M/s Gulati Sales Corporation, New Delhi V. ITO, New Delhi

ITA 2687/DEL/2011

• Counselvise Citation: 268720114 RSA 2011
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SAKSENA
• Assessee Lawyers: MANEESH UPNEJA CAS; TARANDEEP SINGH VINAY SING HAL
• Keywords: Non-deduction of tax
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NOS. 2686 & 2687 (DEL)2011 ASSESSMENT YEAR: 2007-08 GULATI SALES CORPORATION, INCOME TAX OFFICER, 4092, NAI SARAK, DELHI-110 006. V. W ARD 28(2), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI TARANDEEP SINGH, VINAY SING HAL & MANEESH UPNEJA, CAS. RESPONDENT BY: SHRI V.K . SAKSENA, CIT/DR ORDER PER A.D. JAIN, J.M. ITA NO. 2686(DEL)2011: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 007-08 CONTENDING THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING T HE DISALLOWANCE OF ` 5,61,933/- MADE U/S 40(A)(IA) OF THE I.T. ACT. 2. THE ASSESSEE IS IN THE BUSINESS OF WHOLE-SALE PA PER TRADING. DURING THE YEAR, IT CLAIMED INTEREST PAYMENT OF ` 5,61,933/-. THE AO, HOWEVER, MADE DISALLOWANCE OF THE ENTIRE INTEREST PAYMENT CL AIMED OBSERVING THAT THE ITA NOS. 2686 & 2687(DEL)2011 2 ASSESSEE HAD NOT MADE TDS ON THE INTEREST PAYMENT A S REQUIRED U/S 194 A OF THE ACT, DUE TO WHICH, THE PAYMENT WAS LIABLE TO BE DISALLOWED U/S 40 (A)(IA) OF THE ACT. 3. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. THE ASSESSEE IS IN FURTHER APPEAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEND ED THAT THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY:- 1. VIPIN P.MEHTA V. ITO, 46 SOT 71(BOM); 2. VALIBHAI KHANBHAI MANKAD V. DCIT, 46 SOT 469(AHD) ; AND 3. ITO V. RAJESH KR. GARG ORDER DATED 5.8.2011, PA SSED BY KOLKATA BENCH OF THE TRIBUNAL IN ITA NO. 532(KOL)20 11, FOR ASSESSMENT YEAR 2006-07(COPY PLACED ON RECORD). 5. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRON G RELIANCE ON THE IMPUGNED ORDER, CONTENDING THAT THE TURN OVER OF TH E ASSESSEE IS VERY HIGH AND ITS BOOKS OF ACCOUNT ARE ALSO SAID TO BE AUDITE D U/S 44 AB OF THE ACT AND THE ASSESSEE WAS REQUIRED TO MAKE TDS U/S 194A(1) O N THE PAYMENT OF INTEREST , WHICH, AS RIGHTLY OBSERVED BY THE CIT(A) , HAS NOT BEEN DONE; AND THAT THEREFORE, THE DISALLOWANCE WAS CORRECTLY MADE U/S 40(A)(IA) OF THE ACT AND THIS DISALLOWANCE WAS CORRECTLY CONFIRMED BY TH E CIT(A). 6. IN VIPIN P.MEHTA V. ITO(SUPRA), IT HAS BEEN HE LD, INTER ALIA, THAT SECTION 194 A OF THE ACT PROVIDES FOR DEDUCTION OF TAX FROM THE INTEREST PAID BY THE ASSESSEE, AT THE APPROPRIATE RATE, THAT SECT ION 197A (1A) PROVIDES THAT ITA NOS. 2686 & 2687(DEL)2011 3 NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 194A, NO DEDUCTION OF TAX SHALL BE MADE UNDER THE SECTION, IF THE PAYEE OF TH E INTEREST FURNISHED TO THE PERSON RESPONSIBLE FOR PAYING THE INTEREST, A DECLA RATION IN WRITING IN DUPLICATE IN THE PRESCRIBED FORM AND VERIFIED IN TH E PRESCRIBED MANNER, TO THE EFFECT THAT THE TAX ON HIS ESTIMATED TOTAL INCOME O F THE PREVIOUS YEAR IN WHICH THE INTEREST IS TO BE INCLUDED WILL BE NIL; T HAT SECTION 197 A(2) PROVIDES THAT THE PERSON RESPONSIBLE FOR PAYING INT EREST SHALL DELIVER OR CAUSE TO DELIVER TO THE CCIT OR THE CIT, ONE COPY OF THE DECLARATION SUBMITTED BY THE PAYEE OF INTEREST TO THE ASSESSEE ON OR BEFORE THE SEVENTH DAY OF THE MONTH NEXT FOLLOWING THE MONTH IN WHICH THE DECLARA TION WAS FURNISHED TO HIM; AND THAT THE PERSON RESPONSIBLE FOR PAYING THE INTEREST , I.E., THE ASSESSEE DOES NOT COMPLY WITH THE PROVISIONS OF SECTION 197A (2), HE IS LIABLE TO PAY PENALTY OF ` 100/- FOR EVERY DAY DURING WHICH THE FAILURE CONTIN UES. 7. IN VALIBHAI KHANBHAI MANKAD V. DCIT (SUPRA) AN D ITO V. RAJESH KUMAR GARG (SUPRA) ARE ALSO TO THE SAME EFFECT. 8. IN THE PRESENT CASE, UNDISPUTEDLY, THE ASSESSEE HAD RECEIVED FORM 15 G U/S 197 A(1) FOR NON-DEDUCTION OF TAX. THE ASSESS EE WAS, AS SUCH, UNDER NO LIABILITY TO MAKE TDS, AS PER SECTION 197A(1A). THAT BEING SO, NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT COULD HAVE BE EN MADE. THE ONLY OBSERVATION OF THE AUTHORITIES AGAINST THE ASSESSEE IS THAT IT FAILED TO FURNISH ITA NOS. 2686 & 2687(DEL)2011 4 PROOF OF HAVING DELIVERED THE COPY OF THE DECLARATI ON BEFORE THE CONCERNED CIT. HOWEVER, DISALLOWANCE U/S 40(A)(IA) IS NOT TH E CONSEQUENCE OF THIS FAILURE OF THE ASSESSEE AND THE ASSESSEES GRIEVANC E IN THIS REGARD IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. 9. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ITA NO. 2687 (DEL)2011 : 10. THIS IS ASSESSEES APPEAL AGAINST THE CIT(A)S ACTION IN CONFIRMING LEVY OF PENALTY OF ` 57,879/- U/S 271 C OF THE ACT. 11. WHILE LEVYING THE PENALTY, THE AO OBSERVED THAT SINCE THE ASSESSEE HAD NOT MADE TDS AS REQUIRED U/S 194 A OF THE ACT O N THE INTEREST PAYMENT, THE ASSESSEE WAS LIABLE FOR PENALTY U/S 271 C OF TH E ACT. THE LD. CIT(A) CONFIRMED SUCH LEVY OF PENALTY. AGGRIEVED, THE AS SESSEE IS IN APPEAL. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS STATED THAT THE PENALTY HAS WRONGLY BEEN LEVIED UNDER THE PROVISIONS OF SECTION 271- C OF THE ACT WHEREAS, IF AT ALL, THE PENALTY AGAINST THE ASSESSE E COULD HAVE LEVIED U/S 272 A(2)(F) OF THE ACT. RELIANCE HAS BEEN PLACED ON SAMY AUTO PARTS V. FIRST INCOME TAX OFFICER, 44 ITD 44(MAD). 13. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY REL IED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT SINCE THE ASSESS EE HAD NOT MADE TDS AS ITA NOS. 2686 & 2687(DEL)2011 5 REQUIRED U/S 194 A OF THE ACT, THE PENALTY WAS RIG HTLY IMPOSED U/S 271(1)(C) OF THE ACT. 14. IN SAMY AUTO PARTS (SUPRA), IT HAS BEEN HELD THAT THE ACT CONTAINS SEPARATE PROVISIONS FOR LEVYING PENALTY IN CASES OF DEFAULT IN PAYMENT OF TAXES AND THOSE PROVISIONS ARE CONTAINED IN SECTION 221; THAT THEREFORE, IF THE INTENTION OF THE AO WAS TO PENALIZE THE ASSESSEE FO R ITS FAILURE TO PAY THE ADVANCE TAX IN INSTALLMENTS, HE SHOULD HAVE TAKEN R ECOURSE TO SECTION 271 AND NOT TO SECTION 273 (1)(B) OF THE ACT, WHICH DEA LS WITH A TOTALLY DIFFERENT TYPE OF DEFAULT, NAMELY, FAILURE TO FILE A STATEMEN T OF ADVANCE TAX PAYABLE BY THE ASSESSEE. 15. THE FACT SITUATION IN THE PRESENT CASE, IT IS S EEN, ATTRACTS THE PROVISIONS OF SECTION 272 A(2)(F), AS CONTENDED BY THE ASSESSE E AND NOT THOSE OF SECTION 271-C OF THE ACT. IT WAS THE NON-DELIVERY IN TIME, OF THE DECLARATION MENTIONED IN SECTION 197 A OF THE ACT, WHICH WAS TH E DEFAULT OF THE ASSESSEE, FOR WHICH, IT WAS SOUGHT TO BE CHARGED AN D NOT FOR NOT MAKING TDS OUT OF INTEREST PAID. THIS IS SO, SINCE THE ASSES SEE WAS NOT SHOWN TO HAVE MADE THE TDS. THE CHARGE AGAINST THE ASSESSEE WAS THAT IT HAD NO EVIDENCE OF HAVING FILED THE FORM 15 G WITH THE CONCERNED CI T. THERE WAS, THUS, NO CONTRAVENTION OF THE PROVISIONS OF SECTION 194 A OF THE ACT WITH WHICH THE ITA NOS. 2686 & 2687(DEL)2011 6 ASSESSEE COULD BE CHARGED AND SO, NO PENALTY UNDER SECTION 271 C OF THE ACT WAS LEVIABLE. 16. IN VIEW OF THE ABOVE, THE ASSESSEE IS JUSTIFIED IN CONTENDING THAT THE PENALTY HAS BEEN WRONGLY LEVIED. THIS PENALTY, FO R THE PRECEDING DISCUSSION, IS HEREBY CANCELLED. 17. CONSEQUENTLY, THIS APPEAL OF THE ASSESSEE IS AL SO ALLOWED. 18. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.03.2012. SD/- SD/- (G.D. AGRAWAL) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 30.03.2012 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR