ACIT, New Delhi V. M/s. Mahle Engine Components India Pvt. Ltd., New Delhi

ITA 3555/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97480 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 1
• Next Hearing Date: 29-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VED JAIN
• Assessee Lawyers: S L ANURAGI
• Keywords: Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.3555/DEL/2014 ASSESSMENT YEAR : 2008-09 ACIT, CIRCLE-50(1), NEW DELHI. VS. MAHLE ENGINE COMPONENTS INDIA PVT. LTD., 30, 2 ND FLOOR, NDSE-1, AMRIT NAGAR, NEW DELHI. PAN: AAACM0096K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN, CA RESPONDENT BY: SHRI S.L. ANURAGI, SR.DR DATE OF HEARING : 29.09.2015 DATE OF PRONOUNCEMENT: 29.09.2015 ORDER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 19.3.2014 DELETING THE PENALTY OF RS.2,20 ,031/- IMPOSED BY THE ADDITIONAL CIT U/S 271C OF THE INCOME-TAX ACT, 196 1 (HEREINAFTER ALSO CALLED `THE ACT) IN RELATION TO THE ASSESSMENT YEA R 2008-09. ITA NO.3555/DEL/2014 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THA T DURING THE COURSE OF TDS SURVEY CONDUCTED BY THE REVENUE OFFICERS ON 1.11.20 10 IN THE OFFICE OF MADHYA PRADESH AUDYOGIK KENDRA VIKAS NIGAM (INDORE) LTD. (MPAKVN), IT TRANSPIRED THAT THE ASSESSEE MADE PAYM ENT OF RENT/LEASE CHARGES TO MPAKVN WITHOUT DEDUCTING TAX AT SOURCE. THE ASSESSEE WAS TREATED IN DEFAULT BY MEANS OF ORDER U/S 201(1)/(1A ) OF THE ACT DETERMINING ITS LIABILITY TO THE TUNE OF RS.3,16,263/-. THEREA FTER, PENALTY U/S 271C WAS IMPOSED, WHICH WAS DELETED BY THE LD. CIT(A). THE R EVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER DELETING SUCH PENALTY. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE WAS TRE ATED IN DEFAULT IN TERMS OF SECTION 201(1)/(1A) IN RESPECT OF LEASE RENTAL PAYM ENTS MADE TO MPAKVN WITHOUT DEDUCTION OF TAX AT SOURCE. DURING THE COU RSE OF SUCH PROCEEDINGS, IT WAS ARGUED BY THE ASSESSEE THAT MPAKVN IS A SPEC IALIZED STATE CORPORATION PROMOTED FOR THE DEVELOPMENT OF INDUSTR IAL AREAS AND INFRASTRUCTURE FACILITIES IN THE WESTERN PART OF TH E STATE AND, AS SUCH, THE ASSESSEE WAS OF THE OPINION THAT NO TAX AT SOURCE W AS REQUIRED TO BE DEDUCTED FROM PAYMENT OF LEASE RENT. IT WAS FURTHE R CONTENDED THAT NOT ONLY ITA NO.3555/DEL/2014 3 THE ASSESSEE, BUT, WHOLE OF THE INDUSTRY WAS UNDER THIS IMPRESSION THAT THE LEASE RENT IS BEING PAID TO GOVERNMENT AND, HENCE, NO LIABILITY TO DEDUCT TAX AT SOURCE WAS THERE. THIS IS APPARENT FROM PAGE 2 OF THE ORDER PASSED BY THE AO U/S 201(1)/(1A). IT IS FURTHER EVIDENT FROM NEX T PARA OF THE SAME ORDER THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE FROM PAYMENT OF SUCH LEASE RENTALS IN THE PAST ALSO. THE AO HAS FOUND THE ASS ESSEES CONTENTION IN THIS REGARD AS TRUE, WHICH HAS BEEN RECORDED ON PARA 3 O F PAGE 2 OF HIS ORDER. HE DID NOT TREAT THE ASSESSEE IN DEFAULT IN RESPECT OF FINANCIAL YEARS 2004-05 TO 2006-07. IT WAS ONLY FOR THE FINANCIAL YEAR 200 7-08 AND 2008-09 THAT THE ASSESSEE WAS TREATED IN DEFAULT U/S 201(1)/(1A). TH ESE FACTS AMPLY INDICATE THAT THE ASSESSEE AB INITIO ENTERTAINED A BELIEF THAT THE PAYMENT OF LEASE RENTALS TO MPAKVN WAS NOT SUBJECT TO DEDUCTION OF T AX AT SOURCE, BEING IN THE NATURE OF A PAYMENT MADE TO GOVERNMENT. 4. AT THIS STAGE, IT IS PERTINENT TO MENTION TH AT SECTION 273B PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISION S OF CERTAIN SECTIONS SET OUT IN THIS PROVISION, NO PENALTY SHALL BE IMPOSABL E WHERE FAILURE REFERRED TO IN THESE SECTIONS IS PROVED TO BE FOR A REASONABLE CAUSE. SECTION 271C, WHICH HAS BEEN INVOKED IN THE INSTANT CASE FOR IMPO SITION OF PENALTY, IS ONE ITA NO.3555/DEL/2014 4 OF THE SECTIONS COVERED IN SECTION 273B. IN THIS VI EW OF THE MATTER, IT BECOMES PATENT THAT PENALTY FOR FAILURE TO DEDUCT T AX AT SOURCE U/S 271C CANNOT BE IMPOSED IF THERE EXISTS A REASONABLE CAUS E FOR THE FAILURE OF THE ASSESEE TO DEDUCT TAX AT SOURCE. IN MY CONSIDERED OPINION, THE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED A REASONABLE CAUSE, AS DI SCUSSED IN THE IMMEDIATELY PRECEDING PARA, FOR NOT MAKING DEDUCTI ON OF TAX AT SOURCE FROM PAYMENT OF LEASE RENTALS OF MPAKVN. I, THEREF ORE, APPROVE THE VIEW TAKEN BY THE LD. CIT(A) IN DELETING THE INSTANT PEN ALTY, BUT, ON THIS LEGAL ISSUE. 5. IN THE RESULT, THE APPEAL FILED BY THE RE VENUE IS DISMISSED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 9 TH SEPTEMBER, 2015. SD/- (R.S. SYAL) ACCOUNTANT MEMBER DATED: 29 TH SEPTEMBER, 2015. DK ITA NO.3555/DEL/2014 5 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI