The ACIT, TDS Circle, Ahmedabad V. M/s. Xcellon Education Ltd., Ahmedabad

ITA 2408/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6267 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 22-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI
• Assessee Lawyers: TUSHAR HEMANI P B PARMARAR
• Keywords: Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2408/AHD/2016 (ASSESSMENT YEAR: 2014-15) THE ASST. COMMISSIONER OF INCOME TAX, TDS CIRCLE, AHMEDABAD V/S M/S XCELLON EDUCATION LTD. 10 TH FLOOR, SANGITA COMPLEX, NR. PARIMAL CROSSING, ELLISBRIDGE, AHMEDABAD-380009 (APPELLANT) (RESPONDENT) PAN: AHMXO0028A APPELLANT BY : SHRI SANTOSH KARNANI, SR. D.R. RESPONDENT BY:SHRI TUSHAR HEMANI &P.B. PARMAR,AR ( )/ ORDER DATE OF HEARING : 09 -01-201 8 DATE OF PRONOUNCEMENT : 11 -01-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-8, AHMEDABAD DATED 20.07.2016 PERTAINING TO A.Y. 2014- 15. ITA NO. 2408 /AHD/2016 . A.Y. 2014-15 2 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE PENALTY OF RS. 27.40 LAKHS LEVIED U/S 271C OF THE A CT. 3. FACTS ON RECORD SHOW THAT THE ASSESSEE IS ENGAGED I N THE BUSINESS OF RUNNING MANAGEMENT INSTITUTE. A SURVEY ACTION WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 26.11.2013. DURING THE COURSE OF THE SU RVEY PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE AMOUNTING TO RS. 27,40,125/- BUT HAS NOT DEPOSITED THE SAME IN GOVER NMENT ACCOUNT TILL DATE. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAS NOT EVEN FILED THE QUARTERLY STATEMENT PERTAINING TO F.Y. 2011-14. WHILE FRAMING THE ORDER U/S 201(1)/201(1A) OF THE ACT, PENALTY PROCEEDINGS 271C OF THE ACT WERE SEPAR ATELY INITIATED. THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY PENALTY SHOULD NOT BE LEVIED U/S 271C OF THE ACT. ON RECEIVING NO PLAUSIBLE REPLY, THE A. O. LEVIED PENALTY AT RS. 27,40,125/-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND VEHEMENTLY STATED THAT PROVISIONS OF SECTION 271C OF THE ACT DO NOT APPLY ON THE FACTS OF THE CASE. 5. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, T HE LD. CIT(A) HELD AS UNDER:- I HAVE CAREFULLY GONE THROUGH THE ORDER U/S,201(L) /201(LA), PENALTY ORDER U/S.271C AND THE WRITTEN SUBMISSION FILED BY THE AR OF THE APPELLANT. IT IS EVIDENT FROM THE ORDER U/S.201(LA) DATED 28.11.2013 THAT TH E ASSESSEE HAS DEDUCTED TDS AMOUNTING TO RS.27,40,125/- PERTAINING TO F.Y.2013- 14 (TILL 26.11.2013), BUT HAS NOT DEPOSITED THE SAME IN GOVERNMENT ACCOUNT TILL D ATE. WHILE IMPOSING THE IMPUGNED PENALTY, THE ADDITIONAL CIT, TDS-RANGE TOT ALLY IGNORED THE PROVISIONS OF SECTION 271C WHICH STIPULATES THAT THE ASSESSEE WIL L BE LIABLE TO PAY PENALTY ONLY IF THERE IS FAILURE TO DEDUCT TAX AT SOURCE. IN APPELLANT'S CASE THERE IS NO FAIL URE TO DEDUCT WHICH IS EVIDENT FROM THE FACTS NARRATED BY THE AO HIMSELF IN ORDER U/S.201(L)/201(LA) AND ALSO IN THE PENALTY ORDER. S ECTION 271C (1) (A) SPEAKS ABOUT THE FAILURE TO DEDUCT THE WHOLE OR ANY PART O F TAX AND SECTION 271C (1) (B) ITA NO. 2408 /AHD/2016 . A.Y. 2014-15 3 SPEAKS CLEARLY ABOUT THE FAILURE TO PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDER SUBSECTION (2) OF SECTION 115- O; OR THE SECOND PROVISO TO SECTION 194B. IN THE CASE OF THE ASSESSEE, THERE IS NO SUCH DEFAULT AS THE TDS IS DEDUCTED BY THE APPELLANT U/S. 194C, 194H, 1941, 19 4J AND 192B OF THE I.T. ACT, WHICH ARE NOT COVERED BY 271C (L)(B), HENCE THERE I S NO QUESTION OF FAILURE OF PAYMENT FOR THE PURPOSE OF IMPOSING PENALTY. HENCE, AS THERE IS N FAILURE OF DEDUCTION, THE A.O. CANNOT IMPOSED PENALTY U/S. 271 C AND ACCORDINGLY, THE A.O. IS DIRECTED TO DELETE THE PENALTY. 6. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 7. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. IT IS THE SAY OF THE LD. D.R. THAT IT WAS ONLY DURING THE SURVEY PROCEEDINGS , THE DEPARTMENT CAME TO KNOW THE DEFAULT MADE BY THE ASSESSEE IN NOT DEPOSI TING THE TAX WHICH WAS DEDUCED BY IT AT SOURCE. THE LD. D.R. VEHEMENTLY ST ATED THAT THE ASSESSEE WAS USING THE MONEY BELONGED TO THE GOVERNMENT WITHOUT ANY JUSTIFIABLE CAUSE AND IS THEREFORE LIABLE FOR PENALTY U/S 271C OF THE ACT . IN SUPPORT, THE LD. D.R. STRONGLY RELIED UPON THE DECISION OF THE HONBLE HI GH COURT OF KERALA IN THE CASE OF US TECHNOLOGIES INTERNATIONAL (P.) LTD. 195 TAXMANN.COM 323. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPO N BY THE FINDINGS OF THE LD. CIT(A) AND FURTHER RELIED UPON THE JUDGMENTS REPORT ED IN 154 ITR 561 (DELHI), 80 ITR 627 (CALCUTTA) AND 136 ITR 505 (ALLAHABAD). IT IS THE SAY OF THE LD. COUNSEL THAT FAILURE TO DEDUCT TAX AT SOURCE IS DIF FERENT FROM DEPOSITING THE TAX DEDUCTED BELATEDLY. THE LD. COUNSEL CONCLUDED BY S AYING THAT THERE IS NO DEFAULT IN DEDUCTING TAX AT SOURCE AND THE ONLY DEF AULT IS DELAY IN DEPOSITING THE SAME AND THEREFORE THE LD. CIT(A) HAS RIGHTLY DELET ED THE PENALTY. 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT THE ASSESSEE HAS DE DUCTED TAX AT SOURCE BUT HAS ITA NO. 2408 /AHD/2016 . A.Y. 2014-15 4 NOT DEPOSITED THE SAME TO THE EXCHEQUER. IN OUR CON SIDERED OPINION, FAILURE TO DEDUCT OR FAILURE TO REMIT RECOVERED TAX BOTH SHOUL D ATTRACT PENALTY U/S 271C OF THE ACT OTHERWISE, IF THE ASSESSES ARE ALLOWED TO K EEP THE TDS WITH THEMSELVES WITHOUT DEPOSITING THE SAME TO THE EXCHEQUER AND GE TTING AWAY WITHOUT PAYING ANY PENALTY WOULD DEFEAT THE VERY PURPOSE OF THE AC T. NOBODY SHOULD BE ALLOWED TO DERIVE BENEFIT FROM SUCH CONDUCT BY WHIC H THE TAX HAS BEEN DEDUCTED AT SOURCE AND THE SAME IS NOT DEPOSITED WI TH THE EXCHEQUER AND BEING USED IN ONCE OWN BUSINESS. 9. THE HONBLE HIGH COURT OF KERALA (SUPRA) WAS SEIZED WITH THE IDENTICAL SETS AND THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READ AS UNDER:- 2. THE FIRST QUESTION RAISED IS WHETHER PENALTY COU LD BE LEVIED UNDER SECTION 271C OF THE ACT FOR NON-PAYMENT OF TAX DEDUCTED AT SOUR CE. THE CONTENTION OF COUNSEL FOR THE APPELLANT IS THAT SECTION 271C PROVIDES FOR PENALTY ONLY FOR FAILURE TO DEDUCT TAX AS REQUIRED UNDER CHAPTER XVIIB AND F OR NON-PAYMENT OF TAX, PENALTY PROVIDED IS ONLY FOR VIOLATION OF SUBSECTIO N (2) OF SECTION 115(O) OR SECTION 194B OF THE ACT. IN OTHER WORDS, ACCORDING TO HIM IF TH E ASSESSEE HAS MADE DEDUCTION FROM SOURCE ON PAYMENTS LIKE SALARY, PAYMENT TO CONTRACTORS, PAYMENT ON RENT, ETC. UNDER VARIOUS PR OVISIONS OF CHAPTER XVIIB, THEN NO PENALTY COULD BE LEVIED IF THE ASSESSEE FAI LED TO REMIT THE RECOVERED TAX. ACCORDING TO HIM FAILURE TO REMIT TAX ATTRACTS PENA LTY UNDER SECTION 271C ONLY IN RESPECT OF TAX PAYABLE UNDER SUBSECTION (2) OF SECTION 115(O) OR SECTION 194B OF THE ACT. STANDING COUNSEL FOR THE REVENUE CONTENDED THAT SECTION 271C PROVIDES FOR PENALTY BOTH FOR FAILURE TO DEDUCT OR TO REMIT RECOVERED TAX AND FOR BOTH. IN OTHER WORDS, ACCORDING TO HIM, PENALTY PROVIDED UND ER SECTION 271C ALSO COVERS THE SITUATION WHERE THE ASSESSEE AFTER DEDUCTION AT SOURCE RETAINS THE RECOVERED AMOUNT WITHOUT PAYMENT TO THE DEPARTMENT. IN OUR VI EW, THE TRIBUNAL WHILE CONSIDERING THE APPEAL RECAST THE SECTION IN IT'S O WN WAY COMPLETELY DISTORTING IT'S MEANING. ORIGINALLY THERE WAS NO PROVISION FOR PENALTY FOR FAILURE TO DEDUCT TAX OR REMIT THE DEDUCTED TAX AND THE PROVISION UND ER SECTION 276B ONLY AUTHORISED PROSECUTION FOR VIOLATION. HOWEVER, SECTION 271C WAS INTRODUCED BY THE DIRECT LAWS (AMENDMENT) ACT, 1987 WITH EFFECT F ROM 1.4.1989 PROVIDING FOR PENALTY FOR FAILURE TO DEDUCT OR REMIT TAX UNDER CH APTER XVIIB, SUBSECTION (2) ITA NO. 2408 /AHD/2016 . A.Y. 2014-15 5 OF SECTION 115(O) AND SECTION 194B OF THE ACT. FOR EASY REFERENCE WE EXTRACT HEREUNDER SECTION 271C . 271C. PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE. --(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 XVII-B; 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. (2) ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1)SHAL L BE IMPOSED BY THE JOINT COMMISSIONER. 3. COUNSEL FOR THE APPELLANT HAS DRAWN A DISTINCTIO N BETWEEN CLAUSES (A) AND (B) OF SECTION 271C (1) OF THE ACT. ACCORDING TO HIM PE NALTY UNDER CLAUSE (A) IS ONLY FOR FAILURE TO DEDUCT TAX AS REQUIRED UNDER ANY OF THE PROVISIONS OF CHAPTER XVIIB. IT IS ARGUED THAT IN THE SURVEY CONDUCTED BY THE DE PARTMENT WHAT WAS NOTICED WAS THAT DEDUCTIONS HAVE BEEN MADE AND THE VIOLATIO N WAS ONLY DELAYED REMITTANCE OF PART OF THE DEDUCTED AMOUNT AND NON-R EMITTANCE OF BALANCE AMOUNT. HOWEVER, THE CONTENTION OF COUNSEL FOR THE ASSESSEE IS THAT SINCE THERE IS NO PROVISION FOR PENALTY FOR NON-REMITTANCE OF TAX DEDUCTED AT SOURCE UNDER THE PROVISIONS OF CHAPTER XVIIB, THE LEVY OF PENALTY IS UNAUTHORISED. COUNSEL CONTENDED THAT PENALTY UNDER SECTION 271C(1) FOR NO N-REMITTANCE IS ONLY OF TAX, WHETHER RECOVERED OR NOT, UNDER SUB-SECTION (2) OF SECTION 115(O) OR SECOND PROVISO TO SECTION 194B OF THE ACT. WE ARE UNABLE T O ACCEPT THIS CONTENTION BECAUSE THE FIRST PART OF CLAUSE (B) OF SECTION 271 C(1) I.E. FAILURE TO PAY WHOLE OR ANY PART OF TAX AS REQUIRED, TAKES IN THE TAX DEDUC TED UNDER CLAUSE (A) UNDER ANY OF THE PROVISIONS OF CHAPTER XVIIB. SO MUCH SO, IN OUR VIEW, FAILURE TO DEDUCT OR FAILURE TO REMIT RECOVERED TAX, BOTH WILL ATTRACT P ENALTY UNDER SECTION 271C OF THE ACT. SO MUCH SO, THE CONTENTION OF THE APPELLANT FA ILS AND WE UPHOLD THE FINDING OF THE TRIBUNAL DISMISSING THE CHALLENGE AGAINST LE VY OF PENALTY. ITA NO. 2408 /AHD/2016 . A.Y. 2014-15 6 10. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA (SUPRA), WE SET ASIDE THE FINDINGS OF THE LD. CIT(A ) AND RESTORE THAT OF THE A.O. LEVY OF PENALTY IS UPHELD. 11. BEFORE PARTING, THE LD. COUNSEL HAS RELIED UPON CER TAIN DECISIONS MENTIONED ELSEWHERE, IN OUR CONSIDERED OPINION, THOSE JUDGMEN TS WERE GIVEN BY THE HONBLE HIGH COURTS IN A DIFFERENT CONTEXT AND THER EFORE NOT APPLICABLE ON THE FACTS OF THE CASE IN HAND. 12. APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11- 01- 20 18 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 11 /01/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD