The ITO,(Intl.Taxn.)-III, Ahmedabad V. Vishal Exports Overseas Limited, Ahmedabad

ITA 2887/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1982 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-12-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 16-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI C K MISHRA
• Assessee Lawyers: SHRI URVASHI SHODHAN
• Keywords: Bonafide belief; Reasonable cause; TDS
• Section: 271(1)(c); 273B; 133A; 201(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH, AHMEDABAD. BEFORE: SHRI T.K. SHARMA, JUDICIAL MEMBER , AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER. ITA NO.2887/AHD/2009 & 2888/AHD/2009 ASSESSMENT YEAR : 2002-2003 & 2003-2004 ITO,(INT. TAXN.)-III, 4 TH FLOOR, NATURE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD VISHAL EXPORT OVERSEAS LTD. VISHAL HOUSE OPP. SALES INDIA, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VERSUS (RESPONDENT) PAN: AAACV 2354 D FOR THE APPELLANT: SHRI SHRI C.K.MISHRA DR FOR THE RESPONDENT SHRI. SHRI URVASHI SHODHAN ORDER PER T K SHARMA (JUDICIAL MEMBER):- THESE APPEALS BY THE ASSESSEE ARE AGAINST THE ORDER DATED 03.08.2009, OF LD. COM MISSIONER OF INCOME TAX(APPEALS), GANDHINAGAR, CANCELING THE PEN ALTY OF RS.1,86,166/- AND RS.2,69,348/- LEVIED BY THE ASSES SING OFFICER UNDER SECTION 271(1)(C) OF THE I.T.ACT, 1961, FOR THE ASS ESSMENT YEAR 2002-03 AND 2003-04 RESPECTIVELY. 2. THE FACTS IN BRIEF IN THE CASE ARE THAT A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED AT BUSINE SS PREMISES OF THE ASSESSEE ON 15.10.2005, WHEN IT WAS FOUND THAT TDS HAD NOT BEEN DEDUCTED ON USUANCE INTEREST REMITTED TO THE NON RE SIDENT FOR THAT YEAR AS WELL AS FOR EARLIER YEAR. FOR BOTH THE ASSESSMEN T YEARS, ORDERS UNDER SECTION 201(1) AND 201(1A) WERE PASSED AND PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 WERE INITIATE D. SUBSEQUENTLY, ASSESSING OFFICER LEVIED THE PENALTY OF RS.1,86,166 /- AND RS. 2,69,348/- UNDER SECTION 271(1)(C) FOR THE ASSESSMENT YEAR 200 2-03 AND 2003-04 2 ITA NO.2887&2888/AHD/2009 AND RELYING ON THE DECISION OF THE JURISDICTIONAL H IGH COURT IN THE CASE OF VIJAY SHIP BREAKING CORPORATION REPORTED IN 261 ITR 113. 3. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS), IN THE IMPUGNED ORDER, LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) CANCELLED THE PENALTY ON THE GROUND T HAT DECISION IN THE CASE OF VIJAY SHIP BREAKING CORPORATION (SUPRA) WAS PRONOUNCED ON 20.03.2003 AND SAME WOULD HAVE BEEN REPORTED IN JOU RNAL AND OTHER FORA WITHIN NEXT FEW MONTHS SAY BY JUNE 2003. THERE FORE, TILL SUCH TIME THERE WAS A REASONABLE CAUSE FOR NON DEDUCTION OF T AX ON USUANCE INTEREST FOR THE ASSESSMENT YEAR 2002-03 AND 2003-0 4 BECAUSE ITAT, RAJKOT BENCH IN THE CASE OF VIJAY SHIP BREAKING COR PORATION (SUPRA) WAS IN FAVOUR OF THE ASSESSEE. THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) ACCORDINGLY, CANCELLED THE PENALTY FO R THESE TWO YEARS WHEREAS HE CONFIRMED THE PENALTY LEVIED UNDER SECTI ON 271(1)(C) FOR THE ASSESSMENT YEAR 2004-05. AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CANCELING THE PENALTY UNDER SECTION 271(1)(C) FOR THE ASSESSMENT YEAR 2002-03 A ND 2003-04 REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING, ON BEHALF OF THE REVENUE , SHRI C.K.MISHRA DR APPEARED AND CONTENDED THAT ASSESSEE WAS REQUIRE D TO DEDUCT TDS, WHICH WAS NOT DEDUCTED AND THERE WAS NO REASON ABLE CAUSE BECAUSE AS PER JUDGEMENT OF HON'BLE GUJARAT HIGH CO URT IN THE CASE OF VIJAY SHIP BREAKING CORPORATION (SUPRA), THE ASSESS EE WAS REQUIRED TO DEDUCT TAX AT SOURCE FOR BOTH THE YEARS FOR WHICH D EMAND UNDER SECTION 201(1) AND 201(1A) WERE RAISED. THEREFORE, THE PENA LTY UNDER SECTION 271(1)(C) LEVIED BY ASSESSING OFFICER FOR BOTH THE ASSESSMENT YEARS BE RESTORED. 3 ITA NO.2887&2888/AHD/2009 4. ON THE OTHER HAND, SHRI C.K.MISHRA LEARNED DEPAR TMENTAL REPRESENTATIVE APPEARED FOR THE ASSESSEE CONTENDED THAT THERE WAS A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF INCOME TAX ACT, 1961 BECAUSE PRIOR TO JUDGEMENT OF HON'BLE GUJ ARAT HIGH COURT IN THE CASE OF VIJAY SHIP BREAKING CORPORATION (SUPRA) , THE DECISION OF ITAT, RAJKOT BENCH IN THE CASE OF VIJAY SHIP BREAK ING CORPORATION VS. DCIT REPORTED IN 86 ITD 497 WAS IN FAVOUR OF THE AS SESSEE. THIS WAS REVERSED BY HONBLE GUJARAT HIGH COURT ON 20.03.200 3. IN VIEW OF THIS, AT THE RELEVANT TIME, THE ASSESSEE WAS OF THE BONAF IDE BELIEF THAT IT IS NOT REQUIRED TO DEDUCT TDS ON USUANCE CHARGES PAID TO NON RESIDENT. SHE ACCORDINGLY CONTENDED THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN CANCE LING THE PENALTY LEVIED BY ASSESSING OFFICER UNDER SECTION 271(1)(C) OF INC OME TAX ACT, 1961. 5. HAVING HEARD, BOTH THE SIDE, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ITAT, RAJKOT BRANCH IN THE CASE OF VIJAY SHIP BREAKING CORPORATION VS. DCIT REPORTED IN (200 3) IN 86 ITD 497 (RAJKOT) VIDE ORDER DATED 16.04.2002 HELD THAT ASSE SSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF SHIP BREAKING IS NOT REQ UIRED TO DEDUCT TAX AT SOURCE ON USUANCE INTEREST UNDER SECTION 195(1) OF INCOME TAX ACT, 1961. THIS DECISION IS REVERSED BY HON'BLE GUJARAT HIGH COURT ON 20.03.2003 REPORTED IN 261 TTJ 113(GUJ). FOR BOTH T HE ASSESSMENT YEAR, IT APPEARS THAT ASSESSEE WAS OF THE BONAFIDE BELIEF THAT IT IS NOT REQUIRED TO DEDUCT TDS UNDER SECTION 195(1) ON USUA NCE INTEREST PAID. THIS BONAFIDE BELIEF, IN OUR OPINION CONSTITUTE REA SONABLE CAUSES WITHIN THE MEANING OF SECTION 273B OF THE INCOME TAX ACT, 1961. WE ARE THEREFORE, OF THE VIEW THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN COGENT REASON FOR CANCELING THE PENALTY FOR BOTH THE ASSESSMENT YEARS LEVIED BY THE A.O. UNDER SECTION 2 71(1)(C) OF I.T.ACT, 1961. WE THEREFORE, INCLINED TO UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 4 ITA NO.2887&2888/AHD/2009 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 31 ST DECEMBER, 2009. SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED: 31/12/2009 PARAS# COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.