The DCITTDS Circle, Ahmedabad V. Binani Cements Limited, Ahmedabad

ITA 2898/AHD/2010

• Counselvise Citation: 289820514 RSA 2010
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-07-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 18-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: V K BESWAL K V BESWAL; VIJ AY MEHTA A RS
• Keywords: Question of law; Non-deduction of tax; Reasonable cause
• Section: 273B; 194C; 201(1); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SHRI A.K.GARODIA, A.M.) I.T.A. NOS. 2898 TO 2901/AHD./2010 ASSESSMENT YEARS : 1999-2000 TO 2002-2003 DCIT, TDS CIRCLE, AHMEDABAD VS- BINAN I CEMENTS LTD., AHMEDABAD (PAN : AABCB 3087C) (APPELLANT) (RESP ONDENT) APPELLANT BY : SHRI B.L.YADAV, D.R. RESPONDENT BY : S/SHRI V.K.BESWAL, K.V.BESWAL & VIJ AY MEHTA, A.RS DATE OF HEARING : 29.07.2011 DATE OF PRONOUNCEMENT : 30.08.2011 O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE FOUR APPEALS FILED BY THE REVENUE ARE AGAINS T FOUR SEPARATE ORDERS ALL DATED 13-08-2010 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-VI, AHMEDABAD CANCELLING THE PENALTY OF RS.6,48,000/-, RS.8,01,90 0/-, RS.11,20,800/- AND RS.11,01,600/- LEVIED BY THE ADDL.CIT, TDS RANGE, A HMEDABAD FOR THE ASSESSMENT YEARS 1999-2000, 2000-01, 2001-02 AND 2002-03 RESPE CTIVELY. SINCE ALL THESE APPEALS INVOLVE ONLY ONE ISSUE AND ARGUED BY COMMON REPRESE NTATIVE, THEREFORE, THESE ARE DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVEN IENCE. 2. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 1999-2000 ARE THAT THE ADDITIONAL C .I.T., TDS RANGE, AHMEDABAD IMPOSED PENALTY UNDER SECTION 271C OF THE I.T. ACT, 1961 AMOUNTING TO RS.6,48,000/-. THIS PENALTY WAS LEVIED ON THE GROUND THAT THE ASSE SSEE COMPANY WAS UNDER OBLIGATION TO DEDUCT TAX AS PER SECTION 194-I OF THE I.T. ACT BUT IT HAS FAILED TO DEDUCT THE TAX, AS PER PROVISIONS OF THE ACT. IT WAS ALSO HELD THAT TH ERE WAS NO REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE I.T. ACT, 1961. ITA NOS.2899 TO 2901-AHD-10 2 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE OB JECTED TO LEVY THE PENALTY ON FOLLOWING GROUNDS: (I) PENALTY ORDER IS BARRED BY LIMITATION SINCE A.O . DID NOT INITIATE PENALTY IN THE ORDER DTD. 18/6/2002. THE SAME WAS NOT INITIATE D EVEN AFTER THE ORDERS OF CIT (A) & ITAT TILL 22/12/2006. PENALTY NOTICE WAS ISSUED FOR THE FIRST TIME ON 11/5/2009. ASSESSEE RELIED ON THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF H. AJITBHAI & CO. VS. ACIT. 45 ITD 262 WHEREIN PENA LTY WAS DELETED IN IDENTICAL CIRCUMSTANCES. (II) PENALTY NOT LEVIABLE SINCE THERE IS NO TAX LI ABILITY. (III)THE TAX WAS DEDUCTED U/S 194C WHICH WAS CONFIR MED BY THE A.O. BY GRANTING LOWER DEDUCTION CERTIFICATE FOR A.Y.2002-0 3. THEREFORE, THERE WAS REASONABLE CAUSE IN CONSIDERING THE APPLICABILITY O F SECTION 194C AS AGAINST 194-1. (IV) THE AGREEMENT WAS FOR VARIOUS SERVICES INCLUDI NG RENT FOR THE PREMISES. THE RENTAL CHARGES WOULD BE ONLY 1.44 LACS TO 1.56 LACS PER ANNUM AND THE MARKET VALUE OF THE PROPERTY ALSO WAS AROUND RS. 10 TO 12 LACS. AGAINST THIS THE PAYMENT OF RS 40 LACS PER ANNUM CANNOT BE ONLY FOR RENT. HENCE, THERE WAS REASONABLE CAUSE IN BELIEVING THAT PROVISIONS OF SE C. 194C ARE APPLICABLE. (V) IT WAS ADVISED BY THE C.A. THAT 194C IS APPLIC ABLE AND NOT 194-I AND AS PER DECISIONS IT CONSTITUTES REASONABLE CAUSE. 3.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, TH E LD. CIT(A) CANCELLED THE PENALTY FOR THE DETAILED REASONS GIVEN AT PAGE 6, W HICH ARE EXTRACTED HEREUNDER: APPELLANT'S ARGUMENTS ON MERIT ARE CONSIDERED FIRST . IT IS A FACT THAT AS PER THE CIT(A)'S ORDER IN SECOND ROUND, INTEREST HAS BEEN C ALCULATED BY APPLYING RATES MENTIONED U/S 194-I. HOWEVER, IT IS ALSO NOT IN DIS PUTE THAT A.O HAS GRANTED CERTIFICATE TO THE APPELLANT IN A.Y.2002-03 FOR LOW ER DEDUCTION U/S 194C FOR PAYMENT OF SERVICE CHARGES FOR BUSINESS CENTRE IN A HMEDABAD. THE VALUE OF PROPERTY AS WELL AS MARKET RENT FOR THE PROPERTY IN QUESTION ARE NOT EVEN 10% OF SERVICE CHARGES PAID BY THE APPELLANT. CONSIDERI NG THE AGREEMENT FOR SERVICE CHARGES WHICH INVOLVED SEVERAL SERVICES, THE PAYMEN T IS IN THE NATURE OF CONTRACT. EVEN IF IT IS FOUND THAT MOST OF THESE SE RVICES WERE NOT RECEIVED BY THE APPELLANT, IT CANNOT BE SAID THAT SUCH HUGE AMOUNT IS PAID FOR THE RENT OF THE PREMISES. RENT IS NOT EVEN 2 LACS PER ANNUM AS PER MARKET INFORMATION OR NEWS PAPER REPORTING OF THAT TIME. THEREFORE, ONE CAN RE ASONABLY BELIEVE THAT - PROVISIONS OF SEC. 194C APPLY FOR THE SUBSTANTIAL P ART OF PAYMENT. CONSIDERING THE VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT AND ALSO THE FACTS OF THE CASE, I FIND MERIT IN APPELLANT'S ARGUMENT THAT THE RE WAS REASONABLE CAUSE IN ITA NOS.2899 TO 2901-AHD-10 3 NOT DEDUCTING TDS U/S 194-I AS AGAINST 194C. IN V IEW OF THIS, PENALTY U/S 271C IS NOT LEVIABLE CONSIDERING THE PROVISIONS OF SEC.273B. 3.2 THE TECHNICAL GROUND, THAT PENALTY IS TIME BARR ED, WAS NOT DISCUSSED BY THE LD. CIT(A), SINCE ON MERIT THE PENALTY WAS DELETED. 4. FOR THE ASSESSMENT YEAR 2000-01, THE AO LEVIED T HE PENALTY OF RS.8,01,900/- UNDER SECTION 271C OF THE I.T. ACT ON THE SIMILAR G ROUND AS MENTIONED IN PARA 2 OF THIS ORDER FOR THE ASSESSMENT YEAR 1999-2000. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE OBJECTED TO LEVY THE PENALTY LEVIED BY TH E AO ON THE SIMILAR GROUNDS AS MENTIONED IN PARA 3 OF THIS ORDER FOR THE ASSESSMEN T YEAR 1999-2000. THE LD. CIT(A) CANCELLED THE SAME FOR THE IDENTICAL REASONS AS GIV EN IN THE ASSESSMENT YEAR 1999- 2000. THE TECHNICAL GROUND, THAT PENALTY IS TIME BARRED, WAS NOT DISCUSSED BY THE LD. CIT(A), SINCE ON MERIT THE PENALTY WAS DELETED. 5. FOR THE ASSESSMENT YEAR 2001-02, THE AO LEVIED T HE PENALTY OF RS.11,20,800/- UNDER SECTION 271C OF THE I.T. ACT ON THE SIMILAR G ROUND AS MENTIONED IN PARA 2 OF THIS ORDER FOR THE ASSESSMENT YEAR 1999-2000. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE OBJECTED TO LEVY THE PENALTY LEVIED BY TH E AO ON THE SIMILAR GROUNDS AS MENTIONED IN PARA 3 OF THIS ORDER FOR THE ASSESSMEN T YEAR 1999-2000. THE LD. CIT(A) CANCELLED THE SAME FOR THE IDENTICAL REASONS AS GIV EN IN THE ASSESSMENT YEAR 1999- 2000. THE TECHNICAL GROUND, THAT PENALTY IS TIME BARRED, WAS NOT DISCUSSED BY THE LD. CIT(A), SINCE ON MERIT THE PENALTY WAS DELETED. 6. LASTLY, FOR THE ASSESSMENT YEAR 2002-03, THE AO LEVIED THE PENALTY OF RS.11,01,600/- UNDER SECTION 271C OF THE I.T. ACT O N THE GROUND THAT THE ASSESSEE COMPANY WAS UNDER OBLIGATION TO DEDUCT TAX, AS PER SECTION 194-I OF THE ACT, BUT IT FAILED TO DEDUCT TAX, AS PER THE PROVISIONS OF THE ACT. FAILURE TO DEDUCT THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UNDER THE PR OVISIONS OF CHAPTER XVIIB, ATTRACT PENALTY UNDER SECTION 271C OF THE ACT. THE AO ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT THERE WAS REASONABLE CAUSE WITHIN THE MEANING OF 273B OF THE ACT. ON ITA NOS.2899 TO 2901-AHD-10 4 APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A), CANC ELLED THE PENALTY FOR THE DETAILED REASONS GIVEN IN PARA 2.3, WHICH READS AS UNDER: 2.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND AP PELLANT'S SUBMISSION. IT IS SUBMITTED BY THE APPELLANT THAT HON'BLE ITAT IN ITS ORDER DATED 22/12/2006 ALLOWED THE APPEAL IN FAVOR OF APPELLANT. THE RELEV ANT EXTRACT OF THE ORDER OF ITAT WITH REGARD TO THIS YEAR IS AS UNDER: 'SO FAR AS THE APPEAL FOR A.Y.02-03 IS CONCERNED, T HE ASSESSEE HAS DEDUCTED FAX AS PER THE CERTIFICATE ISSUED BY THE O FFICER OF THE PAYEE U/S 195(3) OF THE ACT AND THEREFORE, THE ASSESSEE CANNOT BE SAID TO BE IN DEFAULT . THE CIT (A), IN OUR OPINION, WAS RIGHT IN DELETIN G THE SAME'. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE APPELLAN T IS NOT HELD TO BE IN DEFAULT AS FAR AS A.Y. 2002-03 IS CONCERNED. CIT (A)'S ORDER D ELETING THE A.O.'S DEMAND WAS CONFIRMED BY THE ITAT. SINCE A.O. HAS ISSUED CE RTIFICATE FOR LOWER DEDUCTION, APPELLANT CANNOT BE HELD TO BE ASSESSEE IN DEFAULT. IN VIEW OF THIS, APPELLANT WAS NOT LIABLE TO DEDUCT TAX AT THE RATE HIGHER THAN MENTIONED IN A.O.'S CERTIFICATE AND THEREFORE, THERE WAS NO FAIL URE U/S 271C ON THE PART OF THE APPELLANT FOR WHICH PENALTY CAN BE LEVIED. SINCE ITAT HAS CONFIRMED THE ORDER OF THE CIT (A) DELETING THE TAX AND INTEREST LIABILITY LEVIED BY A.O. , APPELLANT IS NOT LIABLE FOR ANY PENALTY . SINCE THI S ORDER WAS NOT SET ASIDE BY ITAT, THE ISSUE IS NOT OPEN FOR ANY DISCUSSION OR D EBATE. SINCE TRIBUNAL, BEING HIGHEST FACT FINDING AUTHORITY, HAS DECIDED ASSESSE E NOT IN DEFAULT, APPELLANT CANNOT BE HELD TO BE LIABLE FOR PENALTY. ACCORDINGL Y, I DO NOT SEE ANY MERIT IN THE ORDER OF ADDL. CIT. [TDS] LEVYING PENALTY FOR T HIS YEAR. PENALTY LEVIED IS THEREFORE, DELETED. 7. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) CANCE LLING THE PENALTY LEVIED BY THE AO UNDER SECTION 271C FOR ALL THE FOUR ASSESSMENT Y EARS, THE REVENUE IS IN APPEALS BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING BEFORE US, SHRI B.L.YADAV , D.R. APPEARED FOR THE REVENUE AND DREW OUR ATTENTION TO PARA 2 OF THE PEN ALTY ORDER UNDER SECTION 271C DATED 19.11.2009 FOR THE FINANCIAL YEAR 1998-1999 W HEREIN THE ADDITIONAL COMMISSIONER OF INCOME TAX, TDS RANGE, AHMEDABAD HA S POINTED OUT THAT THE ASSESSEE COMPANY HAD MADE PAYMENT OF RENT OF RS.36 LAKHS TO ONE OF ITS GROUP CONCERN, NAMELY, TRITON TRADING CO. PVT. LTD. FROM THIS PAYMENT, THE ASSESSEE DEDUCTED TDS @2%, AS PER THE PROVISIONS OF SECTION 194C OF THE I.T. ACT, 1961, TREATING THE SAME AS CONTRACTUAL PAYMENT, WHEREAS I T WAS REQUIRED TO DEDUCT TDS UNDER SECTION 194-I. THE LD. D.R. POINTED OUT THAT AS PER CIT(A)S ORDER IN SECOND ITA NOS.2899 TO 2901-AHD-10 5 ROUND, INTEREST UNDER SECTION 201(1) AND 201(1A) IS CHARGED BY APPLYING THE RATE MENTIONED IN SECTION 194-I. IN VIEW OF THIS, PENALT Y UNDER SECTION 271C OF RS.6,48,000/- FOR THE ASSESSMENT YEAR 1999-2000 WAS RIGHTLY LEVIED BY THE AO. THE LD. CIT(A) CANCELLED THE PENALTY, ON THE BASIS OF CERTI FICATE UNDER SECTION 194C FOR THE ASSESSMENT YEAR 2002-2003, GRANTED BY THE AO IN THE ASSESSMENT YEAR 2002-03. HE SUBMITTED THAT THERE IS NO REASONABLE CAUSE FOR NOT DEDUCTING THE TAX UNDER SECTION 194-I. THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED I N CANCELLING THE PENALTY UNDER SECTION 271C FOR THE ASSESSMENT YEAR 1999-2000. SIMILARLY, FOR THE ASSESSMENT YEARS 2000- 2001 AND 2001-2002 ALSO, THERE IS NO JUSTIFICATION WHATSOEVER FOR CANCELLING THE PENALTY LEVIED BY THE AO UNDER SECTION 271C AMOUNTI NG TO RS.8,01,900/- AND RS.11,20,800/- RESPECTIVELY. 8.1 IN RESPECT OF CANCELLING THE PENALTY OF RS.11,0 1,600/- FOR THE ASSESSMENT YEAR 2002-2003, THE LD. D.R. POINTED OUT THAT THE ASSESS EE DEDUCTED THE TAX AT LOWER RATE UNDER SECTION 194C. FOR DEDUCTING THE TAX, THE ASSE SSEE RELIED ON THE TWO CERTIFICATES ISSUED TO THE DEDUCTEES/PAYEES UNDER SECTION 194C T O DEDUCT TAX AT SOURCE AT A LOWER RATE. HE POINTED OUT THAT THESE TWO CERTIFICATES WE RE ISSUED UNDER SECTION 194C OF THE I.T. ACT, 1961 WHEREAS THE CORRECT SECTION APPLICAB LE FOR DEDUCTING TAX AT SOURCE IN RESPECT PAYMENT OF RENT IS 194-I OF THE I.T. ACT, 1 961. FURTHER, FOR THE ASSESSMENT YEAR, THE ORDERS, UNDER SECTION 201(1) AND 201(1A) OF THE ACT DATED 16.06.2002, WERE PASSED WHEREIN THE AO HAS CALCULATED THE DEFAULT FO R THE YEAR UNDER CONSIDERATION BY REDUCING THE AMOUNT OF TDS DEDUCTED BY THE ASSESSEE @2%. THE AMOUNT OF DEFAULT OF TDS PAYABLE OF RS.11,01,600/- WAS ARRIVED AT BY SUB STRACTING RS.1,22,400/- FROM RS.12,24,000/-. THEREFORE, IT IS EVIDENT THAT THE A SSESSEE HAD DEDUCTED TDS @2% FOR THE ENTIRE YEAR I.E. FINANCIAL YEAR 2001-02. THE AS SESSEE COMPANY DID NOT MENTION ANYTHING ABOUT THESE TWO CERTIFICATES WHEREBY TDS C AN BE DEDUCTED IN THE CASE OF TRITON TRADING CO. PVT. LTD. @0.50% AND IN THE CASE OF M/S. CHAVANNESE & CO. @1%. BOTH THESE CERTIFICATES WERE ISSUED IN THE MON TH OF MARCH, 2002. THEREFORE, THE ASSESSEE COMPANY WAS REQUIRED TO DEDUCT TAX UNDER S ECTION 194-I @20%. THE LD. D.R. POINTED OUT THAT THE ASSESSEE COMPANY HAS COMMITTED THE DEFAULT FOR NOT DEDUCTING THE TDS @20% UNDER SECTION 194-I AND THERE IS NO REASON ABLE CAUSE WITHIN THE MEANING ITA NOS.2899 TO 2901-AHD-10 6 OF SECTION 273B OF THE I.T. ACT, 1961. THEREFORE, T HE ORDER OF THE LD. CIT(A) CANCELLING THE PENALTY OF RS.11,01,600/-LEVIED BY T HE AO UNDER SECTION 172C BE QUASHED. 9. ON THE OTHER HAND, S/SHRI V.K.BESWAL, K.V.BESWAL AND VIJAY MEHTA, APPEARED ON BEHALF OF THE ASSESSEE AND FOR ALL THE FOUR ASSE SSMENT YEARS UNDER APPEAL, RAISED THE FOLLOWING GROUNDS UNDER RULE 27 OF INCOME-TAX (APPE LLATE TRIBUNAL) RULES, 1963. 1. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE P ROCEEDINGS FOR LEVY OF PENALTY U/S.271C OF THE ACT INITIATED BY THE ASSESS ING OFFICER BY ISSUANCE OF NOTICE DATED 11.05.2009 WERE BARRED BY LIMITATION A ND, THEREFORE, THE CONSEQUENT PENALTY ORDER WAS INVALID, BAD IN LAW AN D NON EST. 2. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT IN V IEW OF THE ATTENDANT FACTS AND CIRCUMSTANCES, THE PENALTY U/S.271C OF THE ACT WAS NOT LEVIABLE SINCE THERE WAS NO TAX LIABILITY FOR THE YEAR UNDER CONSIDERATI ON. 9.1 THE COUNSEL OF THE ASSESSEE POINTED OUT THAT FO R ALL THE FOUR ASSESSMENT YEARS, THE AFORESAID GROUND OF APPEAL WAS RAISED BEFORE TH E LD. CIT(A) AND IT WAS NOT ADJUDICATED ON THE GROUND THAT ON MERIT, THE PENALT Y HAS BEEN DELETED. IT IS, THEREFORE, ACCORDING TO THE LD. COUNSEL OF THE ASSESSEE, NOW I T IS OPEN TO THE ASSESSEE, AS RESPONDENT TO SUPPORT THE RELEVANT DECISION OF THE LD. CIT(A) THROUGH A DIFFERENT GROUND, NAMELY, THAT THE IMPUGNED ORDER PASSED BY T HE ADDL. C.I.T., TDS RANGE, AHMEDABAD ARE BARRED BY LIMITATION. THE COUNSEL OF THE ASSESSEE POINTED OUT WHEN THE ASSESSEE HAVING SUCCEEDED BEFORE THE LD. CIT(A) OPTS TO FILE CROSS OBJECTION, EVEN WHEN APPEAL HAS BEEN PREFERRED BY OTHER PARTY, FROM THAT IT IS NOT POSSIBLE TO INFER THAT THE SAID PARTY HAS ACCEPTED THE ORDER OR PART THERE OF WHICH WERE AGAINST THAT PARTY. UNDER RULE 27 OF THE INCOME-TAX (APPELLATE TRIBUNAL ) RULES, 1963, THE AFORESAID GROUNDS OF APPEAL WHICH WERE NOT ADJUDICATED BY THE LD. CIT(A) CAN BE ENTERTAINED AND ADJUDICATED BY THE TRIBUNAL, AS HELD BY THE HON BLE GUJARAT HIGH COURT IN THE CASE OF DAHOD SAHAKARI KHARID VECHAN SANGH LTD. VS - CIT REPORTED IN 282 ITR 321 (GUJ.). CONTINUING HIS ARGUMENT, THE COUNSEL OF THE ASSESSEE POINTED OUT THAT THE ORDER UNDER SECTION 271C FOR ALL THE ASSESSMENTS YEARS PA SSED BY THE ADDL. CIT, TDS RANGE, ARE BARRED BY LIMITATION AS THESE WERE PASSE D BY ISSUANCE OF NOTICE DATED 11.05.2009. IN SUPPORT OF THIS, RELIANCE WAS PLACED ON THE JUDGMENT OF THE ITAT, ITA NOS.2899 TO 2901-AHD-10 7 MUMBAI SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHI NDRA LTD. VS- DCIT REPORTED IN 313 ITR 263 (MUM.)(SB). WITHOUT PREJUDICE TO ABO VE, ON MERIT, THE COUNSEL OF THE ASSESSEE POINTED OUT THAT THERE WAS A REASONABLE CA USE WITHIN THE MEANING OF SECTION 273 FOR DEDUCTING THE TAX UNDER SECTION 194C WHICH IS EVIDENT FROM THE FACT THAT THE DEPARTMENT HAS ISSUED THE FOLLOWING CERTIFICATES UN DER SECTION 194C OF THE I.T. ACT, 1961 FOR DEDUCTING TAX AT 1% AND 0.5%. 1) CERTIFICATE DATED 14.03.2002 FOR DEDUCTING THE TAX AT SOURCE IN RESPECT OF PAYMENT MADE TO CHAVANNESE & CO. PVT. LT D. @1%. 2) CERTIFICATE DATED 13.03.2002 FOR DEDUCTING THE T AX AT SOURCE IN RESPECT OF PAYMENT MADE TO THE TRITON TRADING CO. L TD. @0.5%. 9.2 THE COUNSEL OF THE ASSESSEE ALSO PRODUCED THE C OPIES OF AGREEMENTS DATED 24 TH JULY, 2000 UNDER WHICH PAYMENTS WERE MADE TO CHAVAN NESE & COMPANY PVT. LTD. AND SERVICE CHARGES PAID TO M/S. TRITON TRADING COM PANY LTD. IT WAS POINTED OUT THAT FROM THE PERUSAL OF THE AFORESAID TWO AGREEMENTS, I T CAN BE SEEN THAT THE ASSESSEE WAS MAKING THE PAYMENT FOR OFFICE FACILITIES/PREMISES W HICH, INTER ALIA, INCLUDE PAYMENT FOR OFFICE EQUIPMENTS/FACILITIES, FURNITURE FIXTURE , FITTINGS, RECEPTION FOR VISITORS, TEA/COFFEE TWICE A DAY FOR MAXIMUM OF 15 EMPLOYEES OF BINANI ON WORKING DAYS, OTHER FACILITIES INCLUDING PROVIDING PHOTOCOPYING M ACHINE, PROVIDING PEON FACILITY, PROVIDING SERVICE OF REPAIR AND REPLACE OF EQUIPMEN TS, AMENITIES INCLUDING AIR CONDITIONING, ETC. 9.3 THE COUNSEL OF THE ASSESSEE ALSO DREW THE ATTEN TION OF THE BENCH TO THE DECISION DATED 18.10.2002 OF THE LD. CIT(A)-X, AHMEDABAD, WH EREBY THE LD. CIT(A) CANCELLED THE DEDUCTION CREATED BY THE ITO, TDS, OSD-III UNDE R SECTION 201(1) AND 201(1A) OF THE I.T. ACT, 1961. THE ATTENTION WAS ALSO DRAWN TO THE DECISION DATED 22.12.2006 OF THE ITAT, D BENCH, AHMEDABAD, WHEREBY THE TRIBUNA L UPHELD THE ORDER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2002-03 DELETING THE DEDUCTION UNDER SECTION 201(1) AND 201(1A). IN THIS ORDER, THE TRIBUNAL SET ASIDE THE ISSUE TO THE FILE OF THE LD. CIT(A) FOR DECIDING AS TO AT WHAT RATE THE ASSESSEE WAS RE QUIRED TO DEDUCT TAX AND COMPUTE THE INTEREST THEREON UNDER SECTION 201(1A) FOR THE SHOR TFALL AND FOR THE PERIOD. ON THE BASIS OF THESE TWO ORDERS, THE COUNSEL OF THE ASSES SEE POINTED OUT THAT WHETHER THE TAX ITA NOS.2899 TO 2901-AHD-10 8 WAS REQUIRED TO BE DEDUCTED UNDER SECTION 194C OR 1 94-I WAS HIGHLY DEBATABLE. THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) CANCELL ING THE PENALTY UNDER SECTION 271C FOR ALL THE FOUR ASSESSMENT YEARS UNDER APPEAL BE U PHELD. 