M/s.Mithra Agricultural Produce Company Ltd, Cochin V. The Jt CIT(TDS), Cochin

ITA 212/COCH/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5526 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A DHANARAJ
• Keywords: Reasonable cause
• Section: 273B; 201(1); 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI P. K. BANSAL, VICE PRESIDENT AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO S.212 TO 214/COCH/2015 ASSESSMENT YEARS:2010-11 TO 12-13 JT.C.I.T. (TDS), KOCHI. VS M/S MITHRA AGRICULTURAL PRODUCE CO. LTD., AKSHARA MANDIRAM, 3 RD FLOOR, MARINE DRIVE, ERNAKULAM, KOCHI. PAN:AAECM 3228 M (RESPONDENT) (APPELLANT) SHRI T. M. SREEDHARAN APPELLANT BY SHRI A. DHANARAJ, SR. D. R. RESPONDENT BY 25/09/2017 DATE OF HEARING 26/09/2017 DATE OF PRONOUNCEMENT ORDER PER P. K. BANSAL, V.P. ALL THESE APPEALS FILED BY THE ASSESSEE SINCE INVO LVE COMMON ISSUE THEREFORE, ALL THESE APPEALS ARE DECIDED BY T HIS COMMON ORDER, AS AGREED BY BOTH THE PARTIES, ON THE BASIS OF THE FAC TS RELATING TO THE ASSESSMENT YEAR 2010-11. IN ALL THESE APPEALS, THE ASSESSEE HAS TAKEN THE FOLLOWING COMMON GROUND OF APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-LLL, KOCHI, IN I.T.A. NO.27/TDS/EKM/CIT(A)-LLL/12-13 DATED 30.01.2015 DISMISSING THE APPEAL AGAINST THE ORDER U/S 271C OF 2 THE INCOME TAX ACT, FOR 2010-11 ASSESSMENT, IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE . 2. THE CIT(A) WENT WRONG IN CONFIRMING THE LEVY OF PENALTY AND DISMISSING THE APPEAL. THE REASONS GIVE N TO DO SO ARE UNJUST AND UNWARRANTED. 3. THE CIT(A) OUGHT TO HAVE FOUND THAT PROVISIONS O F 271C WERE NOT ATTRACTED TO THE APPELLANT'S CASE. 4. IT IS RESPECTFULLY SUBMITTED THAT SECTION 271C W AS WRONGLY INVOKED IN THE APPELLANT'S CASE, IN SO FAR AS DEDUCTION OF TAX UNDER CHAPTER XVII B WAS CONCERNED. 5. IT IS RESPECTFULLY SUBMITTED THAT THERE IS NO FA ILURE ON THE PART OF THE APPELLANT TO DEDUCT THE TAX AT SOUR CE UNDER CHAPTER XVIIB, WHICH IS AN ADMITTED FACT. IN SUCH CIRCUMSTANCES SECTION 271C IS NOT ATTRACTED. 6. IT IS RESPECTFULLY SUBMITTED THAT THE NOTICE DAT ED 6.2.2012 ISSUED BY THE ADJUDICATING AUTHORITY INITIATING ACTION U/S 274 R.W.S. 271C OF THE IT ACT IS ALSO ILLEGAL AND INVALID, IN AS MUCH AS THE REASONS STATED FOR ISSUANCE OF THE NOTICE IS 'FAILURE TO DE DUCT TAX AT SOURCE' UNDER CHAPTER XVII B FOR THE FINANCI AL YEAR 2009-10. THERE IS NO SUCH VIOLATION ON THE PAR T OF THE APPELLANT WHICH HAS BEEN STATED BEFORE THE JOINT COMMISSIONER OF INCOME TAX (TDS), KOCHI THROUGH REPLY DATED 29.2.2012. TRUE COPY OF THE NOTICE DATED 06.02.2012 ISSUED BY THE JOINT COMMISSIONER OF INCOME TAX (TDS) AND THE REPLY DATED 29.02.2012 FILED BY THE APPELLANT ARE PRODUCE D HEREWITH AND MARKED AS ANNEXURES A & B RESPECTIVELY. 7. IN THIS CONNECTION, THE ADJUDICATING OFFICER ALS O FAILED TO CONSIDER THAT CIRCULAR NO.551 DATED 23.01.1990 EXPLAINING THE SCOPE OF NEW SECTION 271C VIDE PARA 16.5 CLEARLY SHOWED THAT THE OBJECT OF INTRODUCING THE NEW SECTION WAS TO PROVIDE FOR LEVY OF PENALTY FOR FAILURE TO DEDUCT AT SOURCE. 3 8. THE STATUTORY AUTHORITY IS BOUND TO INTERPRET TH E ABOVE PROVISION STRICTLY IN ACCORDANCE OF LAW. 9. IT IS RESPECTFULLY SUBMITTED THAT DELAY IN REMIT TANCE OF THE TAX IS COMPENSATED BY THE LEVY OF INTEREST U/S 201(1A) OF THE ACT AND AS SUCH THE DELAY IN REMITTI NG THE TAX WAS ALSO REGULARIZED. 10. AT ANY RATE, THE STATUTORY AUTHORITY SHOULD HAV E FOUND THAT THE APPELLANT WAS ENTITLED TO GET PROTECTION OF SECTION 271B FROM LEVY OF PENALTY AS THE DELAY IN REMITTANCE OF THE TAX DEDUCTED WAS DUE TO REASONS BEYOND CONTROL AND THAT THERE WAS REASONABLE CAUSE FOR THE DELAY. 2. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE HAS DEDUCTED TAX AT SOURCE IN EACH OF THE ASSESSMENT YE ARS BUT DEPOSITED THE SAME LATE NOT WITHIN THE TIME AS PERMISSIBLE UN DER THE I.T. ACT. THE ASSESSING OFFICER THEREFORE, LEVIED THE PENALTY UNDER SECTION 271C OF THE ACT IN EACH OF THE ASSESSMENT YEARS AS DETAI LED BELOW: ASSESSMENT YEAR AMOUNT (RS.) -------------------- ------------------ 2010-11 16,84,542.00 2011-12 8,98,639.00 2012-13 1,11,613.00 2. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WH O CONFIRMED THE ORDER OF THE ASSESSING OFFICER IN EACH OF THE A SSESSMENT YEARS AND REJECTED THE SUBMISSIONS OF THE ASSESSEE THAT THERE IS ONLY A DELAY AND NOT A CONTINUED OR ABSOLUTE FAILURE WITH A GUILTY M IND OR INTENTION TO EVADE TAX. THE SERIOUS FINANCIAL CRISIS ON ACCOUNT OF HUGE LOSSES WAS THE ONLY REASON FOR THE DELAY IN REMITTING TAX AND AS SUCH THERE WAS NO DELIBERATE OR INTENTIONAL ACT ON THE PART OF THE AS SESSEE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY C ONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES B ELOW. BEFORE US, 4 LEARNED A. R. REFERRED TO THE PROVISIONS OF SECTION 271C(1) OF THE ACT AND ON THAT BASIS IT WAS CONTENDED THAT THE PENALTY UNDER SECTION 271C CAN BE LEVIED ONLY IF THERE IS A FAILURE ON THE PAR T OF THE ASSESSEE TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED UNDER THE PROVISIONS OF CHAPTER XVIIB OR PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRED UNDER SUB-SECTION (2) OF SECTION 115-O; OR THE SECOND PROVISO TO SECTION 194B. IT WAS CONTENDED THAT IN THE CASE OF THE ASSESSEE THERE WAS NO FAILURE TO DEDUCT THE TAX AT SOURCE UN DER THE PROVISION OF SECTION CHAPTER XVIIB. OTHERWISE ALSO, ON MERIT IT WAS CONTENDED THAT THERE WAS FINANCIAL CRISIS IN THE COMPANY AND DUE T O THE ACUTE FINANCIAL DIFFICULTIES AND LACK OF WORKING CAPITAL FOR THE BU SINESS, THE ASSESSEE HAS INCURRED HEAVY LOSS DURING THE IMPUGNED ASSESSM ENT YEAR AS DETAILED BELOW: FINANCIAL YEAR LOSS ACCUMULATED LOSS SECURED LOANS 2009-10 4.96 CRORES UPTO 31/03/2010 17.06 CRORES 21.23 CRORES AS AT 31/03/2010 2010-11 4.83 CRORES UPTO 31/03/2011 21.82 CRORES 23.61 CRORES AS AT 31/03/2011 2011-12 4.21 CRORES UPTO 31/03/2012 25.94 CRORES 26.49 CRORES AS AT 31/3/2012 THEREFORE, THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE TO DEPOSIT THE TAX DEDUCTED AT SOURCE WITHIN THE PERMISSIBLE T IME. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF HON'BLE KE RALA HIGH COURT IN THE CASE OF CIT VS. CHEMBARA PEAK ESTATE LTD. 183 ITR 4 71 IN WHICH IT WAS HELD THAT WHEN DEFAULT WAS FOR GOOD AND SUFFICIENT REASON, NO PENALTY IS LEVIABLE. ACCORDING TO LEARNED A.R., FINANCIAL STR INGENCY WAS THE REASONABLE CAUSE. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX-XVIII DELHI VS. BANK OF NOVA SCOTIA, CIVIL APPEAL NO. 1704 OF 2 008 DATED 5 07/01/2016. LEARNED D. R., ON THE OTHER HAND, RELI ED ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL (P) LTD. VS. CIT 195 TAXMAN 323 (KER) IN WHICH IN PARA 3 OF THEIR ORDER THE HON'BLE HIGH COURT OBSERVED SO MUCH SO, IN OUR VIEW FAILURE TO DEDUCT OR FAILURE TO REMIT RECOVERED TAX , BOTH WILL ATTRACT PENALTY U/S. 271C OF THE ACT, LEARNED D. R. ALSO RELIED ON THE FOLLOWING OBSERVATION OF THE SAID DECISION SO FAR AS FAILURE ON THE PART OF THE ASSESSEE TO R EMIT TAX RECOVERED AT SOURCE IS CONCERNED, WE DO NOT THINK T HERE CAN BE ANY JUSTIFYING CIRCUMSTANCES FOR DELAY IN REMITT ANCE BECAUSE ASSESSEE CANNOT DIVERT TAX RECOVERED FOR TH E GOVERNMENT TOWARDS WORKING CAPITAL OR ANY OTHER PUR POSE. SO MUCH SO, IN OUR VIEW, DEFENCE AVAILABLE AND SECT ION 273B DOES NOT COVER FAILURE IN PAYMENT OF RECOVERED TAX'. LEARNED D. R. HAS ALSO REFERRED TO THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF INCOME TAX OFFICER VS. ANIL BA TRA & ANR. CRL.L.P.241 TO 243 OF 2012. WE HAVE GONE THROUGH A LL THE DECISIONS AS HAVE BEEN RELIED ON BY BOTH THE PARTIES. WE NOTED THAT HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX-XVIII DELHI VS. BANK OF NOVA SCOTIA (SUPRA) VIDE ORDER DATED 07 /01/2006 DISMISSED THE APPEAL OF THE REVENUE AGAINST THE ORDER OF THE HIGH COURT IN WHICH REVENUE, AGAINST THE ORDER OF THE TRIBUNAL, TOOK UP THE MATTER BEFORE THE SUPREME COURT, HOLDING THAT NO SUBSTANTIAL QUES TION OF LAW ARISE IN THE MATTER. WE NOTED IN THAT DECISION THE TRIBUNAL VIDE ORDER DATED 31/03/2006 GAVE THE FOLLOWING FINDING: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS . IN THE INSTANT CASE WE ARE NOT DEALING WITH COLLECTION OF TAX U/S 201(1) OR COMPENSATORY INTEREST U/S 201 (1A) . THE CASE OF THE ASSESSEE IS THAT THESE AMOUNTS HAVE ALREADY BEE N PAID SO AS TO END DISPUTE WITH REVENUE. IN THE PRESENT A PPEALS WE ARE CONCERNED WITH LEVY OF PENALTY U/S 271C FOR WHICH IT 6 IS NECESSARY TO ESTABLISH THAT THERE WAS CONTUMACIO US CONDUCT ON THE PART OF THE ASSESSEE. WE FIND THAT O N SIMILAR FACTS HON'BLE DELHI HIGH COURT HAVE DELETED LEVY OF PENALTY U/S 271C IN THE CASE OF M/S. ITOCHU CORPORATION, RE PORTED IN 268 ITR 172 (DEL) AND IN THE CASE OF CIT VS. MITSUI & COMPANY LTD. REPORTED IN 272 ITR 545. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENTS OF HON'BLE DELHI HIGH COURT AND THE DECISION OF THE ITAT, DELHI IN THE CA SE OF TELEVISION EIGHTEEN INDIA LTD., WE ALLOW THE ASSESS EE'S APPEAL AND CANCEL THE PENALTY AS LEVIED U/S 271C. SO FAR THE CONTENTION OF THE ASSESSEE THAT THE PROV ISION OF SECTION 271C WILL NOT APPLY WHERE THERE IS FAILURE TO DEPOSIT TH E TAX RECOVERED AT SOURCE, WE NOTED THAT THIS ISSUE IS DULY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AGAINST THE ASSE SSEE IN THE CASE OF US TECHNOLOGIES INTERNATIONAL (P) LTD. (SUPRA) IN WHIC H HON'BLE HIGH COURT HAS LAID DOWN THE PROPOSITION OF LAW THAT FAILURE TO DEDUCT THE TAX OR FAILURE TO REMIT RECOVERED TAX, BOTH WILL ATTRACT P ENALTY UNDER SECTION 271C. THEREFORE, THE ONLY ISSUE REMAINS WHETHER TH E ASSESSEE HAS A REASONABLE CAUSE TO DEPOSIT THE TAX WITHIN THE PERM ISSIBLE TIME. THE PROVISIONS OF SECTION 271C ARE SUBJECT TO THE PROVI SIONS OF SECTION 273B. SECTION 273B SPECIFICALLY STATES THAT NO PENALTY SH ALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. IN THIS CASE, WE NOTED THAT THE ASSESSEE HAS TAKEN A PLEA B EFORE THE CIT(A) AS WELL AS BEFORE THE ASSESSING OFFICER THAT DUE TO TH E FINANCIAL DIFFICULTIES FACED BY THE ASSESSEE, THE ASSESSEE COULD NOT DEPOS IT THE TAX WITHIN THE PERMISSIBLE TIME, ALTHOUGH SUBSEQUENTLY HE HAS DEPOSITED THE SAID TAX. WE ALSO NOTED THAT HON'BLE KERALA HIGH COURT HAS CLEARLY HELD IN THE CASE OF CIT VS. CHEMBRA PEAK ESTATES LTD. [1990 ] 183 ITR 471 (KER) THAT THE FINANCIAL DIFFICULTY IS A REASONABLE CAUSE FOR DELAY IN PAYMENT OF TAX DEDUCTED AT SOURCE. SIMILAR VIEW HA S BEEN TAKEN BY HON'BLE KERALA HIGH COURT IN THE CASE OF IAC VS. IS SAC PETER THAT THE 7 FINANCIAL DIFFICULTY IS A REASONABLE CAUSE FOR DELA Y IN PAYMENT OF TAX DEDUCTED AT SOURCE. WE HAVE ALSO GONE THROUGH THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ITO VS. ANI L BATRA & ANR. (SUPRA) AS RELIED BY LEARNED D. R. WE NOTED THAT I N THAT CASE THE QUESTION RELATES TO THE PROSECUTION UNDER SECTION 2 76B OF THE INCOME TAX ACT IN RESPECT OF THE LIABILITY OF THE DIRECTOR OF THE COMPANY WHETHER THE DIRECTOR IS A PRINCIPAL OFFICER OR NOT. THE LOWER COURT HAS ACQUITTED THE DIRECTOR ON THE PLEA THAT THE DIRECTO RS WERE NOT ISSUED SEPARATE SHOW CAUSE NOTICE BUT WHEN THE MATTER TRAV ELLED TO HIGH COURT, HON'BLE HIGH COURT CONVICTED BOTH THE DIRECT ORS AND IMPOSED A FINE ON BOTH OF THEM. THIS DECISION, IN OUR OPINIO N, DOES NOT RELATE TO THE ISSUE BEFORE US WHETHER THE ASSESSEE WAS PREVEN TED WITH A REASONABLE CAUSE OR NOT. IN VIEW OF THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX-XVI II DELHI VS. BANK OF NOVA SCOTIA (SUPRA), WE ARE OF THE VIEW THAT THE REASONABLE CAUSE HAS TO BE LOOKED INTO BY THE AUTHORITIES BELOW BEFO RE LEVYING THE PENALTY UNDER SECTION 271C OF THE ACT. WE NOTED TH AT THE CIT(A) JUST CONFIRMED THE ORDER OF THE ASSESSING OFFICER LEVYIN G THE PENALTY FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL (P) LTD. VS. CIT (SUP RA) AND WITHOUT GOING TO THE PLEA OF THE ASSESSEE WHETHER THE ASSES SEE WAS PREVENTED IN DEPOSITING THE TAX DEDUCTED AT SOURCE WITHIN THE TIME PERMISSIBLE DUE TO THE FINANCIAL DIFFICULTIES. WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES, SET ASIDE THE OR DER OF CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL REDECIDE THE ISSUE WHETHER THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE IN DEPOSITING THE TAX DEDUCTED AT SOURCE AFTER GIVING PROPER AND SUFFICIENT OPPORTUNI TY TO THE ASSESSEE AFRESH IN ACCORDANCE WITH LAW KEEPING IN VIEW THAT IT IS NOT A CASE THAT 8 THE ASSESSEE HAS NOT MADE THE ABSOLUTE DEFAULT BY N OT REMITTING THE RECOVERED TAX. THIS IS A CASE WHERE THE ASSESSEE H AS DULY DEPOSITED THE TAX DEDUCTED AT SOURCE BUT NOT WITHIN THE TIME AS PERMISSIBLE UNDER THE INCOME TAX ACT. 4. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 26/09/2017) SD/. SD/. (GEORGE GEORGE K.) (P. K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT DATED:26/09/2017 *SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5. D.R., I.T.A.T., COCHIN ASS TT. REGISTRAR