JCIT, Coimbatore V. Chroma Print India Pvt . Ltd., Coimbatore

ITA 2083/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5952 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 11-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VENI RAJ
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Non-deduction of tax; Reasonable cause; Ignorance of law
• Section: 273B; 201(1)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUD ICIAL MEMBER ./ I T.A. NO. 2083 /MDS/201 6 / ASSESSMENT YEAR :20 1 2 - 1 3 THE JOINT COMMISSIONER OF INCOME TAX, TDS RANGE, COIMBATORE. VS. M/S. CHROMA PRINT INDIA PVT. LTD., P.B. NO. 5316, 53, GANESH NAGAR, G.N. MILLS POST, MTP ROA D, COIMBATORE. [PAN: A AC CC6021A ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MS. VENI RAJ , J CIT / RESPONDENT BY : SHRI T.N. SEETHARAMAN , ADVOCATE / DATE OF HEARING : 03 . 0 8 .201 7 / DATE OF P RONOUNCEMENT : 13. 1 0 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 2 , C OIMBATORE DATED 30 . 0 3 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 1 2 - 1 3 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL : 1. THE ORDER OF LEARNED CIT(A) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD CIT(A) HAS ERRED IN HOLDING THAT NO PENALTY IS LEVIABLE ON THE NON DEDUCTION OF TDS ON PAYMENT OF LABOUR CHARGES WORTH I.T.A. NO . 2083 /M/ 1 6 2 1,71,873/ - ,AUDIT FEES WORTH 56,180/ - ,INTEREST PAYMENT WORTH 11,69,750/ - ,AND COMMISSION ON PROFIT WORTH 64,30,000/ - . 3. THE LD CIT(A) HAS ERRED IN HOLDING THAT IN ORDER T O LEVY PENALTY IT SHOULD BE SHOWN THAT THERE WAS CONTINUOUS AND REPEATED DEFAULTS. 4. THE LD CIT(A) HAS ERRED IN OVERLOOKING THE FACT THAT THE ONLY GROUND ON WHICH THE PENAL PROVISION U/S 273 B IS NOT ATTRACTED IS FOR THE ASSESSEE TO SHOW THAT THERE IS REASONABLE CAUSE FOR THE FAILURE TO DEDUCT TAX AT SOURCE. THE ASSESSEE HAD FAILED TO SHOW THAT THERE WAS REASONABLE CAUSE TO ACCOUNT FOR THE FAILURE TO DEDUCT TAX. 5. THE LD CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT OF PENALTY LEVIED IS HARSH AS HE HA S FAILED TO CONSIDER THE FACT THAT AS PER SECTION 271C, THE MINIMUM PENALTY LEVIABLE IS EQUIVALENT TO THE TAX NOT DEDUCTED WHICH CANNOT BE TERMED AS HARSH. 6. THE LD CIT(A) HAS ERRED IN HOLDING THAT THE SUBSEQUENT PAYMENT OF THE TAX BY THE ASSESSEE HAS CAUSED NO LOSS OF REVENUE TO THE DEPARTMENT .THE MAIN INGREDIENT THAT ATTRACTS THE LEVY OF PENALTY UNDER SECTION271C IS WHETHER OR NOT THERE IS A FAILURE TO DEDUCT TAX AS PER LAW. ONCE THIS IS PROVED, SUBSEQUENT PAYMENT OF TAX DOES NOT OBLITERATE THE INFRA CTION OF LAW THAT CALLS FOR LEVY OF PENALTY. 7. THE LD CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT DISPUTED THE LIABILITY TO DEDUCT TAX AND ITS FAILURE TO DEDUCT TAX IN TIME. 8. FOR THE ABOVE AND ANY OTHER REASONS THAT MIGH T BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OFFSET PRINTING, MAINLY LABELS FOR IMFL. DUR ING THE COURSE OF INSPECTION CARRIED OUT AT THE ASSESSEE S PREMISES ON 16.10.2012, THE TDS OFFICER NOTIED THAT THE ASSESSEE FAILED TO DEDUCT TAX ON CERTAIN PAYMENTS AND I.T.A. NO . 2083 /M/ 1 6 3 THEREAFTER PASSED ORDER UNDER SECTION 201 (1) AND 201(A) OF THE INCOME TAX ACT, 1961 [ A CT IN SHORT] HOLDING THAT THE ASSESSEE IS AN ASSESSEE IN DEFAULT IN RESPECT OF TAX OUGHT TO HAVE BEEN DEDUCTED. UPON RECEIVING INTIMATION FROM THE TDS OFFICER REGARDING THE DEFAULTS AND ORDER PASSED UNDER SECTION 201(1) AND 201(1A) OF THE ACT, THE JCIT, TDS RANGE INITIATED PROCEEDINGS UNDER SECTION 271C OF THE ACT BY ISSUING SHOW CAUSE NOTICE. HAVING NOT RECEIVED ANY RESPONSE TO THE NOTICE AND OBSERVING NON - COMPLIANCE TO FURTHER OPPORTUNITIES GRANTED, THE JCIT PROCEEDED TO PASS ORDER UNDER SECTION 271C O F THE ACT IMPOSING PENALTY EQUIVALENT TO THE TAX NOT DEDUCTED ON THE GROUND THAT THE ASSESSEE FAILED TO ESTABLISH ANY REASONABLE CAUSE FOR NOT DEDUCTING TAX AT SOURCE. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AGAINST LEVY OF PE NALTY UNDER SECTION 271C OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED THE PENALTY. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON R ECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS CLAIMED CREDIT FOR TDS MADE FOR A SUM OF .6,34,240/ - AGAINST DEDUCTOR S TAN , WHEREAS, THE TDS AMOUNT DEPOSITED BY THE DEDUCTOR WAS ONLY .95,992/ - . THEREFORE, AN INSPECTION WAS CONDUCTED ON 16.10.2012 AND ON VERIFICATION OF I.T.A. NO . 2083 /M/ 1 6 4 THE BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2011 - 12, THE ASSESSING OFFI CER HAS NOTICED THAT O UT OF TOTAL LABOUR CHARGES OF .51,50,089/ - PAID DURING THE YEAR, THE ASSESSEE DID NOT DEDUCT TAX ON .1,71,873/ - . SIMILARLY, AGAINST PAYMENT OF AUDIT FEES OF .1,68,540/ - , THE ASSESSEE HAS NOT DEDUCTED TAX ON .56,180/ - AND MOREOVER, TOWARDS INTEREST PAYMENT OF .18,27,500/ - , NON DEDUCTION OF TAX WAS .11,69,750/ - . ACCORDINGLY, THE ASSESSING OFFICER PASSED ORDER UNDER SECTION 201(1) AND 201(1A) OF THE ACT HOLDING THAT THE ASSESSEE AS AN ASSESSEE IN DEFAULT . ACCORDINGLY, THE JCIT INI TIATED PROCEEDINGS UNDER SECTION 271C OF THE ACT BY ISSUING SHOW CAUSE NOTICE. SINCE THERE WAS NO RESPONSE FROM ASSESSEE, THE JCIT LEVIED PENALTY UNDER SECTION 271C OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED THE P ENALTY BY OBSERVING AS UNDER: 4.2 IN GROUND NO. 7, THE APPELLANT FOUND