The Post Master, Panipat V. JCIT (TDS), Karnal

ITA 3019/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3720 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 16-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: U S AGARWAL; BHARAT BHUSHAN JAIN
• Keywords: Question of law; Non-deduction of tax; Reasonable cause
• Section: 273B; 201(1); 6

Judgement Text

PG. 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SHRI G.D.AGRAWAL , HON BLE PRESIDENT AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 3019 /DEL/201 4 A.Y. 1999 - 2000 ITA NO. 3020 /DEL/201 4 A.Y. 20 0 0 - 2001 ITA NO. 3021 /DEL/201 4 A.Y. 20 01 - 02 ITA NO. 3022 /DEL/201 4 A.Y. 20 02 - 03 & ITA NO. 3023 /DEL/201 4 A.Y. 20 03 - 04 THE POST MASTER VS. JCIT(TDS) HEAD POST OFFICE TDS RANGE PANIPAT KARNAL PAN: AAAGP 0009H (APPELLANT) (RESPONDENT ) APPELLANT BY : SH. BHARAT BHUSHAN JAIN AND SHRI U S AGARWAL, ADV. RESPONDENT BY : SH.AMIT JAIN, SR.D.R. DATE OF HEARING: 1 8 /01/2018 DATE OF PRONOUNCEMENT : 29.01.2018 ORDER PER BE NCH PG. 2 TH E PRESENT APPEALS FOR VARIOUS ASSESSMENT YEARS HAVE BEEN PREFERRED BY REVENUE AGAINST ORDER DATED 22 / 10 /1 3 PASSED BY LD. CIT(A) , SECTOR 12, KARNAL . THE LD. AO LEVIED PENALTY UNDER SECTION 271C OF THE INCOME TAX ACT, 1961 (THE ACT) VIDE ORDER DATED 25/05/12 FOR THE YEARS UNDER CONSIDERATION. ALL THE GROUNDS CHALLENGED IN THESE APPEALS ARE COMMON AS THERE WAS A DEFAULT ON THE PART OF ASSESSEE IN COMPLYING WITH PROVISIONS OF SECTION 20 1 (1) AND 201 (1A) OF THE ACT. 2. IT HAS BEEN SUBMITTED THAT ASSESSEE IS A N EMPLOYEE OF POST AND TELEGRAPH DEPARTMENT GOVERNMENT STATUTORY ORGANISATION. IT HAS BEEN SUBMITTED THAT ASSESSEE WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE TO DEDUCT THE REQUISITE TAX AS IT WAS IGNORANT ABOUT THE TD S PROVISION. LD. AR HAS SUBMITTED THAT ASSESSEE DID NOT RECEIVE ANY INTIMATION REGARDING THE PROVISIONS THAT ARE APPLICABLE FOR DEDUCTING TAX FROM HIS HIGHER AUTHORITIES FOR THE YEARS UNDER CONSIDERATION. IT HAS BEEN SUBMITTED THAT THE PROVISIONS PERTAINING TO DEDUCTION OF TAX AT SOURCE C AME INTO EFFECT FROM ASSESSMENT YEAR 200 1 - 0 2 AND THAT THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION ARE 1999 - 2000 , 2000 - 2001 AND 2001 - 02. LD. AR SUBMITTED THAT THE INFORMATION FOR DEDUCTION OF TDS WAS RECEIVED AFTER THE END OF THE FINANCIAL YEAR 2000 - 01 BY THE POSTMASTER GEN ERAL HARYANA CIRCLE AMB ALA ON 01/08/01 FROM THE C OMMUNICATION AND IFTS DIVISION V IDE ORDER NUMBER SB ORDER NO. 9/2001 DATED 16 /07/ 2001 . THE SAID ORDER WAS COMMUNICATED TO ALL THE JURISDICTIONAL POSTMASTERS. ASSESSEE BEING ONE OF TH E POSTMASTER GENERAL F ALLING UNDER HARYANA CIRCLE, RECEIVED THE SAME ON 04/08/01. SUBSEQUENTLY PG. 3 INFORMATION OF TDS COMMISSION V IDE COMMUNICATION OF I TFS DIVISION NO. 107/1/2002 SB DATED 08/10/02 WAS RECEIVED BY POSTMASTER HARYANA , GEN ERAL HARYANA CIRCLE AMBALA ON 09/10/02 WHICH WAS RECEIVED BY ASSESSEE POSTMASTER ON NOVEMBER , 2002. IT WAS THUS SUBMITTED THAT ASSESSEE HAD SUFFICIENT REASON FOR NOT DEDUCTING TD S. LD. A.R. SUBMITTED THAT THE STAFF HAD COLLECTED FORM NO. 15 I FROM THE PAYEE S WHO HAS WITHDRA WN FROM NSS ACCOUNTS AND DUE TO THE SHIFTING OF OFFICIAL RECORD, CERTAIN FORMS COULD NOT BE FOUND. LD. A.R. THUS SUBMITTED THAT ASSESSEE CANNOT BE HELD TO BE GUILTY OF CONDUCT OF CONTUMACIOUS OR DISHONEST ACTION. HE THUS SUBMITTED FOR THE PENALTY BEING DEL ETED AS THE NON - DEDUCTION WAS ON THE BASIS OF A BONA FIDE BELIEF. 2.1. LD. AO HOWEVER LEVIED PENALTY UNDER SECTION 271C OF THE ACT FOR YEARS UNDER CONSIDERATION. 2. AGGRIEVED BY THE ORDER OF LD. AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) WHO DECIDED THE ISSUE AS UNDER: 4.1 2 EVEN OTHERWISE, THE IMPLICIT PURPOSE OF THE PROVISIONS IN THE STATUTE IS TO ENABLE THE DEPARTMENT TO ENFORCE THE ACT EFFECTIVELY. LOOKING AT THIS, IT IS CLEAR THAT NON - DEDUCTION OF CORRECT RATE OF TAX AND FAILURE IN DEDUCTING T AX PER SE CANNOT BECOME TECHNICAL OF VENIAL. IN THE FACTS OF THE CASES UNDER CONSIDERATION, THE DEFAULT WAS SUBSTANTIAL DEFAULT FOR WHICH PENALTY HAS TO BE LEVIED UNLESS GROUND OF REASONABLE CAUSE IS PROVED. THE APPELLANT, HOWEVER, FAILED TO BRING ANY RE ASONABLE CAUSE FOR ITS FAILURE IN DEDUCTING TAX AT THE APPLICABLE RATE AND, HENCE, THE AO RIGHTLY LEVIED THE PENALTY. PG. 4 3. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US. 3.1 . LD.AR SUBMITTED THAT THERE WAS A REASONABLE CAUSE FOR NON - DEDUCTION OF TDS BY ASSESSEE AS IT WAS NOT AWARE ABOUT THE TREATY S PROVISIONS. HE MADE REFERENCE TO ALL THE COMMUNICATIONS THAT HAS BEEN RECEIVED BY ASSESSEE SUBSEQUENTLY FOR DEDUCTION OF TAX ON THE PAYMENTS MADE. LD. A.R. HAS SUBMITTED THAT REQUIREMENT TO DEDUCT TDS WAS NOT THERE ON STATUTE DURING THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION AND ASSESSEE WAS UNDER A BONA FIDE BELIEF REGARDING ITS NONAPPLICABILITY. LD. A.R. HAS PLACED REFERENCE UPON THE DECISION OF HON BLE SUPREME COURT IN THE CASE O F HINDUSTAN STEEL LTD VS . S TATE OF ORISSA REPORTED IN 86 ITR 26 WHEREIN IT HAS BEEN HELD THAT; AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS A RESULT OF QUASI - CRIMINAL PROCEEDING , AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED , EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST , OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION . PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHE R PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE A PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTIES, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM PG. 5 A BONA FIDES BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 3.2. LD.DR SUPPORTED THE ORDER PASSED BY LD. AO. 4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. BEFORE DECIDING THE ISSUE RELEVANT PROVISIONS OF SECTION 271 A AS WEL L AS 273B ARE REPRODUCED HEREINBELOW: PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE. 271C. [(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 PAR T 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 - SE CTION (1) SHALL BE IMPOSED BY THE [JOINT] COMMISSIONER.] [ PENALTY NOT TO BE IMPOSED IN CERTAIN CASES. 273B. NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF [CLAUSE ( B ) OF SUB - SECTION (1) OF] [ SECTION 271 , SECTION 271A , [ SECTION 271AA ,] SECTION 271B [, SECTION 271BA ], [ SECTION 271BB ,] SECTION 271C , [ SECTION 271CA ,] SECTIO N 271D , SECTION 271E , [ SECTION 271F , [ SECTION 271FA ,] [ SECTION 271FAB ,] [ SECTION 271FB ,] [ SECTION 271G ,]] [ SECTION 271GA ,] [ SECTION 271GB , ] [ SECTION 271H ,] [ SECTION 271 - I ,] [ SECTION 271J , ] CLAUSE ( C ) OR CLAUSE ( D ) OF PG. 6 SUB - SECTION (1) OR SUB - SECTION (2) OF SECTION 272A , SUB - SECTION (1) OF SECTION 272AA ] OR [ SECTION 272B OR] [SUB - SECTION (1) [OR SUB - SECTION (1A)] OF SECTION 272BB OR] [SUB - SECTION (1) OF SECTION 272BBB OR] CLAUSE ( B ) OF SUB - SECTION (1) OR CLAUSE ( B ) OR CLAUSE ( C ) OF SUB - SECTION (2) OF SECTION 273 , NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FA ILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. 4.1 . WE OBSERVED FROM THE SUBMISSIONS ADVANCED BY LDAR, THAT ADMITTEDLY, NON - DEDUCTION OF TDS WAS NOT DELIBERATE BUT MERELY A TECHNICAL DEFAULT. WE OBSERVE THAT THERE WAS A REASONABLE CAUSE FOR NOT DEDUCTING TDS. ASSESSEE WAS IGNORANT OF THE TD S PROVISIONS UNDER I NCOME T AX A CT AND IT WAS INTIMATED TO HIM IN THE SUBSEQUENT ASSESSMENT YEARS. UNDER SUCH CIRCUMSTANCES AS PER 273 B, PENALTY PROVISIONS CAN NOT BE CONSIDERED TO BE AUTOMATIC IF THE ASSESSEE HAS BEEN ABLE TO ESTABLISH A REASONABLE CAUSE FOR THE SAID FAILURE. 4.2. A SIMILAR SITUATION EMERGED BEFORE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS MATSUSHITA ELECTRIC INDUSTRIAL LTD., REPORTED IN 278 ITR 162 . HON BLE DELHI HIGH COURT HELD AS UNDER: 'IT IS NOT NECESSARY FOR US TO NOTICE THE MERIT OR OTHERWISE OF THE CONTENTIONS RAISED BEFORE US IN ANY GREATER DETAIL. SUFFICES IT TO NOTE AND WHICH IS FAIRLY POINTED OUT BY THE LEARNED COUNSEL APPEARIN G FOR REVENUE DEPARTMENT THAT THE CONTROVERSY IN THE PRESENT CASE IS SQUARELY COVERED ON FINDING OF FACT AS WELL AS ON QUESTION OF LAW BY A JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V . ITOCHU CORPORATION 268 ITR 172. IN THAT CASE, THE COURT HELD THAT FINDING RELATION TO THE FACT WHETHER THE ASSESSED ACTED BONA FIDE WAS A FINDING OF FACT AND THE ASSESSED HAD PAID THE TAX IN TERMS OF LAW SUBSEQUENTLY. ON PG. 7 SUCH FINDING OF FACT, THE TRIBUN AL WAS JUSTIFIED IN DELETING THE PENALTY AND IT WOULD NOT GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW UNLESS THE FINDING RECORDED WAS PATENTLY PERVERSE. IN THIS VERY JUDGMENT WHILE RELYING UPON IN THE DIVISION BENCH JUDGMENT OF THIS COURT IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD. V. CIT (2002) 253 ITR 745, THE BENCH ALSO NOTICED THAT WHETHER THERE WAS REASONABLE CAUSE OR NOT FOR THE ASSESSED NOT TO DEDUCT TAX AT SOURCE, IS A QUESTION OF FACT WHICH HAS TO BE DETERMINED BY THE TRIBUNAL AND NORMALLY WOULD NOT GIVE RISE TO A QUESTION OF LAW. WITH RESPECT, WE WOULD ADOPT THE REASONING OF THE DIVISION BENCH IN THE CIT V. ITOCHU CORPN . (SUPRA). IN THE PRESENT CASE, THE TRIBUNAL HAS COME TO A FINDING OF FACT THAT THE REASONABLE CAUSE CAN BE REASONABLY SAID TO BE A CAUSE WHICH PREVENTS A MAN OF AVERAGE NEGLIGENCE AND ORDINARY PRUDENCE ACTING UNDER A NORMAL CIRCUMSTANCES WITHOUT NEGLIGENCE OR INACTION OR WANT OF BONAFIDE. IT THEN RECORDED A DEFINITE FINDING THAT THE ACT ON THE PART OF THE ASSESSED WAS BONAFIDE AND IT ACTED UNDER A REASONABLE BELIEF. SUBSEQUENTLY HON BLE SUPREME COURT IN THE CASE OF CIT VS . BANK OF NOVA SCOTIA , REPORTED IN 380 ITR 550 HAS UPHELD TH E FINDINGS OF THE T RIBUNAL WHERE IT WAS HELD AS UNDER: 2. THE MATTER WAS PURSUED BY THE REVENUE BEFORE THE INCOME TAX APPELLATE TRIBUNAL. THE INCOME TAX APPELLATE TRIBUNAL VIDE ORDER DATED 31.03.2006 ENTERED THE FOLLOWING FINDINGS: '11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE INSTANT CASE WE ARE NOT DEALING WITH COLLECTION OF TAX U/S 201(1) OR COMPENSATORY INTEREST U/S 201(1A). THE CASE OF THE ASSESSEE IS THAT THESE AMOUNTS HAVE ALREADY BEEN PAID SO AS TO END DISPUTE WITH REVENUE. IN THE PRESENT APPEALS WE ARE CONCERNED WITH LEVY OF PENALTY U/S 271 - C FOR WHICH IT IS NECESSARY TO ESTABLISH THAT THERE WAS CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE. WE FIND THAT ON SIMILAR FACTS HON'BLE DELHI HIGH COURT HAVE DELETED LEVY OF PENALTY U/S 271 - C IN THE CASE OF ITOCHU CORPORATION 268 ITR 172 (DEL) AND IN THE CASE OF CIT V. MITSUI & COMPANY LTD. 272 ITR 545 . RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENTS OF HON'BLE DELHI HIGH COURT AND THE DECISION OF THE ITAT, DELHI IN THE CASE OF TELEVISION PG. 8 EIGHTEEN INDIA LTD. , WE ALLOW THE ASSESSEE'S APPEAL AND CANCEL THE PENALTY AS L EVIED U/S 271 - C.' 3. BEING AGGRIEVED, THE REVENUE TOOK UP THE MATTER BEFORE THE HIGH COURT OF DELHI AGAINST THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL. THE HIGH COURT REJECTED THE APPEAL ONLY ON THE GROUND THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE MATTER. 4. ON FACTS, WE ARE CONVINCED THAT THERE IS NO SUBSTANTIAL QUESTION OF LAW, THE FACTS AND LAW HAVING PROPERLY AND CORRECTLY BEEN ASSESSED AND APPROACHED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS BY THE INCOME TAX APPELLATE TRIBUNAL . 4. 3 . APPLYING THE RATIO UPHELD BY HON BLE SUPREME COURT IN THE CASE OF CIT V S. B ANK OF NOVA SCOTIA (SUPRA) TO THE FACTS OF THE PRESENT CASE WE ARE INCLINED TO DELETE THE PENALTY LEVIED BY LD. AO UNDER SECTION 271C OF THE ACT. ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE STANDS ALLOWED IN ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. 5. IN THE RESULT APPEALS FILED BY ASSESSEE STAND ALLOWED FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01.2018. SD/ - SD/ - ( G.D.AGRAWAL ) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DATED: 29 TH JANUARY, 2018 *MV PG. 9 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI