ITO (TDS), Patiala V. Sh. Om Parkash Gupta (HUF), Mandi Gobindgarh

ITA 341/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9930 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 16-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: N K SAHI
• Keywords: Non-deduction of tax; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NOS. 341 & 342/CHD/2016 A.YS: 2011-12 & 2012-13 THE ITO (TDS), VS SHRI OM PARKSH GUPTA (HUF), PATIALA. PROP. M/S ALWAR SALES CORP., MANDI GOBINDGARH. TAN/PAN: AAAHO2883F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL RESPONDENT BY : SHRI N.K.SAHI DATE OF HEARING : 16.06.2016 DATE OF PRONOUNCEMENT : 20.06.2016 O R D E R BOTH THE APPEALS BY REVENUE HAVE BEEN DIRECTED AGAINST COMMON ORDER OF LD. CIT(APPEALS) PATIALA, DATED 29.01.2016 FOR ASSESSMENT YEAR 2011-12 AND 2012-13 CHALLENGING THE CANCELLATION OF PENALTY UND ER SECTION 271CA OF THE INCOME TAX ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS INDIVIDUAL. HE IS RUNNING THE BUSINESS OF PURCHASE AND SALE OF OLD IRON SCRAP. THOUGH ON PURCHASE OF THIS SCRAP, TAX WAS BEING COLLECTED BY THE PARTIES FROM WHOM THE ASSESSEE DEDUCTOR HAD MADE PURCHASES, YET THE ASSESSEE DEDUCTOR HAD NOT COLLECTED TAX ON FURT HER SALES OF THIS SCRAP I.E. NEITHER HE COLLECTED TAX N OR 2 DEPOSITED THE SAME INTO GOVERNMENT ACCOUNT AS REQUIRED UNDER SECTION 206C(1) OF THE INCOME TAX AC T. THEREFORE, PENALTY PROCEEDINGS UNDER SECTION 271CA WERE INITIATED. THE ASSESSING OFFICER HELD THAT ASSESSEE HAD DEFAULTED ON TCS AMOUNTING TO RS. 7,42,086/- ON SCRAP SALE OF RS. 7.42 CR MADE BY HIM TO THE TRADERS. THE ASSESSING OFFICER ISSUED SHOW CAU SE NOTICE WHY PENALTY FOR DEFAULT UNDER ABOVE PROVISIO NS MAY NOT BE IMPOSED AS THE ASSESSEE HAD FAILED TO COLLECT TAX AT SOURCE ON SALE OF SCRAP DURING THE ASSESSMENT YEAR UNDER APPEALS AS REQUIRED UNDER SECTION 206C OF THE INCOME TAX ACT. THE ASSESSEE I N REPLY SUBMITTED BEFORE ASSESSING OFFICER THAT PENAL TY IS NOT LEVIABLE AND RELIED UPON DECISION OF ITAT BANGL ORE BENCH IN THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD. 24 CCH/1 (BANGLORE). THE ASSESSING OFFICER DID NOT ACCEPT THE SAID ORDER FOR THE REASON THAT SAME HAS NOT REACHED FINALITY. THE ASSESSING OFFICER FOLLOWED C BDT CIRCULAR DATED 16.07.2013. ACCORDING TO THE ASSESS ING OFFICER, SINCE ASSESSEE HAD NOT DEDUCTED TCS @ 1% O N THE SALES AND FAILED TO EXPLAIN ANY REASONABLE CAUS E FOR NON DEDUCTION OF TAX AT SOURCE, THEREFORE, PENALTY UNDER SECTION 271CA WAS IMPOSED. 3. PENALTY ORDERS WERE CHALLENGED BEFORE LD. CIT(APPEALS). THE WRITTEN STATEMENT OF THE ASSESSE E IS REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT ASSESSEE IS NOT LIA BLE TO 3 COLLECT TCS BECAUSE ASSESSEE DID NOT DEAL IN SCRAP AND PROVISIONS ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE ALSO EXPLAINED MODUS-OPERAN DI OF BUSINESS OF THE ASSESSEE AND THE PURCHASERS AND RELIED UPON SEVERAL DECISIONS INCLUDING THE DECISIO N OF ITAT AHMEDABAD BENCH IN THE CASE OF NAVINE FLOURINE INTERNATIONAL LTD. V ACIT 139 TTJ 248. THE ASSESSE E ALSO SUBMITTED THAT HE WAS NOT REQUIRED TO COLLECT TAX AT SOURCE ON THE SALES MADE BY ASSESSEE WHICH WAS ACCEPTED BY THE ASSESSING OFFICER ALSO AND WHERE NO TAX IS REQUIRED TO BE COLLECTED AT SOURCE IN SUCH C ASE, NO PENALTY IS LEVIABLE UNDER SECTION 271CA OF THE A CT AS IS HELD IN THE CASE OF VIPRO GE MEDICAL SYSTEMS LTD. (SUPRA) IN WHICH IT WAS HELD THAT, WHERE AMOUNT OF TAX HAS ALREADY BEEN PAID BY THE PAYEE AND ASSESSING OFFICER HAS RAISED NIL DEMAND AGAINST THE ASSESSE E, IN SUCH A CASE THERE IS NO REASON FOR LEVY OF PENALTY . 3(I) THE ASSESSEE ALSO RELIED UPON DECISION IN THE CASE OF SHRI MANJUNATH WINES V CIT 202 TAXMAN 620 (KAR) IN WHICH THE ASSESSEE HAS NOT COLLECTED THE TAX UND ER SECTION 206 FROM BUYER, IT WAS HELD THAT BEFORE PROCEEDING AGAINST THE ASSESSEE, IT IS NECESSARY TO FIND OUT WHETHER BUYERS HAVE PAID TAX IN ACCORDANCE WITH THE PROVISIONS OF ACT AND ONLY WHEN THE BUYER HAS N OT PAID TAX, THEN AUTHORITIES CAN PROCEED AGAINST THE ASSESSEE WHO WAS UNDER OBLIGATION TO COLLECT TAX AN D REMIT TO THE GOVERNMENT. IT WAS SUBMITTED THAT TAX 4 PAYABLE BY THE PARTIES ON THEIR TOTAL INCOME HAS ALREADY BEEN PAID AND IN SUCH A CASE, NO TAX COULD BE RECOVERED FROM THE ASSESSEE. IT WAS SUBMITTED THAT BUYERS ARE INCOME TAX ASSESSEES AND PAID THE TAX DU E ON THEIR INCOME. MATERIAL SOLD ARE DULY ACCOUNTED IN THEIR BOOKS OF ACCOUNT, HENCE NON-DEDUCTION OF TCS IS NO GROUND FOR LEVY OF PENALTY AND RELIED UPON DECIS ION OF THE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE P.LTD. V CIT 293 ITR 226. IN THE PRE SENT CASE ALSO, THERE IS NO DISPUTE THAT TAX PAYABLE BY THE PARTIES ON THEIR INCOME HAS BEEN PAID AND THIS FACT IS ACCEPTED BY THE ASSESSING OFFICER. 4. THE LD. CIT(APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN DETAIL, DECIDED THE ISSUE DIFFERENTLY. THE LD. CIT(APPEALS) HELD THAT THE GO ODS SOLD BY THE ASSESSEE ARE COVERED BY THE DEFINITION OF SCRAP IN TERMS OF EXPLANATION (B) OF SECTION 206C OF THE ACT. HOWEVER, AS REGARDS THE DEFAULT, LD. CIT(APPEALS) CANCELLED THE PENALTY AND ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDINGS OF L D. CIT(APPEALS) IN PARA 6.4 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 6.4 WITH REGARD TO GROUNDS NO 5, 6, 7 AND 9 RAISED BY THE APPELLANT, AS FAR ASSESSMENT ORDER IS CONCERNED THERE IS NO DOUBT THAT THE ASSESSING OFFI CER HAS STATED ALL THE NECESSARY FACTS ALONG WITH EXPLANATIONS AND REASONS FOR NON ACCEPTANCE OF 5 APPELLANT'S PLEA. IT IS AN ADMITTED FACT THAT THE APPELLANT HAS FURNISHED COMPLETE DETAILS OF SALES O F SCRAP MADE TO VARIOUS TRADERS ALONG WITH COPIES OF THEIR INCOME TAX RETURNS OF THE RELEVANT ASSESSMENT YEAR EVIDENCING THE PAYMENT OF DUE TAXES ON THEIR INCOME BY THE RESPECTIVE PURCHASERS. ON PERUSAL OF ORDER DATED 19.03.2013 PASSED BY THE INCOME TAX OFFICER (TDS), PATIALA, IT IS OBSERVED THAT NO DEMA ND ON ACCOUNT OF NON COLLECTION OF TAX AT SOURCE HAS B EEN RAISED AND SHE HAS CHARGED INTEREST ON THE TAX NOT SO COLLECTED TILL THE FILLING OF ITR BY RESPECTIVE BUY ERS RELYING ON THE JUDGMENT OF HINDISTAN COCA COLA BEVERAGES PRIVATE LIMITED VS COMMISSIONER OF INCOME TAX 211 CTR (SC) 545 WHILE HOLDING THAT THE BUYERS HAVE PAID THE TAXES ON THEIR RESPECTIVE INCOME, HER ACTION CLEARLY ESTABLISHES THAT SHE HAS NOT TREATED THE APPELLANT AS ASSESSEE IN DEFAULT AS FAR AS TCS IS CONCERNED. IT IS AN ACCEPTED LEGAL POSITION THAT WHERE THE PURCHASER HAS PAID THE TAX ON HIS INCOME, THE REVENUE CAN ONLY CHARGE INTEREST ON THE TAX NOT SO COLLECTED U/S 206(7) OF THE ACT, TIL L THE FILLING OF ITR BY HIM. I HAVE CONSIDERED THE CASE L AWS REFERRED BY THE APPELLANT AND AM OF FIRM VIEW THAT THE JUDGMENT OF HON'BLE INCOME TAX APPELLATE TRIBUNAL DELIVERED IN THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD (2005) 24 CCH 0001 BANG TRIBUNAL I S APPLICABLE. THE RELEVANT EXCERPT READS AS UNDER:- '8. REGARDING PENALTY UNDER S. 271C OF THE ACT, IT HAS BEEN SUBMITTED ON BEHALF OF THE ASSESSEE THAT SUFFICIENT COMPLIANCE WAS MADE BECAUSE THE TAX DEMAND WAS ALREADY PAID BY WIPRO LTD, HENCE, THERE WAS A REASONABLE CAUSE FOR NOT LEVYING PENALTY. IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE, THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN WIPRO FINANCE LTD. (SUPRA), WHEREIN A NUMBER OF 6 DECISIONS WERE RELIED UPON BY THE TRIBUNAL ON THIS ISSUE. IN THE CASE OF THE AZADI BACHAO ANDOLAN (SUPRA), THE HON'BLE DELHI HIGH COURT HAS HELD THAT LEVY OF PENALTY UNDER S. 271C FOR FAILURE TO DEDUCT TAX AT SOURCE IS NOT AUTOMATIC. ABSENCE OF REASONABLE CAUSE HAS TO BE ESTABLISHED BEFORE LEVY OF SUCH PENALTY.' AS AFORESAID, THE FACTS OF THE PRESENT CASE ARE COV ERED BY THE ABOVE JUDGMENT. THE JCIT (TDS), CHANDIGARH HAS NOT FOLLOWED IT ON THE GROUND THAT THE JUDGMENT HAS NOT ATTAINED FINALITY. IN MY CONSIDERED VIEW, T HE VIEW TAKEN BY THE JCIT (TDS) IS NOT ACCEPTABLE. CLEARLY THE HON'BLE ITAT IS A FINAL FACT FINDING AUTHORITY AND UNLESS ANY UPPER COURT HAS UPSET ITS JUDGMENT ON THE SAME ISSUE, ITS DECISION WILL PREVA IL AND ANY OFFICER OPERATING UNDER LAW CANNOT IGNORE I T ON THIS GROUND. ACCORDINGLY, THIS JUDGMENT HAS FULL BINDING FORCE IN THE PRESENT CASE. FURTHER, VARIOUS COURTS HAVE ALSO SETTLED THE ISSUE AS IN THE CASE O F SREE MANJUNATHAN WINES VS CIT (2011) 202 TAXMAN (KARN) WHICH HELD THAT IN CASE APPELLANT HAS NOT COLLECTED THE TAX U/S 206C FROM , IT IS HELD THAT T O IMPOSE PENALTY FOR NON COLLECTION OF TAX AT SOURCE, IT IS NECESSARY OUT WHETHER BUYER HAS PAID TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND ONLY WHEN THE BUYER HAS NOT PAID THE TAX THEN THE AUTHORITIES CAN PROCEED AGAINST THE APPELLANT, WHO WAS UNDER OBLIGATION TO COLLECT TAX AT SOURCE AND R EMIT THE SAME TO GOVT. ACCOUNT. ACCORDINGLY, I ACCEPT TH ESE GROUNDS OF APPEAL RAISED BY THE APPELLANT AND DELET E THE PENALTY OF RS. 7,42,086/- IMPOSED BY THE ASSESSING OFFICER. 7 5. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY. THE LD. CIT(APPEALS) HAS RECORDED SPECIFIC FINDING OF FACT THAT ASSESSEE FURNISHED COMPLETE DETAILS OF SALES OF SCR AP MADE TO VARIOUS TRADERS ALONGWITH COPIES OF THEIR INCOME TAX RETURNS OF RELEVANT ASSESSMENT YEAR PROV ING THAT PAYMENT OF DUE TAXES HAVE BEEN MADE BY THE RESPECTIVE PURCHASERS. IT WAS ALSO RECORDED THAT N O DEMAND ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE HAS BEEN RAISED BY THE ASSESSING OFFICER AND ONLY INTEREST HAS BEEN CHARGED. IT IS, THEREFORE, CLEAR LY ESTABLISHED THAT REVENUE DEPARTMENT HAS NOT TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT AS FAR AS TCS I S CONCERNED. THE LD. CIT(APPEALS) WAS, THEREFORE, JUSTIFIED IN FOLLOWING DECISION OF BANGLORE BENCH I N THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD. IN WHICH THE TRIBUNAL HAS CONSIDERED REASONABLE CAUSE FOR NOT LEVYING THE PENALTY WHEN SUFFICIENT COMPLIANCE WAS MADE BECAUSE OF THE TAX DEMAND HAD ALREADY BEEN PAID. SINCE TAXES HAVE ALREADY BEEN PAID BY THE BU YERS AND THERE WAS NO TAX DEMAND REMAINED. THEREFORE, L D. CIT(APPEALS) CORRECTLY HELD THAT THERE WAS REASONAB LE CAUSE FOR FAILURE TO COMPLY WITH PROVISIONS OF LAW. FURTHER, THE ASSESSEE SINCE BEGINNING HAS BEEN CLAIMING THAT ASSESSEE IS NOT COVERED BY THE DEFINI TION OF SCRAP IN TERMS OF SECTION 206C OF THE ACT. TH E EXPLANATION OF THE ASSESSEE WAS SUPPORTED BY ORDER OF 8 ITAT AHMEDABAD BENCH IN THE CASE OF NAVINE FLOURINE INTERNATIONAL LTD. V ACIT (SUPRA). EVEN THOUGH THE LD. CIT(APPEALS) DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE ON MERIT BUT THE FACTS DISCUSSED ABOVE CLE ARLY CONSTITUTE THAT THERE WAS A REASONABLE CAUSE FOR FA ILURE TO COMPLY WITH PROVISIONS OF LAW. SINCE, THERE IS NO DEMAND ARISES AGAINST THE ASSESSEE AND ALL TAXES HA VE BEEN PAID AND NO LOSS TO REVENUE HAVE BEEN CAUSED, THEREFORE, IT IS NOT A FIT CASE FOR LEVY OF PENALTY AGAINST THE ASSESSEE. HON'BLE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNOR INDIA P.LTD. VS CIT 253 ITR 745 HELD AS UNDER : LEVY OF PENALTY UNDER SECTION 271C OF THE INCOME-TA X ACT, 1961, FOR FAILURE TO DEDUCT TAX AT SOURCE, IS N OT AUTOMATIC. IN ORDER TO BRING IN APPLICATION OF SECTI ON 271C, IN THE BACKDROP OF THE OVERRIDING NON OBSTANT E CLAUSE IN SECTION 273B, ABSENCE OF REASONABLE CAUSE , EXISTENCE OF WHICH HAS TO BE ESTABLISHED, IS A SINE QUA NON. BEFORE LEVYING PENALTY, THE CONCERNED OFFICER IS REQUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAI LURE TO DEDUCT TAX AT SOURCE, THE SAME WAS WITHOUT REASONABLE CAUSE. THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT THERE EXISTS REASONABLE CAUSE WHICH WAS THE REASON FOR THE FAILURE. THERE- AFTER, THE OFFICER HAS TO CONSI DER WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE OR O THER PERSON AS REGARDS THE REASON FOR FAILURE, WAS ON ACCOU NT OF REASONABLE CAUSE. 6. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DISCUSSION AND FINDINGS RECORDED BY LD. 9 CIT(APPEALS), I DO NOT FIND ANY MERIT IN THE APPEAL S OF THE REVENUE. BOTH APPEALS OF THE REVENUE ARE, ACCORDINGLY, DISMISSED. 7. IN THE RESULT, BOTH APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 20 TH JUNE, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD