IDBI Bank Ltd., Surat V. The Jt.CIT.,(TDS), Surat

ITA 2096/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85727 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 25-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: S N DIVETIA
• Keywords: Bonafide belief; Reasonable cause; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , CH CHCH CH BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER . ITA. NOS. 2094 TO 2097/AHD/2011 (ASSESSMENT YEARS: 2003-04 TO 2006-07) IDBI BANK LTD., CENTRALISED CLEARING UNIT, 202, 21 ST CENTURY BUSINESS CENTRE, NEXT TO WORLD TRADE CENTRE, RING ROAD, SURAT - 395002 APPELLANT VS. JOINT COMMISSIONER OF INCOME TAX, (TDS), ROOM NO.312, AAYKAR BHAVAN, MAJURA GATE, SURAT RESPONDENT PAN: AABC18842G / BY ASSESSEE :SHRI S. N. DIVETIA, A.R. / BY REVENUE :SHRI M. K. SINGH, SR. D.R. /DATE OF HEARING :23.02.2015 !' /DATE OF PRONOUNCEMENT : 26.02.2015 ITA. NOS. 2094 TO 2097/AHD/2011 FOR A.YS.03-04 TO 06-07 [IDBI BANK LTD. VS. JCIT (TDS)] PAGE 2 ORDER PER SHAILENDRA KUMAR YADAV, J.M: ALL THESE FOUR APPEALS FILED BY ASSESSEE ON SIMILAR GROUND I.E. ON THE GROUND OF PENALTY U/S. 271C FOR A.YS. 2 003-04 TO 06-07 ARISING OUT FROM THE RESPECTIVE ORDERS OF CIT (A)-I, SURAT. SO, THEY ARE BEING DISPOSED OF BY WAY OF THIS COMMO N ORDER FOR THE SAKE OF CONVENIENCE. 2. IN A.Y. 2003-04 ASSESSEE HAS FILED APPEAL ON FOL LOWING GROUNDS: AGGRIEVED BY THE APPELLATE ORDER DATED 09.06.2011, PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) I, SURAT [CIT (A)], FOR THE ASSESSMENT YEAR 2003-04, T HE APPELLANT BEGS TO FILE THIS APPEAL AND RAISE THE FO LLOWING GROUNDS OF APPEAL, WHICH ARE INDEPENDENT OF AND WIT HOUT PREJUDICE TO EACH OTHER. 1) AS PER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW. 2) THE LEARNED CIT(A) ERRED IN FAILING TO ADJUDICAT E ALL THE GROUNDS RAISED BY THE APPELLANT IN ITS APPEAL. 3) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , WHILE ADJUDICATING THE APPEAL FILED BY THE APPELLAN T, ERRED BY NOT CONSIDERING THE SUBMISSIONS MADE BY TH E APPELLANT. AS SUCH THE PRINCIPLES OF NATURAL JUSTIC E ARE VIOLATED. 4) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT FOLLOWING THE DECISIONS OF HIGHER COUR TS ON THE SIMILAR ISSUES WHILE CONFIRMING PENALTY U/S 271 C OF THE I T ACT, 1961. 3. INDUSTRIAL DEVELOPMENT BANK OF INDIA LTD. TOOK O VER ITS SUBSIDIARY, ERSTWHILE IDBI BANK LTD., WHICH WAS A C OMMERCIAL ITA. NOS. 2094 TO 2097/AHD/2011 FOR A.YS.03-04 TO 06-07 [IDBI BANK LTD. VS. JCIT (TDS)] PAGE 3 BANK IN F.Y.2004-05. SUBSEQUENTLY THE NAME OF INDUS TRIAL DEVELOPMENT BANK OF INDIA LTD WAS CHANGED TO IDBI B ANK LTD. (THE APPELLANT). ASSESSING OFFICER LEVIED PENALTY OF RS.47,491/- ON THE GROUND THAT THE ERSTWHILE IDBI BANK LTD. (E- IBL) HAD FAILED TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE TO STATE BANK OF INDIA, SURAT IN CONNECTION WITH CLEARANCE OF MIC R CHEQUES. THE E-IBL WAS A MEMBER OF MICR CHEQUE CLEARING HOUS E AT SURAT, WHICH WAS MANAGED BY SBI. THE E-IBL WAS TAKE N OVER BY INDUSTRIAL DEVELOPMENT BANK OF INDIA LTD., W.E.F 01.10.2004. PENALTY HAS BEEN LEVIED ON THE SUCCESSO RS FOR AN ALLEGED INFRINGEMENT BY THE PREDECESSOR BANK. STAND OF ASSESSEE HAS BEEN THAT AS PER BUSINESS PRACTICE, BA NKS MANAGING SUCH MICR CENTRES RECOVERED THEIR CHARGES FROM THE PARTICIPATING BANK, LIKE E-IBL BY DEBITING PARTICIP ANTS BANK ACCOUNT MAINTAINED WITH THE BANK MANAGING MICR CENT RE. ACCORDING TO ASSESSEE, THERE WAS NO 'PAYMENT' INVOL VED AS ENVISAGED IN THE RELEVANT PROVISION OF SECTION 194J OF THE INCOME TAX ACT. AMOUNT WAS NOT CREDITED TO THE PAYE E'S ACCOUNT IN THE BOOKS OF PAYER. AS SUCH THE PROVISIO NS OF SECTION 194J COULD BE APPLIED IN THIS CASE. ACCORD ING TO ASSESSEE, IT WAS UNDER BONAFIDE BELIEF THAT THERE W AS NO TAX DEDUCTIBLE ON SUCH CHARGES. HOWEVER, ASSESSING OFFI CER OBSERVED THAT ASSESSEE HAD NOT DEDUCTED TDS FROM TH E PAYMENTS MADE TO THE STATE BANK OF INDIA AS MICR CH ARGES DURING THE RELEVANT YEAR. ASSESSING OFFICER STATED THAT ASSESSEE SHOULD HAVE DEDUCTED TDS ON SUCH PAYMENTS U/S.194J OF THE INCOME TAX ACT SINCE SUCH PAYMENTS WERE MADE TOWARD S 'FEES ITA. NOS. 2094 TO 2097/AHD/2011 FOR A.YS.03-04 TO 06-07 [IDBI BANK LTD. VS. JCIT (TDS)] PAGE 4 FOR TECHNICAL CHARGES' WHICH WAS CHARGED FOR PROVID ING MANAGERIAL SERVICES. ASSESSING OFFICER HAS RELIED UPON THE DECISION OF THE HON'BLE ITAT, B BENCH, AHMEDABAD IN CASE OF CANARA BANK VS ITO, TDS-1, SURAT (117 ITD 207) WHER EIN, IT WAS HELD THAT ASSESSEE WAS LIABLE TO DEDUCT TDS U/S .194 J OF THE ACT FROM THE PAYMENT MADE TO THE STATE BANK OF INDIA AS 'MICR CHARGES'. THUS, ASSESSING OFFICER LEVIED PEN ALTY U/S.271C FOR NON-DEDUCTION OF TDS ON MICR CHARGES O F RS.47,491/-. IN APPEAL, CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER. 4. BEFORE US, LEARNED AUTHORIZED REPRESENTATIVE SUB MITTED THAT SIMILAR ISSUE CAME BEFORE AMRITSAR BENCH IN IT A NO.206(ASR)/2013 FOR A.Y. 2008-09 IN CASE OF DEPUTY COMMISSIONER OF INCOME TAX VS. JAMMU & KASHMIR BANK LTD., WHEREIN ASSESSEE WAS GRANTED RELIEF ON SIMILAR SET OF CIRCUMSTANCES BY OBSERVING AS UNDER: 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) AND THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE, MR. R.K.GUPTA THAT THE LD. CIT(A) IN THE PRESENT CASE HAS GIVEN A PERTINENT FINDING THAT MICR CHEQUE S ARE CLEARED THROUGH WITH THE HELP OF ULTRAVIOLET RAYS W HICH SCANS THE GENUINENESS OF CHEQUES. NO HUMAN INTERVEN TION IS REQUIRED IN MICR CLEARING OF CHEQUES BY WAY OF E XAMINING TECHNICAL DATA, ANALYZING THEM AND MAKING THEM USEF UL FOR SUBSEQUENT USE. IN FACT, MICR CLEARANCE OF CHEQUE C AN BE POSSIBLE BY A MECHANIZED SYSTEM ONLY AND NOT THROUG H HUMAN INTERVENTION KEEPING IN VIEW THE PROCESSING O F BULK CHEQUES. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BHARTI CELLULAR LTD. (SUPRA) IS CLE ARLY APPLICABLE AND THE LD. CIT(A) HAS RIGHTLY DELETED T HE ITA. NOS. 2094 TO 2097/AHD/2011 FOR A.YS.03-04 TO 06-07 [IDBI BANK LTD. VS. JCIT (TDS)] PAGE 5 DISALLOWANCE MADE BY THE A.O. IN GROUND NO.2 OF THE REVENUE. THUS, GROUND NO.2 OF THE REVENUE IS DISMIS SED. LEARNED AUTHORIZED REPRESENTATIVE ALSO DREW OUR ATT ENTION TO THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF COMMISSIONER OF INCOME-TAX VS. CHIEF MANAGER, ST ATE BANK OF INDIA REPORTED IN [2012] 21 TAXMANN.COM 506 (PUN JAB & HARYANA), WHEREIN IT WAS HELD THAT IN CASE OF SERVI CES RENDERED BY BANK IN MICR CHEQUE PROCESSING CENTRE INVOLVES H UMAN INTERVENTION REQUIRING EXAMINATION OF TECHNICAL DAT A, SAME WOULD FALL WITHIN DEFINITION OF TECHNICAL SERVICE AND FOR THAT PURPOSE MATTER WAS REMANDED. IN THIS BACKGROUND, L EARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT ISSUE AT H AND WAS DEBATABLE AT RELEVANT POINT OF TIME SO PENALTY IS N OT JUSTIFIED. WE ALSO FIND THAT ITAT, AHMEDABAD C BENCH IN CASE OF CENTRAL BANK OF INDIA VS. JCIT, TDS RANGE, IN INCOM E TAX ACT NOS. 2322 TO 2325/AHD/2011, IN SIMILAR SET OF CIRCU MSTANCES HAS GRANTED RELIEF ON THE GROUND OF REASONABLE CAUS E BY OBSERVING AS UNDER: 5. AFTER HEARING BOTH THE SIDES, OUR HUMBLE UNDERSTANDING IS THAT THE WORD 'REASONABLE CAUSE' C AN BE INTERPRETED AS APPLIED TO A PERSON HAVING AN ORDINA RY PRUDENCE. THEREFORE, THE EXPRESSION 'REASONABLE' GI VES AN IMPRESSION THAT PRIMA FACIE, IF A PERSON OF AVERAGE INTELLIGENCE HAS ACTED AND UNDER THOSE CIRCUMSTANCE S THE SAID ACTION WAS AT THAT POINT OF TIME NOT INFRINGED THE SETTLED LAW THEN IT CAN BE REASONABLY HELD THAT THE ASSESSEE WAS PREVENTED BY A 'REASONABLE CAUSE' UNDER THOSE CIRCUMSTANCES NOT TO ACT AS PRESCRIBED OR DETERMINE D BY A CASE LAW SUBSEQUENTLY. ALTHOUGH IGNORANCE OF LAW IS NOT AN EXCUSE BUT SIDE BY SIDE IT IS ALSO NOT EXPECTED THA T EVERY TAX PAYER SHOULD BE AWARE ABOUT THE LATEST DEVELOPMENT OF TAX LAW; WHICH ARE OTHERWISE FAST CHANGING. WE, THEREFO RE, DEEM ITA. NOS. 2094 TO 2097/AHD/2011 FOR A.YS.03-04 TO 06-07 [IDBI BANK LTD. VS. JCIT (TDS)] PAGE 6 IT JUSTIFIABLE TO HOLD THAT IN A SITUATION WHEN AN ASSESSEE WAS NOT AWARE ABOUT THE LATEST POSITION OF LAW DURI NG THE ASSESSMENT YEAR UNDER CONSIDERATION; HENCE, HE WAS PREVENTED BY A REASONABLE CAUSE NOT TO DEDUCT THE T DS, THEREFORE, AS FAR AS THE QUESTION OF LEVY OF PENALT Y IS CONCERNED, ENTITLED FOR THE RELIEF. ASSIGNING THIS REASON, WE HEREBY DIRECT TO DELETE THE PENALTY. GROUNDS ALLOW ED FOR ALL THE YEARS UNDER APPEAL. ACCORDINGLY, PENALTY BE DELETED. ON OTHER HAND, LE ARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 5. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT WORD 'REASONABLE CAUSE' CAN BE INTERPRETED AS APPLIED TO A PERSON HAVING AN ORDINARY PRUDENCE. THE EXPRESSION 'REASONABLE' GIVES AN IMPRESSION THAT PR IMA FACIE, IF A PERSON OF AVERAGE INTELLIGENCE HAS ACTED AND UNDE R THOSE CIRCUMSTANCES THE SAID ACTION WAS AT THAT POINT OF TIME NOT INFRINGED THE SETTLED LAW THEN IT CAN BE REASONABLY HELD THAT ASSESSEE WAS PREVENTED BY A 'REASONABLE CAUSE' UNDE R THOSE CIRCUMSTANCES NOT TO ACT AS PRESCRIBED OR DETERMINE D BY A CASE LAW. WE ARE AWARE THAT IGNORANCE OF LAW IS NOT AN EXCUSE BUT AT THE SAME TIME, IT IS NOT PRACTICAL THAT EVERY TA X PAYER SHOULD BE AWARE ABOUT THE LATEST DEVELOPMENT OF TAX LAW; W HICH ARE OTHERWISE FAST CHANGING. WE FIND THAT ISSUE AT HA ND WAS DEBATABLE AT RELEVANT POINT OF TIME AND ASSESSEE WA S PREVENTED BY A REASONABLE CAUSE NOT TO DEDUCT TDS UNDER THE R ELEVANT PROVISIONS OF INCOME TAX ACT. IN VIEW OF THIS, ASS ESSEE IS ITA. NOS. 2094 TO 2097/AHD/2011 FOR A.YS.03-04 TO 06-07 [IDBI BANK LTD. VS. JCIT (TDS)] PAGE 7 ENTITLED FOR RELIEF FROM PENALTY LEVIED UNDER THE P ROVISION OF 271C OF THE ACT. ACCORDINGLY, SAME IS DIRECTED TO BE DELETED. 6. SIMILAR ISSUE AROSE IN A.YS. 2004-05 TO 2006-07. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, PENALTY IN ALL THREE YEARS IS ALSO DIRECTED TO BE DELETED. 7. AS A RESULT, THESE APPEALS FILED BY ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 26 TH DAY OF FEBRUARY, 2015. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 26/02/2015 TRUE COPY S.K.SINHA # # # # %& %& %& %& '&' '&' '&' '&' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ,, - / CONCERNED CIT 4. -- / CIT (A) 5. &12 %, , / DR, ITAT, AHMEDABAD 6. 256 78 / GUARD FILE. BY ORDER / # , 9/ , , ;