN EERS (SUPRA), APPLIED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS A CASE WHERE DISALLOWANCE IS MADE BECAUSE OF NON - DEDUCTION OF TDS. THEREFORE, DECISION OF THE HONBL E SUPREME 12 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S PVT. LTD., (SUPRA) ALSO APPLIED TO THE CASE OF THE ASSESSEE-CO MPANY. MERELY BECAUSE THE ASSESSEE-COMPANY HAD CLAIMED DED UCTION OF EXPENDITURE WITHOUT DEDUCTING TDS ON INTEREST PA YMENT WHICH WAS NOT ACCEPTED BY THE REVENUE, BY ITSELF, W OULD NOT ATTRACT THE LEVY OF PENALTY. MERE DISALLOWANCE OF I NTEREST FOR NON-DEDUCTION OF TDS BY ITSELF MAY NOT BE A GROUND TO LEVY OF PENALTY AGAINST THE ASSESSEE-COMPANY. MOREOVER, THE A.O. IN THE ASSESSMENT ORDER HAS INITIATED THE PENALTY PROC EEDINGS FOR FURNISHING INACCURATE PARTICULARS OF INCOME. HOWEVE R, IN THE PENALTY ORDER, THE A.O. LEVIED THE PENALTY FOR CONC EALMENT OF INCOME WITHIN THE MEANING OF EXPLANATION-1 TO SECTI ON 271(1)(C) OF THE I.T. ACT. THE A.O. DID NOT INITIAT E THE PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME. EXPLANATION- 1 TO SECTION 271(1)(C) WOULD APPLY IN THE CASE OF CONCEA LMENT OF INCOME AND NOT IN THE CASE OF FURNISHING OF INACCUR ATE PARTICULARS OF INCOME. THEREFORE, THERE IS A CONTRA DICTORY FINDINGS GIVEN BY THE A.O. IN THE ASSESSMENT ORDER AS WELL AS IN THE PENALTY ORDER. MERELY BECAUSE THE ASSESSEE-C OMPANY 13 ITA.NO.1704/DEL./2016 M/S. NETAMBI VALUE FIRST SERVICES PVT. LTD., NEW DELHI. DID NOT CHALLENGE THE ADDITION BEFORE LD. CIT(A), I S NO GROUND TO LEVY PENALTY AGAINST THE ASSESSEE-COMPANY BECAUS E IT IS WELL SETTLED LAW THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE DISTINCT AND INDEPENDENT PROCEEDINGS. IT IS NOT AUT OMATIC IN EACH AND EVERY CASE TO LEVY PENALTY, IF ADDITION IS SUSTAINED ON MERITS. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR LEVY OF THE PENALTY. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND C ANCEL THE PENALTY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (O.P.KANT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 16 TH FEBRUARY, 2018 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT D BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.