9.4 IT WAS FURTHER POINTED OUT THAT THE BONA FIDE O F THE ASSESSEE IS ALSO PROVED BY THE FACT THAT THE DEPARTMENT HAS ALSO ISSUED CERTIF ICATE TO DEDUCT TAX AT LOWER RATE UNDER SECTION 194C OF THE I.T. ACT, 1961. FOR REASONABLE CAUSE, THE COUNSEL OF THE ASSESSEE, RELIED ON THE FOLLOWING DECISIONS. (I) HINDUSTAN STEEL LTD. VS STATE OF ORISSA, 83 ITR 26( SC) FOR THE PROPOSITION, THAT EVEN A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE J USTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FRO M A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNE R PRESCRIBED BY THE STATUTE. (II) CIT VS MITSUI & CO. LTD. AND ANOTHER, 272 ITR 545(D ELHI) - HELD, THAT THE ASSESSEE-COMPANY WAS REQUIRED TO PRO VE THE EXISTENCE OF A REASONABLE CAUSE BY PREPONDERANCE OF PROBABILITY ONLY AND NOT BY WAY OF ADDUCING ANY PROOF BEYOND REASONABLE DOUBT. SO FAR AS THE LEVY OF PENALTY UNDER SECTION 271C IS CONCERNED THESE ARE EXTRANEOUS CONSIDERATIONS AS WHAT THE REV ENUE AUTHORITIES ARE REQUIRED TO CONSIDER WHILE LEVYING SUCH PENALTY IS EXISTENCE OF REASONABLE CAUSE FOR NON-DEDUCTION OF TAX AT SOURCE AND THE REASONABLE CAUSE AS SHOWN BY THE ASSESSEE-COMPANY HAS NOT BEEN PROPERLY APPRECIATED AND DELIBERATED BY THE LOWER AUTHORITIE S. (III) WOODWARD GOVERNOR INDIA (P) LTD. VS CIT & ORS. 253 ITR 745 (DELHI) HELD, THAT SECTION 273B STARTS WITH A NON OBSTANTE CLAUSE AND PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN SEVERAL PROVISIONS ENUMERATED THEREIN INCLUDING S.271C, NO PENALTY SHA LL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. THEREFORE, IN ORDER TO BRING IN APPLICATION OF S. 271C IN THE BACKDROP OF S.273B, ABSENCE OF REASONAB LE CAUSE, EXISTENCE OF WHICH HAS TO BE ESTABLISHED BY THE ASSESSES, IS THE SINE QUA NON. THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT THER E EXISTED REASONABLE CAUSE WHICH WAS THE REASON FOR THE FAILURE REFERRED TO IN THE CONCERNED PROVISION. THEREAFTER THE OFFICER DEALING WITH THE MATTER HAS TO CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE OR THE PERSON, AS THE CASE MAY BE, AS REGARDS THE REASON FOR FAILURE, WAS ON ACCOUNT OF REASONABLE CAUSE. THE CAUSE SHOWN HAS TO BE CONSIDE RED AND ONLY IF IT IS ITA NOS.2899 TO 2901-AHD-10 9 FOUND TO BE FRIVOLOUS, WITHOUT SUBSTANCE, OR FOUNDA TION, THE PRESCRIBED CONSEQUENCES FOLLOW. ABOVE BEING THE POSITION, THE CIT'S NON- CONSIDERATION OF THE PLEA RAISED BY THE ASSESSEE AB OUT THE EXISTENCE OF REASONABLE CAUSE VITIATED THE ORDER. ON THAT SCORE, THE ORDER PARSED BY THE CIT IS NOT MAINTAINABLE. REASONABLE CAUSE' AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDI NARY PRUDENCE. IT CAN BE DESCRIBED AS A PROBABLE CAUSE. IT MEANS AN H ONEST BELIEF FOUNDED UPON REASONABLE GROUNDS, OF THE EXISTENCE OF A STAT E, OF CIRCUMSTANCES, WHICH ASSUMING THEM TO BE TRUE, WOULD REASONABLY LE AD ANY ORDINARILY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT SAME WAS THE RIGHT THING TO DO. (IV) DILIP N. SHROFF VS JOINT CIT, 291 ITR 519 (SC) - HELD, THAT IT IS NOW A WELL-SETTLED PRINCIPLE OF LA W THAT MORE STRINGENT THE LAW, MORE STRICT CONSTRUCTION THEREOF WOULD BE NECESSARY. EVEN WHEN THE BURDEN IS REQUIRED TO BE DISCHARGED BY AN ASSES SEE, IT WOULD NOT BE AS HEAVY AS THE PROSECUTION. [P. N. KRISHNA LAL V. GOVERNMENT OF KERALA 1995 SUPPL. (2) SCC 187] (V) CIT VS FOURWAYS INTERNATIONAL, 166 TAXMAN 461 (DEL) - HELD, THAT THE ISSUE THAT ARISES IN THIS CASE CONCE RNS THE LEVY OF PENALTY ON THE ASSESSEE UNDER SECTION 271C OF THE INCOME-TAX ACT, 1961. THE ASSESSEE HAD MADE CERTAIN PAYMENTS FOR FABRICAT ION CHARGES BUT HAD NOT DEDUCTED THE TAX AT SOURCE. THE CONTENT ION OF THE ASSESSEE WAS THAT IT WAS NOT ADVISED BY ITS CHARTERED ACCOUN TANT THAT IT WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194 C OF THE ACT. THE ASSESSEE WAS ANEW FIRM, THE PARTNER WAS A MATRICULA TE AND THEREFORE DEPENDED ENTIRELY ON THE ADVICE GIVEN BY THE CHARTE RED ACCOUNTANT. IT APPEARS THAT THE CHARTERED ACCOUNTANT DID NOT CORRE CTLY ADVISE THE ASSESSEE. THE TRIBUNAL FOUND THIS EXPLANATION TO BE BONA FIDE . IT ACCORDINGLY CANCELLED THE LEVY OF PENALTY IMPOSED B Y THE ASSESSING OFFICER, WHICH HAD BEEN UPHELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS). ANOTHER FACTOR HELD AGAINST THE ASSESSEE WAS THAT A FTER THE MISTAKE WAS REALISED, HE DID NOT DEPOSIT THE TAX DU E. THE TRIBUNAL FOUND THIS TO BE INCORRECT BECAUSE THE ASSESSEE HAD DEPOS ITED TWO CHEQUES OF RS. 4 LAKHS AND RS. 3.4 LAKHS DURING THE SURVEY PRO CEEDINGS. THE TRIBUNAL CONCLUDED ON THESE FACTS THAT THE ASSESSEE WAS NOT AVOIDING ITS LIABILITY AND HAD CO-OPERATED WITH THE REVENUE IN T HE PAYMENT OF TAX. IT ALSO HELD THAT THE ASSESSEE HAD NOT BEEN CORRECTLY ADVISED BY ITS CHARTERED ACCOUNTANT IN REGARD TO ITS LIABILITY. ITA NOS.2899 TO 2901-AHD-10 10 WE MAY NOTE THAT SECTION 273B OF THE ACT DOES NOT MAKE A LEVY OF PENALTY UNDER SECTION 271C OF THE ACT MANDATORY. THE ASSESSEE WOULD NOT BE LIABLE TO PENALTY IF HE IS ABLE TO PROVE THA T THERE WAS A REASONABLE CAUSE FOR FAILING TO DEDUCT THE TAX. THE ASSESSEE I N THE PRESENT CASE HAD GIVEN AN EXPLANATION WHICH FOUND FAVOUR WITH THE TR IBUNAL. WE THINK THAT THE VIEW TAKEN BY THE TRIBUNAL IS ONE THAT COU LD HAVE POSSIBLY BEEN TAKEN IN THE MATTER. IT IS NOT PERVERSE AS TO WARRA NT INTERFERENCE OR WHICH GIVES RISE TO A SUBSTANTIAL QUESTION OF LAW. (VI) THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE FOLLO WING HEAD NOTES IN THE CASE OF ITO-VS- MUTHOOT FINANCIERS, ITAT, COCHIN BENCH, (20 07) 107 TTJ (COCH) 141 PENALTY UNDER S. 271CFAILURE TO DEDUCT TAX AT SOUR CEREASONABLE CAUSE SHORT DEDUCTION OF TAX ADMITTED BY ASSESSEEEXPLANATION O F ASSESSES THAT SHORT DEDUCTION FROM INTEREST WAS UNDER A BONA FIDE BELIEF THAT PAYEE SISTER CONCERNS WOULD HAVE NO TAXABLE IN COME, AND THAT ALL THE PAYEE CONCERNS HAVE TILED THEIR RETURNS, HAD AL SO PAID ADVANCE TAX AND IN MOST OF THE CASES TAXABLE INCOME WAS NIL AND REFUND WAS DUE REVENUE HAS ALSO RECOVERED TAX UNDER S. 201(1 A) AND ASSESSEE CANNOT BE HELD GUILTY OF CONTUMACIOUS OR DISHONEST CONDUCTIN THE FACTS AND CIRCUMSTANCES, CIT(A) WAS JUSTIFIED IN DELETING PEN ALTY ARGUMENT OF THE REVENUE THAT ONCE THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO MAKE COMPLIANCE OF LAW, THEN PENALTY PROCEEDINGS AR E ATTRACTED, IS NOT SUSTAINABLE. ( HEAD NOTES ) 9.5 IN REJOINDER, THE LD. D.R. POINTED OUT THAT THE RE IS NO REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE I.T.ACT, 1961 BE CAUSE THE ASSESSEE WAS KNOWING TRUE NATURE OF THE PAYMENT I.E. IT IS RENT AND NOT SERVICES CHARGES. WITH REGARD TO THE PLEA OF THE ASSESSEE THAT THE ORDER PASSED UNDER SE CTION 194C ARE BARRED BY LIMITATION. THE LD. D.R. POINTED OUT THAT THE DECISION OF THE I TAT, MUMBAI SPECIAL BENCH (SUPRA) IS APPLICABLE FOR THE ORDER PASSED UNDER SECTION 20 1(1) AND 201(1A) AND NOT FOR PASSING THE ORDER UNDER SECTION 271C OF THE I.T. AC T, 1961. 10. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. RIVAL SUBMISSIONS WERE ALSO CON SIDERED. IT IS PERTINENT TO NOTE THAT THE HONBLE DELHI HIGH COURT, IN THE CASE OF WOODWA RD GOVERNOR INDIA (P) LTD. ( SUPRA ), HELD THAT PENALTY FOR FAILURE TO DEDUCT TAX AT S OURCE WAS NOT AUTOMATIC AND ABSENCE OF REASONABLE CAUSE IS NECESSARY FOR LEVY. IN THIS JUDGEMENT, IT WAS ALSO HELD THAT INITIALLY THE BURDEN IS ON THE ASSESSEE TO SHO W THAT THERE EXISTS REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B FOR THE FAILURE. THEREAFTER, THE OFFICER HAS TO ITA NOS.2899 TO 2901-AHD-10 11 CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASS ESSEE OR OTHER PERSON, AS THE CASE MAY BE, AS REGARDS THE REASON FOR FAILURE, WAS ON A CCOUNT OF REASONABLE CAUSE. LOOKING TO THE TOTALITY OF THE FACTS FOR THE ASSESSMENT YEA RS UNDER APPEAL, WE ARE CONVINCED THAT THE ASSESSEE COMPANY WAS OF THE BONA FIDE BELIEF THAT IT REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194C AND NOT UNDER SECTION 194 -I. AS A MATTER OF FACT, IT HAS DEDUCTED THE TAX AT SOURCE. THE HONBLE DELHI HIGH COURT, IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD. VS CIT & ORS.( SUPRA ), HELD THAT REASONABLE CAUSE AS APPLIED TO HUMAN ACTION IS THAT WHICH WOULD CONSTRA IN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE. IT CAN BE DESCRIBED AS A PRO BABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED UPON REASONABLE GROUNDS, OF THE EXIS TENCE OF A STATE, OF CIRCUMSTANCES, WHICH ASSUMING THEM TO BE TRUE, WOULD REASONABLY LE AD ANY ORDINARILY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT SAME WAS THE RIGHT THING TO DO. IF WE APPLY THIS PRINCIPLE TO THE FACTS OF THE ASSESSEES CASE, THE INESCAPABLE CONCLUSION IS THAT THERE WAS A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B FOR DEDUCTING TH E TAX AT SOURCE UNDER SECTION 194C OF THE I.T. ACT, 1961. THE ADDL. CIT, TDS RANGE, AH MEDABAD REJECTED THE EXPLANATION OF THE ASSESSEE ON DOUBTS AND SUSPICION AND LEVIED THE PENALTY UNDER SECTION 271C FOR ALL THE FOUR ASSESSMENT YEARS UNDE R APPEAL AND IN OUR OPINION, THE LD. CIT(A)S DECISION IS LEGALLY AND FACTUALLY CORRECT IN CANCELLING THE PENALTY LEVIED BY THE AO BY ACCEPTING THE PLEA OF THE ASSESSEE THAT T HERE WAS A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B FOR DEDUCTING THE TAX A T SOURCE UNDER SECTION 194C. 10.1 IN VIEW OF THE ABOVE, WE DO NOT CONSIDER IT NE CESSARY TO ADJUDICATE THE PLEA OF THE REVENUE THAT PENALTY ORDERS FOR ALL THE FOUR AS SESSMENT YEARS ARE BARRED BY LIMITATION RAISED UNDER RULE 27 OF THE I.T. RULES, 1964 ARE NOT DISCUSSED. RESULTANTLY, THE APPEALS OF THE REVENUE ARE DISMISSED. 11. IN THE RESULT, ALL THE FOUR APPEALS FILED BY TH E REVENUE ARE DISMISSED. THE ORDER PRONOUNCED IN THE COURT ON 30.08.2011 SD/- SD/- (A.K.GARODIA) (T.K. SHAR MA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30/08/2011 ITA NOS.2899 TO 2901-AHD-10 12 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.