FAULT WITH THE PENALTY LEVIED ON NON DEDUCTION OF TAX ON LABOUR CHARGES, AUDIT FEES AND INTEREST PAYMENTS. FROM THE DETAILS OF DEFAULTS IN THIS REGARD, IT IS SEEN THAT THESE ARE NOT M AJOR DEFAULTS. HOWEVER, THE APPELLANT HAS SUBSTANTIALLY COMPLIED WITH THE TDS PROVISIONS. THESE DEFAULTS COULD BE ACCEPTED AS CLERICAL MISTAKES. THE APPELLANT HAS SUBSEQUENTLY CORRECTED THE MISTAKES BY REMITTING THE TDS. IN ANY CASE, THE TDS OFFICER HAD RA ISED THE DEMAND WHICH WOULD HAVE BEEN LATER ON COLLECTED. AS THESE ARE NOT MAJOR DEFAULTS AND HAVING BEEN SUBSEQUENTLY CORRECTED BY THE APPELLANT, THE LEVY OF PENALTY OF EQUIVALENT AMOUNT OF TDS APPEARS TO BE HARSH. FURTHER, THE JCIT HAS NOT POINTED OUT AN Y CONTINUOUS AND REPEATED DEFAULTS JUSTIFYING LEVY OF PENALTY. THEREFORE, I AM INCLINED TO HOLD THAT THE PENALTY LEVIED U/S 271C, IN SO FAR AS THESE DEFAULTS ARE CONCERNED, IS NOT CALLED FOR AND DELETE PORTION OF THE PENALTY PERTAINING TO THESE DEFAULTS. A CCORDINGLY, THIS GROUND IS ALLOWED. 5.1 THE SUBSTANCE OF THE ISSUE IS WHETHER THE ASSESSEE IS IN DEFAULT AND LIABLE FOR PENAL PROCEEDINGS. ADMITTEDLY, THE ASSESSEE HAS NOT DEDUCTED TDS ON THE EXPENDITURES AS DETAILED HEREINABOVE. THE INCOME TAX ACT I.T.A. NO . 2083 /M/ 1 6 5 MANDA TES THAT A SPECIFIED PERCENTAGE OF TAX IS REQUIRED TO BE DEDUCTED BY THE PAYER AT THE TIME OF MAKING CERTAIN PAYMENTS TO THE PAYEE. THE REQUIREMENT TO DEDUCT TAX IS THERE FOR PAYMENTS, SUCH AS, PAYMENT OF COMMISSION, INTEREST, SALARY, ROYALTY, CONTRACT PAY MENT, BROKERAGE ETC. THE TAX DEDUCTED HAS TO BE DEPOSITED BY THE PAYER TO THE REVENUE DEPARTMENT ON BEHALF OF THE PAYEE WITHIN THE TIME STIPULATED IN THE ACT . IN CASE THE PAYER IS FAILED TO DEDUCT THE TAX AT SOURCE, THE PAYER IS LIABLE TO PAY PENALTY UNDER SECTION 271C OF THE ACT. 271C. 1) IF ANY PERSON FAILS TO A) DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDER THE PROVISIONS OF CHAPTER XVIIB; OR B) PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDER I. SUB - SECTION (2) OF SECTION 115 - O; OR II. THE SECOND PROVISO TO SECTION 194B, 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 OR PAY AS AFORESAID. 5.2 HOWEVER, SECTION 273B OF THE ACT PROVIDES THAT IN CASE THE ASSESSEE PROVES THAT THERE WAS SOME REASONABLE CAUSE FOR THE FAILURE TO DEDUCT TAX, THEN THE PENALTY UNDER SECTION 271C OF THE ACT IS WAIVED OFF. SECTION 273B - PENALTY NOT TO BE IMPOSED IN CERTAIN CASES, CAN BE READ AS FOLLOWS: 273B. NOTW ITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF CLAUSE (B) OF SUB - SECTION (1) OF SECTION 271, SECTION 271A, SECTION 271AA, SECTION 271B, SECTION 271BA, SECTION 271BB, SECTION 271C, SECTION I.T.A. NO . 2083 /M/ 1 6 6 271CA, SECTION 271D, SECTION 271E, SECTION 271F, SECTION 271FA, SECTION 271FB, SECTION 271G, SECTION 271H, CLAUSE (C) OR CLAUSE (D) OF SUB SECTION (1) OR SUB - SECTION (2) OF SECTION 272A, SUB - SECTION (1) OF SECTION 272AA OR SECTION 272B OR SUBSECTION (1) OR SUBSECTION (1A) OF SECTION 272BB OR SUB - SECTION (1) OF SECTION 272BBB OR CLAUSE (B) OF SUB - SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUBSECTION (2) OF SECTION 273, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THER E WAS REASONABLE CAUSE FOR THE SAID FAILURE. 5.3 THERE IS NO DEFINITION FOR THE TERM REASONABLE CAUSE AND IT HAS TO BE DECIDED UPON THE FACTS OF EACH CASE. DURING THE COURSE OF PENALTY PROCEEDINGS UNDER SECTION 271C OF THE ACT, THE ASSESSEE, NEITHER RES PONDED TO THE SHOW - CAUSE NOTICES NOR FILED ANY EXPLANATION TOWARDS NON - DEDUCTION OF TDS . THE ONLY ARGUMENT OF THE ASSESSEE BEFORE THE LD. CIT(A) WA S THAT NON - DEDUCTION OF TDS IS UNINTENTIONAL AND A CLERICAL ERROR. IT IS NOT THE CASE OF THE ASSESSEE THAT TH E ASSESSEE WAS NOT AWARE O F THE TDS PROVISION, BUT FAILED TO DEDUCT TDS ON THE PAYMENTS IN FULL. IF THE DEPARTMENT HAS NOT INSPECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE NON - DEDUCTION OF TDS WOULD NOT HAVE COME TO LIGHT. IN VIEW OF THE ABOVE PROVISIO NS AND CONSIDERING THE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT NON - DEDUCTION OF TDS IS , NOTHING BUT IGNORANCE AND IGNORANCE OF LAW IS NOT AN EXCUSE AND THUS, THE JCIT HAS RIGHTLY LEVIED PENALTY UNDER SECTION 271C OF THE ACT . ACCORDINGLY, WE REV ERSE THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE AND ALLOW THE GROUND RAISED BY THE REVENUE. I.T.A. NO . 2083 /M/ 1 6 7 6. WITH REGARD TO COMMISSION ON PROFIT OF .64,30,000/ - , THE CURRENT ACCOUNT OF THE DIRECTORS WERE CREDITED WITH PROFIT COMMISSION ON 31.03.2012 WITHOUT DEDUCT ION OF TAX AT SOURCE. ANY REVENUE PAYMENT TO DIRECTORS BY WHATEVER NAME CALLED HAS TO BE TREATED AS SALARY AND TDS HAS TO BE DEDUCTED AS PROVIDED IN SECTION 192 OF THE ACT. IN THIS CASE, THE ASSESSING OFFICER NOTICED THAT OUT OF TDS LIABILITY OF .19,29,00 0/ - , .17,68,415/ - WAS PAID ON 26.10.2012 (POST INSPECTION) AND THE BALANCE OF .1,60,585/ - WAS NOT DEDUCTED, WHICH ATTRACTS PENALTY UNDER SECTION 271C OF THE ACT. 6.1 ON APPEAL, THE LD. CIT(A) DELETED THE PENALTY ON THE GROUND THAT THE TDS WAS MADE IN THE SUBSEQUENT YEAR AND REMITTED INTO THE GOVERNMENT ACCOUNT AND MOREOVER, THE DIRECTORS ALSO OFFERED THE SAME TO TAX IN THEIR RETURNS. 6.2 WE HAVE HEARD RIVAL CONTENTIONS. IN THIS CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT PROFIT COMMISSION WAS DETER MINED AFTER CLOSURE OF THE ACCOUNTS AND SUBSEQUENTLY PAID TO THE DIRECTORS ATTRACTING THE TDS PROVISIONS OF SECTION 194H OF THE ACT. THE ASSESSEE HAS, VERY WELL, MADE A PROVISION FOR COMMISSION ON PROFIT AND CLAIMED IT AS A DEDUCTION BY WAY OF DEBITING THE SAME TO THE PROFIT AND LOSS ACCOUNT. IN THE CURRENT ACCOUNT OF THE DIRECTORS, THE ASSESSEE HAS CREDITED WITH, IN THE NAME OF PROFIT COMMISSION OF .64,30,000/ - ON 31.03.2012 W ITHOUT DEDUCTING TDS. THE PAYMENT MADE TO THE DIRECTORS, BY WHATEVER THE NAME CALLED, HAS TO BE TREATED AS SALARY I.T.A. NO . 2083 /M/ 1 6 8 AND TDS SHOULD HAVE BEEN DEDUCTED AS PROVIDED UNDER SECTION 192 OF THE ACT. ONCE THE COMMISSION WAS RELEASED ON 31.03.2012, THE ASSESSEE SHOUL D HAVE PAID THE TDS BY 30.04.2012, BUT, IN THIS CASE, OUT OF THE TOTAL TDS LIABILITY OF .19,29,000/ - , .17,68,415/ - WAS PAID ON 26.10.2012 AND THE BALANCE TDS LIABILITY WAS FOUND, NOT PAID, DURING THE COURSE OF INSPECTION. 6.3 WE HAVE PERUSED THE CASE RELIED ON BY THE ASSESSEE IN THE CASE OF CIT V. R. LAKSHMI NARAYANAN IN TCA NO. 1344 OF 2005, THE PURPORT OF THE DECISION IS THAT THE COMMISSION PAYABLE TO ASSESSEE BY THE COMPANY HAVING BEEN APPROVED IN THE BOARD MEETING ONLY IN THE FOLLOWING YEAR WHICH IS RELEVANT TO ASSESSMENT YEAR 1997 - 98, THE SAME IS TAXABLE IN THAT ASSESSMENT YEAR AND N OT IN THE EARLIER ASSESSMENT YEAR. SIMILAR WAS THE SITUATION IN THE CASE OF SANJIB KUMAR AGARWAL V. CIT 310 ITR 295 (CAL). IN BOTH THE CASES, THE TDS PROVISIONS OF SECTION 194H OF THE ACT APPLIES AND THE ABOVE CASE LAW HAVE NO APPLICATION TO THE FACTS OF T HE PRESENT CASE. IN THE PRESENT CASE, THE COMMISSION PAYMENT, THOUGH IT IS IN DIFFERENT NAME, BEING SALARY AND COVERED UNDER THE TDS PROVISIONS OF SECTION 192 OF THE ACT, THE TDS SHOULD HAVE BEEN PAID BEFORE CLOSURE OF THE FINANCIAL YEAR. SUBSEQUENT PAYMEN T OF TDS DOES NOT OBLITERATE AS TO WHETHER THE ASSESSEE HAS CAUSED ANY LOSS TO THE REVENUE. THE INGREDIENT THAT ATTRACTS THE LEVY OF THE PENALTY UNDER SECTION 271C OF THE ACT IS WHETHER OR NOT THERE WAS A FAILURE TO DEDUCT TAX AS PER LAW. ADMITTEDLY, TDS W AS NOT EFFECTED ON THE I.T.A. NO . 2083 /M/ 1 6 9 COMMISSION PAYMENT IN THE RELEVANT FINANCIAL YEAR. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS LEGALLY NOT CORRECT TO DELETE THE PENALTY LEVIED UNDER SECTION 271C OF THE ACT AND ACCORDINGLY, THE SAME STANDS RE VERSED AND ALLOWED THE GROUND RAISED BY THE REVENUE . 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED ON THE 13 TH OCTOBER , 201 7 AT CHENNAI. SD/ - SD/ - ( SANJAY ARORA ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 13 . 1 0 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.