M/s H.P. State Electricity Board, Shimla V. Addl. CIT (TDS), Shimla

ITA 38/CHANDI/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1626 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Bonafide belief; Initiation of penalty proceedings; Non-deduction of tax; Reasonable cause
• Section: 273B; 133A; 201(1); 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NOS. 38 TO 41/CHD/2015 ASSESSMENT YEARS:2007-08 TO 2010-11 H.P. STATE ELECTRICITY BOARD VS. ADDL.CIT(TDS) VIDYUT BHAVAN SHIMLA RANGE KUMAR HOUSE SHIMLA SHIMLA PAN NO. PTLC10806F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI KUMAR RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 14/10/2015 DATE OF PRONOUNCEMENT : 10/12/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THESE FOUR APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), SHIMLA, HIMACHAL PRADESH, DATED 29-10-2014 IN EACH CASE, FOR ASSESSMENT YEAR 2007-08 TO 2010-11 UPHOLDING THE L EVY OF PENALTY U/S 271C OF THE INCOME TAX ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESEE IS A COMPANY INCORPORATED UNDER THE ELECTRICITY ACT, AND ENGAGED IN GENERATIO N, TRANSMISSION AND DISTRIBUTION OF POWER IN THE STATE OF HIMACHAL PRAD ESH. THE ASSESSEE IS ENGAGED IN PURCHASING / SELLING POWER FROM / PGCIL AND IS A LSO SELLING POWER TO CONSUMERS. POWER IS TRANSMITTED THROUGH TRANSMISSIO N NETWORK OF PGCIL AND THE ASSESSEE MAKES PAYMENT ON ACCOUNT OF WHEELING CHARG ES, SLDC, TRANSMISSION CHARGES TO THE PAYEE COMPANY I.E. PGCIL. TDS INSPECTION / SURVEY U/S 133A OF THE INCOME TAX ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 11-02-2009, DU RING THE COURSE OF WHICH IT WAS NOTICED THAT THE ASSESSEE HAD MADE PAYMENTS OF TRANSMISSION CHARGES TO 2 PGCIL WITHOUT DEDUCTING TAX AT SOURCE. THE A.O., AF TER DETAILED DISCUSSION IN THE ASSESSMENT ORDER, IMPOSED PENALTY U/S 271C OF THE A CT, AMOUNTING TO RS. 1,36,00,187, 2,48,13,453/-, 2,76,67,625/- AND 5,71, 017 FOR F.Y. 2006-07, 2007-08, 2008-09 AND 2009-10 AFTER FINDING THAT THERE WAS NO REASONABLE CAUSE FOR THE DEDUCTOR ASSESSEE NOT TO DEDUCT TAX AT SOURCE. 3. THE MATTER WAS TAKEN UP IN APPEAL BEFORE THE LD. CIT(A), WHERE THE ASSESSEE ARGUED THAT IT HAD REASONABLE CAUSE FOR NO T DEDUCTING THE TAX AT SOURCE AND THAT SINCE IT WAS NOT TREATED AS AN ASSE SSEE IN DEFAULT U/S 201 OF THE ACT, PENALTY U/S 271C COULD NOT BE LEVIED. LD. CIT( A) REJECTED THE CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESS EE, UPHOLDING THE LEVY OF PENALTY U/S 271C BY HOLDING AT PARA 5.1 TO 5.4 OF I TS ORDER AS FOLLOWS : 5.1 THE MAIN ISSUE IN THIS CASE IS WHETHER PENALT Y U/S 271C IS IMPOSABLE IN THE FACT AND CIRCUMSTANCES OF THE ASSESSEES CASE. ASSE SSEE HAS TAKEN ADDITIONAL