M/s.Eurotech Maritime Academy, Cochin V. The ADCIT(TDS), Cochin

ITA 353/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8584 (ITAT-COCHIN)
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 24-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 19-06-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Keywords: Charitable institution; Principle of natural justice; Bonafide belief; Question of law; Non-deduction of tax; Reasonable cause
• Section: 273B; 12A; 201(1)

Judgement Text

ITA NO.352-354/COCH/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE.K, JM ITA NOS.352-354/COCH/2015 (ASST YEARS : 2010-11, 2011-12 & 2012-13) EUROTECH MARITIME ACADEMY PVT. LTD., XXXVII/3492, VAKILS BUILDING, KALOOR, KOCHI-682 017 THE ADDITIONAL COMMISSIONER OF INCOME-TAX (TDS), ERNAKULAM. ( ASSESSEE APPELLANT) VS (REVENUE -RESPONDENT) PAN NO. AAATE 3447M ASSESSEE BY SHRI ANIL D. NAIR, ADV. REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 24/05/2016 DATE OF PRONOUNCEMENT 01/06/2016 ORDER PER B.P. JAIN, AM: THESE THREE APPEALS OF THE ASSESSEE ARISE FRO M THE DIFFERENT ORDERS OF THE LD. CIT(A)-III, KOCHI EACH DATED 27/02/2015 FOR THE ASS ESSMENT YEARS 2010-11 TO 2012- 13. 2. SINCE THE ISSUES IN ALL THE APPEALS ARE IDENTI CAL AND THEREFORE, ALL THE APPEALS ARE BEING TAKEN UP BY THIS CONSOLIDATED ORDER. ITA NO.352-354/COCH/2015 2 3. THE ASSESSEE HAS TAKEN IDENTICAL GROUNDS IN AL L THE APPEALS AND FOR THE SAKE OF CONVENIENCE, THE GROUNDS RAISED BY THE ASSESSEE IN I.T.A. NO.352/COCH/2015 ARE REPRODUCED HEREINBELOW:- 1. THE ORDER THE LEARNED CIT(A)-III IS AGAINST LAW, FACTS AND IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 2. THE PROVISIONS OF SECTION 194(1) SHALL NOT BE AP PLICABLE IF THE ASSESSEE IS NOT REQUIRED TO BE AUDITED U/S. 44AB OF IT ACT. THE REL EVANT PROVISIONS STATED BELOW: PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UND IVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAU SE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INCOME BY WAY OF RENT IS CREDITE D OR PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION. 3. THE ASSESSEE FOLLOWS CASH SYSTEM OF ACCOUNTING S INCE FROM INCEPTION. THEREFORE AS AND WHEN THE RENT IS CREDITED THE REQU IRED AMOUNT OF TDS DEDUCTED AND REMITTED TO THE GOVERNMENT. THE SAME IS EVIDENT FROM THE RECORDS MAINTAINED. 4. SECTION 194(I) PROVIDES FOR DEDUCTION OF INCOME AT SOURCE BY THE TENANT PAYER WHILE PAYING RENT TO THE LANDLORD. SECTION 1 91(I) DOES NOT GOVERN THE PROVISIONS OF ACCRUAL INCOME. THE EXPLANATIONS TO S ECTION 194(!) BEGIN WITH THE EXPRESSION FOR THE PURPOSE OF THIS SECTION .. RENT MEANS ANY PAYMENT BY WHATEVER NAME CALLED . HENCE THE PROVISIONS OF TAXABILITY OF INCOME U/ S. 4 AND 5 WILL NOT BE APPLICABLE IN THE CURRENT CONTE XT. THEREFORE, THE APPELLATE AUTHORITY ERRED IN CONFIRMING THE ORDER O F ADDL. CIT(TDS). 5. THE APPELLATE AUTHORITY FAILED TO CONSIDER THE G ENUINE SITUATION WHICH PROMPTED THE APPELLANT TO REMIT THE TAX DEDUCTED AT SOURCE ON VARIOUS ACCOUNTS. 6. THE APPELLATE AUTHORITY DENIED THE OPPORTUNITY O F BEING HEARD AT THE TIME OF FINALIZING THE ORDER. HENCE VIOLATION OF PRINCIP LES OF NATURAL JUSTICE. ITA NO.352-354/COCH/2015 3 FOR THESE AND OTHER GROUNDS AND DOCUMENTS TO BE SUBMITTED AT THE TIME OF HEARING AND IT IS HUMBLY PRAYED THAT THE TRIBUNA L BE PLEASED TO ALLOW THE APPEAL. 4. WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 352/COCH/2015 FOR THE ASSESSMENT YEAR 2010-11 AND OUR ORDER HEREINBEL OW FOR THE ASSESSMENT YEAR 2010-11 IN I.T.A. NO. 352/COCH/2015 SHALL BE IDENTI CALLY APPLICABLE TO THE APPEALS IN I.T.A. NOS. 353&354/COCH/2015 FOR THE AS SESSMENT YEARS 2011-12 AND 2012-13 RESPECTIVELY SINCE THE ISSUES IN THE SAID A PPEALS ARE IDENTICAL TO THE ISSUES IN ASSESSEES APPEAL IN I.T.A. NO. 352/COCH/ 2015 FOR THE ASSESSMENT YEAR 2010-11. I.T.A. NO. 352/COCH/2015 : AY 2010-11 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A TRUST REGISTERED U/S. 12A OF THE INCOME-TAX ACT AND HAD DEPOSITED TAX DEDUCTE D AT SOURCE DURING THE FINANCIAL YEAR 2009-10 BELATEDLY TO THE CENTRAL GOV ERNMENT ACCOUNT AND HENCE NOTICE U/S. 271C OF THE INCOME-TAX ACT 1961 W AS ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX (TDS), KOCHI AND CONSEQU ENTLY LEVIED A PENALTY OF RS.54,96,368/-. 6. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AS SESSING OFFICER. ITA NO.352-354/COCH/2015 4 7. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT T HE ASSESSEE IS A TRUST WHICH HAS REGISTRATION U/S. 12A OF THE INCOME TAX ACT AND IS ENGAGED IN PROVIDING EDUCATION. FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION, THE ASSESSEE HAD PAID THE RENT TO THEIR LANDLORDS. HOWEVER THE ASSESSEE W AS UNDER A BONAFIDE BELIEF THAT SINCE IT IS A REGISTERED TRUST IT IS NOT LIABL E TO DEDUCT TAX WHEN PAYMENTS ARE EFFECTED. THE CASE OF THE ASSESSEE HAS BEEN PAYING THE RENTS TO THE LANDLORDS. HOWEVER, DURING THE COURSE OF AUDITS OF ACCOUNTS FO R THE YEAR 2009-10 WHICH COMMENCED IN 2011, THE AUDITORS POINTED OUT THAT TH ERE HAS TO BE DEDUCTION OF TAX AT SOURCE FROM SALARY, RENT AND CONTRACTS. THER EFORE, AS SOON AS THE AUDITS WERE COMPLETED IN MARCH 2012, CERTAIN JOURNAL ENTRI ES WERE PASSED TO INCORPORATE THE TAX LIABILITY, BUT DEDUCTED AND KEP T UNPAID. THE LEDGER FOR THE YEAR ENDING 31.03.2012 IS PLACED ON RECORD MARKED A S ANNEXURE A TO DEMONSTRATE THAT THE TOTAL TDS AMOUNT WAS PAID OVER ON 12.08.2011 AND THIS IS THE AMOUNT WHICH IS PAYABLE FOR THE ASSESSMENT YEAR 2010-11, FOR THE SUBSEQUENT YEARS, IN VIEW OF THE OBJECTION RAISED B Y THE AUDITORS THE PAYMENTS HAVE BEEN MADE IN THE MONTHS OF AUGUST, JANUARY, FE BRUARY AND MARCH OF 2013 AND TRUE COPY OF THE LEDGER ACCOUNT EVIDENCING SUCH PAYMENT IS PLACED ON RECORD MARKED AS ANNEXURE B. IT IS SUBMITTED THAT IN VIEW THEREOF, THE LEVY OF PENALTY U/S. 271C IS NOT APPLICABLE. FURTHERMORE, THE ASSESSEE ALSO HAS A SPECIFIC CASE THAT THE PROVISION OF SECTION 194I DO ES NOT APPLY TO THE ASSESSEE AS IT IS NOT INVOLVED IN ANY BUSINESS OF PROFESSION AS IS EVIDENCED BY THE 12A REGISTRATION IN FAVOUR OF THE ASSESSEE. WITHOUT PR EJUDICE TO WHAT IS STATED ABOVE, ITA NO.352-354/COCH/2015 5 IT IS SUBMITTED THAT THE RATIO OF JUDGMENT IN US TE CHNOLOGIES CASE AND CLASSIC CONCEPT HOME PVT. LTD. CASE DOES NOT APPLY MORE SO, WHEN THERE IS NO DEDUCTION OF TAX, RETENTION OF THE SAME AND THEREAF TER BELATEDLY PAYING THE AMOUNT. THEREFORE, IT IS SUBMITTED THAT THE PENAL TY U/S. 271C SHOULD NECESSARILY BE DELETED AND APPEALS BE ALLOWED. 8. IT IS FURTHER SUBMITTED THAT THE SUPREME COURT HAS IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI VS. BANK OF NOVA SCOTIA, HAS HELD THAT UNLESS IT IS ESTABLISHED THAT THERE WAS CONTUMACIOUS CONDU CT ON THE PART OF THE ASSESSEE LEVY OF PENALTY U/S. 271C WAS UNSUSTAINABL E. IT IS THEREFORE PRAYED THAT, APPLYING THE RATIO OF THE HONBLE SUPREME COURT JU DGMENT AND IN FURTHERANCE OF THE FACT THAT THERE IS NO DEDUCTION AND RETENTIO N BY THE ASSESSEE, THE LEVY OF PENALTY U/S. 271C IS LIABLE TO BE DELETED. 9. THE LD. DR RELIED UPON THE ORDERS OF BOTH TH E AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. AT THE OUTSET, THE ADDITIONAL COMMISSIONER OF INCOME-T AX HAS IMPOSED THE PENALTY BY STATING AS UNDER: IT WAS FOUND THAT THE TAX DEDUCTED AT SOURCE FOR T HE RELEVANT FY 2009-10 WAS DEPOSITED BELATED IN THE CENTRAL GOVERNMENT ACCOUNT THERE WAS A DELAY IN DEPOSITING TAX DEDUCTED IN FY 2009-10. ITA NO.352-354/COCH/2015 6 WHEREAS THESE ARE NOT FACTS OF THE CASE WHICH WAS S UBMITTED BY THE ASSESSEE IN THE FORM OF EXPLANATION WHICH IS REPRODUCED IN PARA 6, PG. 3 OF THE ORDER OF THE LD. CIT(A) AS UNDER:- IT IS SUBMITTED THAT THE FINDINGS OF THE ADDITIONA L COMMISSIONER IS AGAINST FACTS,. THE APPELLANT HAD PASSED AN ENTRY FOR DEDUC TION OF TAX FROM SALARY AND RENT THOUGH THESE AMOUNTS WERE NOT ACTUALLY PAID. THESE ENTRIES WERE PASSED IN MARCH 2012 AT THE TIME OF COMPLETION OF AUDIT ON LY. THUS THERE WAS NO DELAY BETWEEN THE DATE OF DEDUCTION AND DATE OF PAYMENT O F TAX. THUS IT MAY KINDLY BE SEEN THAT THE VERY BASIS ON WHICH THE PENALTY IS IMPOSED IS BASED ON WRONG FACTS AND HENCE IS NOT MAINTAINABLE. IN VIEW OF TH E SAME THE PENALTY IS LIABLE TO BE QUASHED. A REPORT FROM THE ADDITIONAL COMMISSIONER OF INCOME -TAX (TDS), KOCHI WAS CALLED FOR AND IN THE SAID REPORT DATED 07/10/2014, THE ADDITIONAL COMMISSIONER OF INCOME-TAX (TDS) SUBMITTED THAT THE ASSESSEE DED UCTOR HAD DEPOSITED BELATEDLY TO THE CENTRAL GOVERNMENT ACCOUNT IN ALL THE THREE FINANCIAL YEARS AND AS AN EDUCATIONAL INSTITUTION, THE ASSESSEE IS LIABLE TO DEDUCT TAX FROM SALARIES AND RENT AND THEREFORE, THE ASSESSEE HAS V IOLATED THE PROVISIONS OF TDS WHICH ATTRACTS PENALTY U/S. 271C OF THE ACT. 11. IT HAS ALSO BEEN SUBMITTED BEFORE THE LD. CIT (A) AND BEFORE US THAT THE ASSESSEE IS A PUBIC CHARITABLE TRUST REGISTERED U/S . 12A OF THE INCOME-TAX ACT, 1961 AND THE STATUS OF THE ASSESSEE HAS TO BE HELD ONLY AS INDIVIDUAL AND THEREFORE THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX U/S. 194I OF THE ACT. THE ASSESSEE RELIED UPON THE DECISIONS OF VARIOUS COURT OF LAW AS UNDER: ITA NO.352-354/COCH/2015 7 (A) ADIT(E) VS. FRENY SAVAKSHAH ANJURBAUGH & SIYAVA KSH RUSTOMJI ANJIRBAUGH CHARITABLE TRUST 60 TTJ (MUM) 91 (B) AUROBOUTIQUE TRUST VS. ITO 36 TTJ (MAD) 318. (C) TRUSTEE IS AN INDIVIDUAL CIT VS. RAMESH SANJAY TRUST 231 ITR 452 (MAD) (D) BOMBAY HIGH COURT IN DIRECTOR OF INCOME-TAX(EXE MPTIONS) VS. SHARDABEN BHAGUBHAI MAFATLAL PUBLIC CHARITABLE TRUST AND OTHE RS 247 ITR 1. 12. THE ASSESSEE HAS ALSO SUBMITTED THE REASONABL E CAUSE FOR NOT DEDUCTING THE TAX AND THEREAFTER PAYING THE TAX AS AND WHEN I T CAME TO THE NOTICE OF THE ASSESSEE. THE SAID EXPLANATION DATED 19/02/2015 AS REPRODUCED IN PARA 9 OF THE LD. CIT(A) IS REPRODUCED HEREINBELOW:- THE DELAY IN DEDUCTION AND PAYMENT OF TDS ACCRUED DUE TO CIRCUMSTANCES BEYOND THE CONTROL OF THE TRUSTEE AS EXPLAINED BELO W:- THE TRUSTEES BEING DEEPLY INVOLVED IN THE ACADEMIC MATTERS AFFECTING THE CAREER OF MANY ASPIRING YOUNGSTERS, HAD DELEGATED T HE ADMINISTRATIVE RESPONSIBILITIES TO THEIR CLERK MRS. DELA P.J. WHO FAILED IN HER DUTIES. THIS FAILURE WAS BROUGHT TO THE NOTICE OF THE TRUSTEES ONLY VERY LATE DURING THE COURSE OF AUDIT. IMMEDIATELY ON BEING MADE AWARE OF THE SITUA TION THE TRUSTEES MADE ARRANGEMENTS TO REMIT THE TDS, REGARDLESS OF THE FA CT THAT NO PHYSICAL DEDUCTION HAS BEEN MADE. THE TRUSTEES HAD VOLUNTARI LY AND BEFORE DETECTION BY THE DEPARTMENT PAID UP THE TDS AND COMPLIED WITH THE PROVISIONS OF THE ACT. THEREFORE, THERE WAS A REASONABLE CAUSE ENVISAGED U NDER THE PROVISIONS OF SEC. 273B REGARDING NON IMPOSITION OF PENALTY. ITA NO.352-354/COCH/2015 8 13. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE PAID THE TAXES VOLUNTARILY WITHOUT RECEIPT OF NOTICE FROM THE INCOME TAX DEPARTMENT OR WITHOUT LEVY OF ANY PENALTY. THE DELAY HAS OCCURRED DUE TO THE CIRCUMS TANCES BEYOND THE CONTROL OF THE ASSESSEE. THE REASON FOR NOT DEDUCTING TAX AT SOURCE HAS BEEN EXPLAINED DURING THE COURSE OF THE AUDIT OF ACCOUNTS FOR THE FINANCIAL YEAR 2009-10. THE AUDITORS STARTED POINTING OUT THAT THERE HAS TO BE DEDUCTION OF TAX AT SOURCE FROM SALARY, RENT AND CONTRACTS. SINCE IT WAS COMP LETED IN MARCH, 2012, CERTAIN JOURNAL ENTRIES WERE PASSED TO INCORPORATE THE TAX LIABILITY, BUT HOWEVER, THERE WAS NO PHYSICAL DEDUCTION OF TAX AT SOURCE AND NO T AX WAS DEDUCTED AND KEPT UNPAID., I.E., THERE WAS NO TAX DEDUCTION AT SOURCE AT THE TIME OF PAYMENT OF TAX, WHICH IS EVIDENT FROM THE LEDGER FOR THE YEAR ENDING 31.03.2012 WHICH IS PLACED ON RECORD. THE TOTAL TDS AMOUNT WAS PAID ON 12.08.2011 AND THIS IS THE AMOUNT WHICH IS PAYABLE FOR THE ASSESSMENT YEAR 201 0-11 AND FOR THE SUBSEQUENT YEARS, IN VIEW OF THE OBJECTION RAISED B Y THE AUDITORS, THE PAYMENTS HAVE BEEN MADE IN THE MONTHS OF AUGUST, JANUARY, FE BRUARY AND MARCH, 2013 AND THE COPY OF THE LEDGER ACCOUNT EVIDENCING SUCH PAYMENT IS PLACED ON RECORD. 14. IT WAS ALSO ARGUED THAT THE PROVISIONS OF SEC TION 194I DOES NOT APPLY TO THE ASSESSEE AS IT IS NOT INVOLVED IN ANY BUSINESS OR P ROFESSION AS IS EVIDENCED BY THE 12A REGISTRATION IN FAVOUR OF THE ASSESSEE. ITA NO.352-354/COCH/2015 9 15. THE ASSESSING OFFICER HAS RELIED UPON THE DEC ISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF M/S. US TECHNOLOGIES INTE RNATIONAL PRIVATE LTD. VS. CIT (2010) 195 TAXMAN 323 PB PG. NOS. 35-37WHEREIN IT W AS HELD AS UNDER: WE ARE UNABLE TO ACCEPT THIS CONTENTION BECAUSE TH E FIRST PART OF CLAUSE(B) OF SECTION 271C(1), I.E., FAILURE TO PAY WHOLE OR A NY PART OF TAX AS REQUIRED TAKES IN THE TAX DEDUCTED UNDER CLAUSE (A) UNDER AN Y OF THE PROVISIONS OF CHAPTER XVII-B. SO MUCH SO IN OUR VIEW, FAILURE TO DEDUCT OR FAILURE TO REMIT RECOVERED TAX, BOTH WILL ATTRACT PENALTY U/S. 271C OF THE ACT. SO MUCH SO THE CONTENTION OF THE APPELLANT FAILS AND WE UPHOLD THE FINDING OF THE TRIBUNAL, DISMISSING THE CHALLENGE AGAINST LEVY OF PENALTY. HOWEVER IN PARA 4 OF THE ABOVE JUDGMENT, IT HAS BEE N UPHELD BY THE HONBLE HIGH COURT OF KERALA AS UNDER: WE FEEL RECOVERY AND REMITTANCE OF TAX, THOUGH WIT H DELAY BUT WITH INTEREST BEFORE DETECTION IS CERTAINLY A MITIGATING CIRCUMST ANCE FOR WAIVER OR REDUCTION OF PENALTY. FURTHER, IF FULL AMOUNT OF T AX WITH INTEREST WAS PAID BEFORE LEVY OF PENALTY, WE FEEL QUANTUM REDUCTION I S CALLED FOR BY THE ASSESSING OFFICER. THEREFORE, WE DIRECT THE ASSESS ING OFFICER TO RECONSIDER THE QUANTUM OF PENALTY BY GIVING ONE MORE OPPORTUNITY T O THE ASSESSEE TO FURNISH FACTS IN THE LIGHT OF OUR OBSERVATIONS ABOVE. THE APPEAL IS ACCORDINGLY, DISPOSED OF UPHOLDING THE ORDER OF THE TRIBUNAL ON THE LEVY OF PENALTY, BUT WITH DIRECTION TO THE ASSESSING OFFICER TO GRANT FU RTHER REDUCTION IN PENALTY, IF ANY, NEW FACT OR CIRCUMSTANCE IS BROUGHT TO THE NOT ICE OF THE ASSESSING OFFICER BASED ON OBSERVATIONS ABOVE OR OTHERWISE IN TERMS OF SECTION 273B OF THE ACT. 16. IT WAS ALLEGED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE AND HAS NOT REMITTED THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT WHICH IN FACT IS NOT THE CASE OF THE ASS ESSEE. IN FACT THE ASSESSEE HAS SUBMITTED THE EXPLANATION THAT AS AND WHEN IT W AS POINTED OUT BY THE AUDITORS, THE TAX WAS DEDUCTED AND PAID AND THERE I S NO DIFFERENCE BETWEEN ITA NO.352-354/COCH/2015 10 TAX DEDUCTION AND TAX PAYMENT DATES. IT IS NOT A C ASE THAT THE ASSESSEE HAS UTILIZED MONEY FOR THE PURPOSE FOR WHICH THE INSTIT UTION WAS FORMED. 17. IT WAS ALSO SUBMITTED THAT THE DEPARTMENT HA D NOT PASSED AN ORDER U/S. 201(1) R.W.S. 221 OF THE ACT HOLDING THE ASSESSEE I N DEFAULT. HAD THERE BEEN NO GOOD AND SUFFICIENT REASONS FOR DELAYED PAYMENT OF TDS, THE REVENUE WOULD HAVE TREATED THE ASSESSEE COMPANY AS ASSESSEE IN D EFAULT AND LEVIED PENALTY U/S. 221OF THE ACT. 18. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. MITSUI & CO. LTD., 140 TAXMAN 430 (PB PG. NO. 39) REFERRED TO PARA 5 WHERE THE TRIBUNAL HELD AS UNDER: IN THE PRESENT CASE ADMITTEDLY, THE DEPARTMENT HAS NEITHER TREATED THE ASSESSEE COMPANY IN DEFAULT U/S. 201(1) NOR IT LEVI ED ANY PENALTY FOR NON- DEDUCTION AND PAYMENT OF TAX UNDER PROVISO TO SECTI ON 201(1) READ WITH SECTION 221 OF THE INCOME TAX ACT. THE ASSESSEE CO MPANY ALSO PAID INTEREST SUO MOTO AS REQUIRED U/S. 201(1A) FOR THE DELAYED P AYMENT. IT IS, THEREFORE, INFERRED THAT THERE EXISTED GOOD AND SUFFICIENT REA SONS FOR NON-DEDUCTION OF TAX AT SOURCE FROM THE SAID AMOUNT IN JAPAN. HAD T HERE BEEN NO GOOD AND SUFFICIENT REASONS FOR NON-DEDUCTION OF SUCH TAX AN D PAYMENT THEREOF, THE REVENUE WOULD HAVE TREATED THE ASSESSEE COMPANY IN DEFAULT AND LEVIED PENALTY U/S. 221 OF THE INCOME TAX ACT. MOREOVER, THE PAYMENT OF THE AMOUNT OF SHORT TAX DEDUCTION AND INTEREST THEREON WAS A M ITIGATING FACTOR FOR NOT TAKING ACTION U/S. 221. WHEN NO ACTION HAS BEEN TAK EN BY THE REVENUE FOR LEVY OF PENALTY U/S. 221 AND DELAY IN PAYMENT OF TA X HAS BEEN FULLY COMPENSATED BY PAYMENT OF INTEREST NO FURTHER ACTIO N IS JUSTIFIED U/S. 271C OF THE INCOME-TAX ACT, LOOKING TO THE RATIO OF THE AFO RE-CITED DECISION OF THE HONBLE JURISDICTIONAL DELHI HIGH COURT. ITA NO.352-354/COCH/2015 11 19. . THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS . MITSUI & CO. LTD., 140 TAXMAN 430 VIDE PARA 10 OF ITS ORDER AT PB PG. 40 FURTHER HAS HELD AS UNDER: THE ARGUMENTS WITH REGARD TO RETENTION HAS BEEN CO NSIDERED BY THE TRIBUNAL IN DETAIL AND SUPPORTED BY THE DECISION OF THE GUJA RAT HIGH COURT IN CASE OF CIT VS. S.G. PGNATALE (1980) 124 ITR 391. THE TRI BUNAL HAS , IN GREAT DETAIL, EXAMINED THE FACTS AND ALL THE MATERIAL ON RECORD A ND HAS ARRIVED AT A CONCLUSION. IT IS NOT POSSIBLE FOR US TO SAY THAT THE FINDING RECORDED BY THE TRIBUNAL IS PERVERSE. THEREFORE, THE APPEAL IS DIS POSED OF AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 20. THE ITAT, BANGALORE BENCH B IN THE CASE OF INDO NISSIN FOODS LTD. VS. JOINT COMMISSIONER OF INCOME-TAX, 3 SOT 495 WHERE THE CON TENTION RAISED WAS THAT NO ORDER HAS BEEN PASSED AGAINST THE ASSESSEE-COMPANY OR NISSIN ON THE LIABILITY UNDER THE ACT IN AS MUCH AS THE ASSESSEE COMPANY HA D NEVER BEEN HELD TO BE AN ASSESSEE IN DEFAULT U/S. 201 OR SECTION 221 OF THE ACT. SECTION 201(1) PRESCRIBES LIABILITY FOR FAILURE TO DEDUCT TAX AND DECLARES THE ASSESSEE IN DEFAULT IN CASES WHERE GOOD AND SUFFICIENT REASON IS FOUND TO EXIST, THE ACTION UNDER THESE SECTIONS IS MITIGATED. ULTIMATELY, THE ITAT, BANGALORE BENCH IN THE CASE OF INDO NISSIN FOODS LTD. VS. JOINT COMMISSIONER OF IN COME-TAX, 3 SOT 495 VIDE PARA 24 AT PB PG. NO.48 HELD AS UNDER: 24. ON THE ISSUE OF NOT PASSING ORDER U/S. 201(1) BEFORE INITIATION OF PROCEEDINGS U/S. 271C, WE ARE INCLINED TO AGREE WIT H THE ASSESSEES CONTENTION AND RELY ON THE DECISION OF THE TRIBUNAL DELHI C BENCH IN MARUBERI CORPN. (LIAISON OFFICE) VS. JOINT CIT (2002) 83 ITD 577 (DEL.) AND THE DECISION OF ITA NO.352-354/COCH/2015 12 TRIBUNAL BANGALORE BENCH IN I.T.A. NOS. 137 TO 140/ BANG/2002. ON THIS GROUND ALSO, THE ORDER OF PENALTY STANDS VACATED. SIIMILAR VIEWS WERE TAKEN BY THE ITAT, DELHI BENCH IN THE CASE OF SAHARA INDIA FINANCIAL CORPORATION LTD. VS. ADDL. COMMISSIONER O F INCOME-TAX, (2009) 30 SOT 149 (DELHI). 21. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND OUR F INDINGS HEREINABOVE, WE FIND THAT THERE IS A REASONABLE CAU SE ESTABLISHED BY THE ASSESSEE FOR REMITTING THE TDS BELATEDLY TO THE CRE DIT OF THE CENTRAL GOVERNMENT ACCOUNT AND THEREFORE, WE DIRECT THE ASSESSING OFFI CER TO CANCEL THE PENALTY LEVIED U/S. 271C OF THE ACT. OUR VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. BANK OF NOVA SCOTIA (2016) 66 TAXMANN.COM 175 AT PB PG. NOS. 52&53 REPRODUCED HER EINBELOW: KURIAN JOSEPH, J. THE SHORT ISSUE PERTAINS TO T HE ASSESSMENT OF PENALTY U/S. 271-C OF THE INCOME TAX ACT, 1961. AGAINST THE ORD ER OF ASSESSING OFFICER, THE RESPONDENT TOOK UP THE MATTER IN APPEAL AND THE COM MISSIONER OF INCOME TAX (APPEALS) DELETED THE LEVY OF PENALTY. 2. THE MATTER WAS PURSUED BY THE REVENUE BEFORE THE INCOME TAX APPELLATE TRIBUNAL. THE INCOME TAX APPELLATE TRIBUNAL VIDE OR DER DATED 31.03.2006 ENTERED THE FOLLOWING FINDINGS: 1.1. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS. 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 AM OUNTS HAVE ALREADY BEEN PAID SO AS TO END DISPUTE WITH REVENUE. IN THE PRE SENT 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 HONBLE DELHI HIGH COURT HAVE DELETED LEVY OF PENALTY U/S. 271C IN THE CASE OF CIT VS. MITSUI & COMPANY LTD. 2 72 ITR 545 . RESPECTFULLY, ITA NO.352-354/COCH/2015 13 FOLLOWING THE AFORESAID JUDGMENTS OF HONBLE DELHI HIGH COURT AND THE DECISION OF THE ITAT, DELHI IN THE CASE OF TELEVISI ON EIGHTEEN INDIA LTD.,WE ALLOW THE ASSESSEES APPEAL AND CANCEL THE PENALTY AS LEV IED 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 APELLATE TRIBUNAL. THE HIGH COURT REJECTED THE APPEAL ONLY ON THE GROUND THAT NO SUBS TANTIAL QUESTION OF LAW ARISES IN THE MATTER. 4. ON FACTS, WE ARE CONVINCED THAT THERE IS NO SUBS TANTIAL QUESTION OF LAW, THE FACTS AND LAW HAVING PROPERLY AND CORRECTLY BEEN AS SESSED AND APPROACHED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS BY THE INCOME TAX APPELLATE TRIBUNAL. THUS, WE SEE NO MERITS IN THE APPEAL AND IT IS ACCORDINGLY DISMISSED. 22. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, AL L THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED AND WE DIRECT THE ASSESSING OF FICER TO CANCEL THE PENALTY LEVIED U/S. 271C OF THE ACT. THUS THE APPEAL OF T HE ASSESSEE IN I.T.A. NO. 352/COCH/2015 IS ALLOWED. 23. SINCE THE ISSUES IN THE MAIN APPEAL ARE IDENTIC AL TO THE ISSUES IN THE ASSESSEES APPEALS IN I.T.A NOS. 353 & 354/COCH/201 5 FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13, OUR ORDER HEREINABOVE SHALL BE IDENTICALLY APPLICABLE TO THE APPEALS OF THE ASSESSEE IN I.T.A. NO. 353 & 354 /COCH/2015 FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13. THUS ALL THE GROUNDS IN ASSESSEES APPEAL IN I.T.A. NOS. 353&354/COCH/2015 ARE ALLOWED. ITA NO.352-354/COCH/2015 14 24. IN THE RESULT, THE APPEALS OF THE ASSESSEE I N I.T.A. NOS. 352-354/COCH/2015 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01-06 -2016 SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : COCHIN DATED: 1 ST JUNE,2016 GJ COPY TO: 1. 2. THE ASSISTANT/DEPUTY COMMISSIONER OF INCOME-TAX , CIRCLE-1(1), RANGE-1/INCOME TAX OFFICER, WARD-, 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), 4. THE COMMISSIONER OF INCOME-TAX, 5. THE DR/ITAT, COCHIN BENCH. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN ITA NO.352-354/COCH/2015 15 1. DATE OF DICTATION : 30/05/2016 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER: 31/05/201 6 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . PS/PS: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER : 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. PS/PS : 6. DATE ON WHICH THE FILE GOES TO BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO HEAD CLERK: 8. DATE ON WHICH THE FILE GOES TO ASSISTANT REGISTR AR 9. DATE OF DISPATCH OF THE ORDER: ITA NO.352-354/COCH/2015 16 APPELLANT IS A TRUST WHICH HAS REGISTRATION U/S. 1 2A OF THE INCOME TAX ACT AND IS ENGAGED IN PROVIDING EDUCATION. FOR THE ASSESSMENT YEAR UNDER ISSUE THE APPELLANT HAD PAID THE RENT TO THEIR LANDLORDS. HOW EVER THE APPELLANT WAS UNDER A BONAFIDE BELIEF THAT SINCE HE IS A REGISTERED TRU ST HE IS NOT LIABLE TO DEDUCT TAX WHEN PAYMENTS ARE EFFECTED. THE CASE OF THE APPELLA NT HAS BEEN PAYING THE RENTS TO THE LANDLORDS. HOWEVER, DURING THE COURSE OF AUDITS OF ACCOUNTS FOR THE YEAR 2009-10 WHICH COMMENCE IN 2011, THE AUDITORS S TARTED POINTING OUT THAT THERE HAS TO BE DEDUCTION OF TAX AT SOURCE FROM SAL ARY, RENT AND CONTRACTS. THEREFORE, AS SOON AS THE AUDITS WERE COMPLETED IN MARCH 2012, CERTAIN JOURNAL ENTRIES WERE PASSED TO INCORPORATE THE TAX LIABILIT Y, BUT DEDUCTED AND KEPT UNPAID. THE LEDGER FOR THE YEAR ENDING 31.03.2012 IS PRODUCED HEREWITH AND MARKED AS ANNEXURE A TO DEMONSTRATE THAT THE TOTAL TDS AMOUNT WAS PAID OVER ON 12.08.2011 AND THIS IS THE AMOUNT WHICH IS PAYAB LE FOR THE ASSESSMENT YEAR 2010-11, FOR THE SUBSEQUENT YEARS, IN VIEW OF THE O BJECTION RAISED BY THE AUDITORS THE PAYMENTS HAVE BEEN MADE IN THE MONTHS OF AUGUST , JANUARY, FEBRUARY AND MARCH OF 2013 AND TRUE COPY OF THE LEDGER ACCOUNT E VIDENCING SUCH PAYMENT IS PRODUCED HEREWITH AND MARKED AS ANNEXURE B. IT IS SUBMITTED THAT IN VIEW THEREOF, THE LEVY OF P ENALTY U/S. 271C IS NOT APPLICABLE. ITA NO.352-354/COCH/2015 17 FURTHERMORE, THE APPELLANTS ALSO HAVE SPECIFIC C ASE THAT THE PROVISION OF SECTION 194I DOES NOT APPLY TO THE APPELLANT AS IT IS NOT INVOLVED IN ANY BUSINESS OF PROFESSION AS IS EVIDENCED BY THE 12A REGISTRATI ON IN FAVOUR OF THE APPELLANT. WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, IT IS RE SPECTFULLY SUBMITTED THAT THE RATIO OF JUDGMENT IN US TECHNOLOGIES CASE AND CLASS IC CONCEPT HOME PVT. LTD. CASE DOES NOT APPLY, MORE SO WHEN, THERE IS NO DEDU CTION OF TAX, RETENTION OF THE SAME AND THEREAFTER BELATEDLY PAYING THE AMOUNT . THEREFORE, IT IS RESPECTFULLY SUBMITTED THAT THE PENALTY U/S. 271C S HOULD NECESSARILY BE DELETED AND APPEALS BE ALLOWED. THE SUPREME COURT HAS IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI VS. BANK OF NOVA SCOTIA, HAS HELD THAT UNLESS IT IS EST ABLISHED THAT THERE WAS CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE LE VY OF PENALTY U/S. 271C WAS UNSUSTAINABLE. IT IS THEREFORE, RESPECTFULLY PRAYED THAT, APPLYING THE RATIO OF THE SC JUDGMENT AND IN FURTHERANCE OF THE FACT THAT THERE IS NO DED UCTION AND RETENTION BY THE APPELLANT THE LEVY OF PENALTY U/S. 271C IS LIABLE T O BE DELETED.TTER TO M, THE AASSESSEE R NM . N AS THE