ACIT (TDS), JODHPUR V. Executive Engineer, BARMER

ITA 297/JODH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1960 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Keywords: Question of law; Non-deduction of tax; Reasonable cause
• Section: 194C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH , JODHPUR BEFORE: SMT. DIVA SINGH, JM & SHRI BHAGCHAND, AM ITA NO. 297/JODH/2016 ASSESSMENT YEAR : 2011-12 ASSISTANT COMMISSIONER OF INCOME TAX (TDS), JODHPUR. VS. EXECUTIVE ENGINEER, PUBLIC HEALTH ENGINEERING DEPARTMENT, BLOCK RIGEP, MAHAVEER NAGAR, BARMER. TAN NO.: JHDE00435B APPELLANT RESPONDENT REVENUE BY : SHRI S.K. MEENA (JCIT) DR ASSESSEE BY : SHRI RAJENDRA JAIN (ADV) DATE OF HEARING : 01/05/2017 DATE OF PRONOUNCEMENT : 02/05/2017 ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISES AGAI NST THE ORDER DATED 21/06/2016 PASSED BY THE LD. CIT(A)-1, JODHPUR PERT AINING TO THE ASSESSMENT YEAR 2011-12, WHEREIN THE REVENUE HAS TAKEN FOLLOWI NG GROUNDS OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED U/S 271C OF THE INCOME TAX ACT, 1961,WITHOUT APPRECIATING THE FACTS THAT T HE ASSESSEE HAS FAILED TO DEDUCT THE TAX, AS REQUIRED BY THE PROVIS IONS OF CHAPTER XVII-B OF THE INCOME TAX ACT, 1961. (II) THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FA CTS AND PROVISIONS OF THE LAW THAT NON-DEDUCTION OF TDS ALSO INCLUDES LAT E PAYMENT OF TDS, THUS THE SAME IS ALSO SUBJECT TO PENALTY U/S 2 71C. ITA 297/JODH/2016_ ACIT VS. EXECUTIVE ENGINEER 2 2. BOTH THE GROUNDS OF APPEAL ARE INTERLINKED AND A RE AGAINST DELETING THE PENALTY LEVIED U/S 271C OF THE INCOME TAX ACT, 1971 (IN SHORT THE ACT). IN THIS REGARD, BRIEFLY STATED FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS QUARTERLY STATEMENT OF TDS FOR QUARTER 1 FOR THE YEAR UNDER A PPEAL. AFTER PERUSING THE STATEMENT, THE ASSESSING OFFICER NOTICED THAT THE A SSESSEE HAS FAILED TO PAY THE AMOUNT OF TDS DEDUCTED U/S 194C OF THE ACT WITHIN T HE STIPULATED TIME. THE ASSESSEE HAD DEDUCTED TOTAL RS. 46,43,727/- AS TAX AND NOT DEPOSITED THE AMOUNT IN THE ACCOUNT OF THE GOVERNMENT. THEREFORE, THE ASSESSING OFFICER LEVIED A PENALTY OF RS. 46,43,727/- U/S 271C OF THE ACT. THE LD. CIT(A) HAS DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER . 3. NOW THE REVENUE IS IN APPEAL BEFORE THE ITAT. T HE LD D.R. HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS AS MADE BEFORE THE LD. CIT(A) AND VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A ). 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW. THE LD. CIT(A) HAS DELETED THE P ENALTY BY HOLDING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED THE ORDER OF THE AO AND SUBMISSIONS OF THE APPELLANT. THE AO NOTICED THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DEDUCTED A SUM OF RS. 46,43,727/- FROM THE PAYMENTS MADE TO CO NTRACTORS ON VARIOUS DATES AND DEPOSITED THE SAME ON VARIOUS DATES AS AGAINST THE DUE DATES AS MENTIONED IN ITA 297/JODH/2016_ ACIT VS. EXECUTIVE ENGINEER 3 PARA 4 SUPRA. THE AO FURTHER OBSERVED THAT THE ASSE SSEE FAILED TO DEPOSIT THE TAX DEDUCTED IN THE ACCOUNT OF CENTRAL GOVERNMENT WITHI N STIPULATED TIME UNDER RULE 30 OF THE IT RULE 1962 AND ALSO FAILED TO PROVE THE EXISTENCE OF REASONABLE CAUSE AND AS SUCH HE IMPOSED A PENALTY OF RS. 46,43,727/- UNDER THE PROVISIONS OF SECTION 271C OF THE ACT. THE APPELLANT HAS CONTENDED THAT I T IS NOT A MATTER OF NON DEDUCTION OF TDS BUT ONLY MATTER OF LATE DEPOSIT OF TDS AND THEREFORE, PENALTY U/S 271C IS NOT ATTRACTED. I FIND FORCE IN THE VARIOUS ARGUMENTS MADE BY THE APPELLANT. SECTION 271C OF THE ACT IS REPRODUCED HEREUNDER FOR THE SAKE OF CLARITY:- [PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE. [(I) IF ANY PERSON FAILS TO (A) DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQ UIRED BY OR UNDER THE PROVISIONS OF CHAPTER XVII-B; OR (B) PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIR ED BY OR UNDER, (I) SUB-SECTION (2) OF SECTION 115-0; OR (II) SECOND PROVISO TO SECTION 194B, THEN, SUCH PERSON SHALL BE LIABLE TO PAY, BY WAY O F 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) S HALL BE IMPOSED BY THE [JOINT COMMISSIONER].]' FROM A PLAIN READING OF THE ABOVE SECTION, IT IS CL EAR THAT SECTION 271C IS ATTRACTED ONLY WHEN A PERSON FAILS TO DEDUCT TAX AT SOURCE OR PAY THE WHOLE OR ANY PART OF THE TAX TO THE CREDIT OF THE CENTRAL GOVT. IT IS CLEAR FROM THE HEADING OF THE SECTION ITSELF THAT IT IS NOT ATTRACTED IN CASE OF LATE DEPOSIT OF TDS. PROVISIONS OF CHAPTER XVII-B ARE REFERRED TO IN THE CONTEXT OF NON DEDUCTION OF TDS AND NOT FOR LATE PAYMENT OF TDS. IN SUB SECTION (1) THERE ARE NO WORDS REGARDIN G ANY DEFAULT OF CHAPTER XVII-B IN RELATION TO LATE DEPOSIT OF TDS, HERE IT IS SPEC IFICALLY RELATED TO NON-DEDUCTION OF TDS WHICH IS NOT THE CASE OF THE INSTANT APPELLANT. HENCE THIS PENALTY IS NOT ATTRACTED AT ALL IN THE CASE OF THE APPELLANT. THE DECISION OF HONBLE ITAT JODHPUR BENCH IN THE C ASE OF XEN IRRIGATION V/S JCIT ITA NO 381/JU/2008 DATED 11/02/2011 IS APPLICABLE TO THE FACTS OF THE PRESENT CASE, WHEREIN THE HONBLE TRIBUNAL HELD AS UNDER: - ITA 297/JODH/2016_ ACIT VS. EXECUTIVE ENGINEER 4 'PENALTY UNDER S. 271C - FAILURE TO DEDUCT TAX AT S OURCE- NON-DEDUCTION OF SURCHARGE ON TAX- ASSESSEE FAILED TO DEDUCT SURCHAR GE ON TDS IN RESPECT OF PAYMENT TO CONTRACTORS- WHEN THE MISTAKE CAME TO TH E NOTICE OF THE ASSESSEE HE PAID THE SURCHARGE ALONG WITH THE INTEREST- PENALTY CANNOT BE IMPOSED UNDER S. 271C' THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT (TD S) V/S FOURWAYS INTERNATIONAL REPORTED IN 166 TAXMAN 461 (DEL) HELD AS UNDER: - ' PENALTY UNDER S. 271C- FAILURE TO DEDUCT TAX AT SOU RCE- REASONABLE CAUSE- TRIBUNAL HAVING DELETED PENALTY UNDER S. 2 71C ON T HE GROUND THAT FAILURE BY ASSESSEE'S CHARTERED ACCOUNTANT TO ADVISE ASSESSEE TO DEDUCT TAX AT SOURCE CONSTITUTED REASONABLE CAUSE, AS PARTNER OF THE ASS ESSEE WAS ONLY MATRICULATE AND NEW IN THE BUSINESS, NO INTERFERENCE WAS CALLED FOR - TRIBUNAL ALSO THAT THE ASSESSEE WAS NOT AVOIDING ITS LIABILITY AND HAD COOPERATED W ITH THE REVENUE IN THE PAYMENT OF TAX- VIEW TAKEN BY THE TRIBUNAL BEING A POSSIBLE VIEW DID NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW.' ON A SIMILAR ISSUE, THE TRIBUNAL, BENCH 'A', JAIPUR IN THE CASE OF BOARD OF SECONDARY EDUCATION, AJMER, 50 TAX WORLD 30 (JP) OBSERVED AS UNDER:- '2.1 WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. DURING THE COU RSE OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER O F THE AO WHEREAS THE LEARNED AUTHORISED REPRESENTATIVE SUPPORTED THE ORDER OF TH E LEARNED CIT(A). WE OBSERVE THAT THE ASSESSEE IS AN EDUCATIONAL INSTITUTION. DU RING TDS SURVEY, IT WAS OBSERVED THAT THE ASSESSEE DID NOT MAKE TDS ON PAYMENT MADE TO M/S RAJASTHAN STATE ROAD DEVELOPMENT CORPORATION LTD. ON BEHALF OF THE ASSESSEE, IT WAS CONTENDED THAT THE ASSESSEE IS NOT COVERED UNDER S. 194C OF T HE ACT. HOWEVER, THE SAID PLEA OF ASSESSEE WAS NOT ACCEPTED. LATER ON, THE ASSESSEE D EDUCTED THE TDS AND THE SAME WAS DEPOSITED ON 6TH MARCH, 2009. WE OBSERVE THAT O N THE DATE OF LEVY OF PENALTY NOT ONLY THE ENTIRE AMOUNT OF TDS WAS DEDUCTED AND DEPOSITED BUT ALSO THE INTEREST ON ACCOUNT OF DELAY IN DEDUCTION OF TAX UN DER S. 201(1 A) WAS LEVIED AND PAID. IN VIEW OF THE ABOVE FACTS, THE LEARNED CIT(A ) HAS HELD THAT THERE WAS A REASONABLE CAUSE FOR FAILURE TO DEDUCT TDS AS THE A SSESSEE WAS UNDER THE IMPRESSION THAT IT WAS NOT LIABLE TO DEDUCT THE TDS AND ACCORDINGLY THE LIABILITY TO DEDUCT TDS WAS A DEBATABLE ONE, ON WHICH THERE COUL D BE TWO OPINIONS. IN VIEW OF THE ABOVE, THE LEARNED CIT(A) HELD THAT THIS IS NOT A SUITABLE CASE FOR LEVY OF PENALTY UNDER S. 271C OF THE ACT.'' IT IS ESTABLISHED FACT THAT IN THE INSTANT CASE, TH E APPELLANT DEDUCTED THE TAX AT SOURCE AND DEPOSITED THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT BUT IT WAS DEPOSITED LATE FOR WHICH INTEREST U/S 201(1 A) OF T HE ACT HAS ALREADY BEEN CHARGED. VARIOUS JUDICIAL DECISIONS CITED BY THE APPELLANT A LSO SUPPORT ITS CASE AS THE ITA 297/JODH/2016_ ACIT VS. EXECUTIVE ENGINEER 5 APPELLANT IS ABLE TO ESTABLISH THAT THERE WAS A REA SONABLE CAUSE FOR DELAY IN DEPOSIT OF TDS INTO GOVT. ACCOUNT AND THEREFORE NO PENALTY U/S 271C IS LEVIABLE UNDER SUCH CIRCUMSTANCES. IN VIEW OF THE ABOVE DISCUSSION AND KEEPING IN VIE W THE FACTS AND CIRCUMSTANCES OF THE CASE, I HOLD THAT THE APPELLANT WAS NOT LIABLE FOR LEVY FOR PENALTY U/S 271C. I, THEREFORE, DELETE THE PENALTY OF RS. 46,43,727/- LE VIED U/S 271C BY THE JT.CIT (TDS), JODHPUR IN THE APPELLANTS CASE. THE GROUNDS RAISED BY THE APPELLANT REGARDING THIS ISSUE ARE ALLOWED. WE FIND THAT THE ASSESSEE DEDUCTED TAX AT SOURCE. I T WAS DEPOSITED LATE FOR THE REASON THAT THE ASSESSEE SENT CHEQUE OF TDS TO ITO TDS-II, JODHPUR ON 23/7/2010 BUT THE CHEQUE WAS NOT ENCASHED. THE FACT COMES TO LIGHT WHEN THE TDS WAS NOT REFLECTED IN THE DEDUCTEES CREDIT. THE LD. D.R. WAS NOT ABLE TO CONTROVERT THE FINDINGS RECORDED BY THE LD. CIT(A), THEREFORE, WE HEREBY SUSTAIN THE ORDER OF THE LD. CIT(A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/05/2017. SD/- SD/- (DIVA SINGH) (BHAGCHAND) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED:- 02 ND MAY, 2017. *RANJAN COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT (TDS),JODHPUR. 2. THE RESPONDENT- THE EXECUTIVE ENGINEER, MAHAVEER NA GAR, BARMER. ITA 297/JODH/2016_ ACIT VS. EXECUTIVE ENGINEER 6 3. CIT 4. THE CIT(A) 5. DR, ITAT, JODHPUR 6. GUARD FILE (ITA NO. 297/JODH/2016) BY ORDER, ASST. REGISTRAR