GROUND DURING APPELLATE PROCEEDINGS THAT SINCE NOTI CE U/S 271C READ WITH SECTION 274 WAS ISSUED ON 16/05/2012 AND PENALTY WA S IMPOSED ON 20/03/2013, THE PROCEEDINGS ARE TIME BARRED BY LIMITATION U/S 2 75. CAREFUL READING OF SECTION 271C, 274, 275 REVEALS THAT THERE IS NO TIME FOR IN ITIATION OF PENALTY U/S 271C EVEN IF ASSESSEE IS NOT TREATED AS ASSESSEE IN DEFAULT U/S 201(1) & 201(A) AND IN-SPITE OF THE PROCEEDINGS U/S 201 HAVE ENDED. SECTION 201 AND SECTION 271C ARE INDEPENDENT SECTIONS. AS FAR AS TIME LIMIT FOR COMP LETION OF PENALTY U/S 271C IS CONCERNED, IT IS GOVERNED BY SECTION 275(1)(C) I.E. WHEN THE A.O. INITIATED THE INDEPENDENT PENALTY PROCEEDINGS U/S 271C ON 16/05/2 012 THE ORDER SHOULD HAVE BEEN PASSED ON OR BEFORE 31/03/2013, IN ACCORDANCE TO THE ABOVE MENTIONED PROVISIONS. THUS THE ORDER PASSED ON 20/03/2013 IS A VALID ORDER. AS SUCH NO TIME LIMIT FOR INITIATION OF PENALTY PROCEEDINGS U/S 271 C HAS BEEN PROVIDED UNDER THE LAW AND IT IS NOT MANDATORY THAT THESE PROCEEDINGS SHOULD BE INITIATED DURING PENDENCY OF ANY OTHER PROCEEDINGS SUCH AS PROCEEDIN GS U/S 271C. 5.2 THE ASSESSEE ALSO REFERRED TO THE CASE OF HINDUSTAN COCA COLA VS. CIT 293 ITR 226 HOLDING THAT THE ASSESSEE MAY NOT BE LIABLE U/S 201 (1) & 201(1A). HOWEVER COMPLETE READING OF JUDGMENT REVEALS THAT HONBLE A PEX COURT IN THIS CASE HAS ENDORSED THE PROVISIONS OF SECTION 271C WITH A VIEW THAT SECTION 201 DEALS WITH THE TAX DEMAND ON BEHALF OF DEDUCTEE WHEREAS THE FA ILURE TO DEDUCT IS LIABLE TO BE PENALIZED U/S 271C INDEPENDENTLY. 5.3 ASSESSEE PLACED RELIANCE ON GOOD HEALTH PLAN LIMITE D ITA NO. 155/HYD/2013 OF ITAT HYDERABAD IN THIS RESPECT THE JUDGMENT IS NOT FROM JURISDICTIONAL TRIBUNAL AND THE FACTS OF THE CASE ARE DIFFERENT FROM THE FACTS OF THE ASSESSEES CASE. MOREOVER IT IS POINTED OUT THAT CHAPTER XVII-B STARTS FROM S ECTION 192 TO SECTION 206CA. MERE NON VIOLATION OF SECTION 201 DOES NOT EXONERAT E THE ASSESSE AS DEDUCTOR TO DEDUCT TAX WITHIN THE SPECIFIC PROVISIONS OF SECTIO N 192,194,194A ETC. FAILURE TO DEDUCT TAX INVOKES TWO TYPES OF SECTIONS ONE SECTIO N LIKE 201, WHERE ASSESSEE DEDUCTOR IS TREATED AS ASSESSEE IN DEFAULT ON BEHAL F OF TAX LIABILITY OF DEDUCTEE AND SECOND PENAL PROVISIONS SUCH AS SECTION 271C WH EREIN FAILURE TO DEDUCT TAX IS LIABLE FOR PENALTY INDEPENDENTLY. THUS THE INTERLIN KING OF TWO SECTIONS 201 & 271C IS VIOLATION OF THE SEPARATE PROVISIONS OF ACT. 5.4 THE ASSESSEE HAS FURTHER ARGUED THAT ASSESSEE WAS U NDER HONEST BELIEF THAT SINCE THE TRANSMISSION CHARGES ARE REGULATED BY CERC, THE ASSESSEE WAS NOT TO DEDUCT TDS ON TRANSMISSION CHARGES. THIS ARGUMENT CANNOT B E ACCEPTED AS REASONABLE CAUSE FOR FAILURE TO DEDUCT. KEEPING IN VIEW, ABOVE FACTS, THE CONTENTION OF ASSESSEE IS NOT ACCEPTED AND APPEAL IS DISMISSED. 3 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS: 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT , 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA IS AGA INST LAW AND FACTS ON THE FILE IN AS MUCH SHE WAS NOT JUSTIFIED TO UPHOLD THE ACTI ON OF THE LD. ASSESSING OFFICER IN IMPOSING PENALTY U/S 271C AT RS. 1,36,00,187/- AS N O SUCH PENALTY WAS EXIGIBLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LD. CIT(A) GRAVELY ERRED IN HOLDING THAT T HE PENALTY LEVIED WAS NOT BARRED BY LIMITATION. 5. IN GROUND NO. 1 THE ASSESSEE HAS AGITATED THE LE VY OF PENALTY UNDER SECTION 271C. 6. BEFORE US LD. AR REITERATED THE CONTENTIONS RAIS ED BEFORE THE LD. CIT(A) AND ARGUED THAT NO PENALTY U/S 271C WAS LEVIABLE SI NCE THE ASSESSEE HAD NOT BEEN TREATED AS AN ASSESSEE IN DEFAULT FOR THE PURP OSE OF SECTION 201(1) OF THE INCOME TAX ACT, 1961, BY THE LD. ITO (TDS) VIDE HIS ORDER DT. 30/03/2010 WHICH WAS CONFIRMED BY THE HONBLE ITAT, CHANDIGARH BENCH ES IN PARA 5 OF THEIR ORDER DT. 28 TH FEBRUARY 2012. THE LD. AR FURTHER SUBMITTED THAT P ENALTY/S 271C IS CONSEQUENTIAL IN NATURE FOR THE DEFAULT COMMITTED/S 201(1) OF THE ACT AND SINCE THE ASSESSEE WAS NOT AN ASSESSEE IN DEFAULT AS PER 201(1) OF THE ACT, PENALTY U/S 271C COULD NOT BE LEVIED. THE LD. AR ARGUED THAT TH E VERY BASIS OF SUCH PENALTY IS THE AMOUNT OF TAX WHICH THE ASSESSEE HAD FAILED TO DEDUCT AND PAY AS PER LAW AND WHEN THERE WAS NO SUCH AMOUNT IN EXISTENCE, SINCE THE ASSESSEE WAS NOT AN ASSESSEE IN DEFAULT AS PER SECTION 201(1) OF THE ACT, THE PENALTY U/S 271C COULD NOT BE IMPOSED. THE LD. AR PLACED RELIANCE IN THE CASE OF ASSTT. CIT, CIRCLE 15(2), HYDERABAD. VS. GOOD HEALTH PLAN LTD. ITA NO.155/ HYD/2013. LD. AR FURTHER STATED THAT THE ASSESSEE HAD NOT DED UCTED TAX AT SOURCE UNDER A BONAFIDE BELIEF. LD. AR STATED THAT AS PER AGREEMEN T ENTERED INTO WITH PGCIL, THE TARIFF WAS TO BE DECIDED BY CENTRAL ELECTRICITY REGULATORY COMMISSION(CERC), AND AS PER CLAUSE 7 OF THE REGULA TION OF CERC, TAX ON 4 INCOMES OF GENERATING COMPANIES OR TRANSMISSION LIC ENSES WAS TO BE COMPUTED AS AN EXPENSE AND RECOVERED FROM BENEFICIARY. LD. A R STATED THAT IN VIEW OF THE SAME PGCIL HAD COLLECTED ALL DUE TAXES FROM THE ASS ESSEE IN THE VARIOUS BILLS RAISED ON IT FOR THE RELEVANT ASSESSMENT YEARS. THE REFORE LD. AR STATED THAT THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT SINCE I T HAS ALREADY PAID TAXES TO PGCIL ANY FURTHER TAX DEDUCTION AT SOURCE WOULD ONL Y AMOUNT TO DOUBLE TAXATION, AND THEREFORE DID NOT DEDUCT TAX AT SOURC E. LD. AR STATED THAT SINCE THERE WAS A REASONABLE CAUSE FOR NOT DEDUCTION TDS, PENALTY U/S 271C WAS NOT LEVIABLE IN VIEW OF THE PROVISION OF SECTION 273B O F THE ACT. 7. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F THE LD.CIT(A) AND STATED THAT THERE WAS NEITHER ANY REASONABLE CAUSE WITH THE ASSESSEE FOR NOT DEDUCTING TAX AT SOURCE NOR DID THE FACT THAT THE A SSESSEE WAS NOT TREATED AS AN ASSESSEE IN DEFAULT AS PER SECTION 201 OF THE AC T, HELP THE ASSESSEES CASE SINCE THE TWO WERE SEPARATE PROVISIONS AND COULD NO T BE INTERLINKED AND HENCE PENALTY U/S 271C WAS RIGHTLY LEVIED. 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRES ENTATIVE OF BOTH THE PARTIES AND PERUSED DOCUMENTS PLACED BEFORE US AND THE ORDER OF THE AUTHORITIES BELOW. 9. THE UNDISPUTED FACTS EMERGING IN THE PRESENT CAS E ARE THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE BUT HAD FAILED T O DO SO ON PAYMENTS MADE TO PGCIL DURING THE IMPUGNED F.Y. AS FOLLOWS : FINANCIAL YEAR TDS NOT DEDUCTED ON PAYMENTS MADE TO PGCIL 2006-07 1,36,00,187/- 2007-08 2,48,13,453/- 2008-09 2,76,67,625/- 2009-10 5,71,017 5 ADMITTEDLY PGCIL WAS FOUND TO HAVE PAID TAXES ON IT S INCOME RECEIVED FROM THE ASSESSEE AND HENCE THE ASSESSEE WAS NOT TREATED AS AN ASSESSEE IN DEFAULT U/S 201 OF THE ACT BY THE ITO(TDS) VIDE HIS ORDER DT. 3 0/03/2010 AND AFFIRMED BY THE HONBLE TRIBUNAL IN ITS ORDER DT. 28/02/2012 IN THE BACKDROP OF THE ABOVE FACTS IT HAS NOW TO BE SEEN WHETHER THE ASSESEE IS LIABLE TO PENALTY U/S 271C OF THE INCOME TAX ACT. 10. FOR A BETTER UNDERSTANDING OF THE ISSUE WE HERE BY REPRODUCE THE PROVISION OF SECTION 271C OF THE INCOME TAX ACT, 1961. 271 C. (1) IF ANY PERSON FAILS TO (A) DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQU IRED BY OR UNDER THE PROVISIONS OF CHAPTER XVII-B; OR (B) PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRE D 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-SECTION(1) SHALL BE IMPOSED BY THE JOINT COMMISSIONER A BARE PERUSAL OF THE PROVISION REVEALS THAT PENALT Y U/S 271C IS LEVIED FOR FAILURE TO DEDUCT TAX AS REQUIRED BY THE PROVISIONS OF CHAP TER-XVII-B OF THE INCOME TAX ACT, 1961 AND THE SAME IS QUANTIFIED AS BEING EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILS TO DEDUCT OR PAY AS STATED IN THE PROVISION. CHAPTER XVIIB WHICH DEALS WITH THE PROVISIONS RELAT ING TO TAX DEDUCTION AT SOURCE, OUTLINES THE INCOMES ON WHICH THE PROVISION APPLIES AND OTHER PROCEDURAL ASPECTS OF TDS. SECTION 201, WHICH IS PA RT OF CHAPTER XVIIB, STATES THAT IN CASE OF DEFAULT IN DEDUCTION OF TAX AT SOUR CE OR PAYMENT OF THE SAME, THE PERSON RESPONSIBLE SHALL BE TREATED AS AN ASSES SEE IN DEFAULT. THE FIRST PROVISO TO SECTION 201 STATES THAT IF RETURNS HAVE BEEN FIL ED BY THE RECIPIENT OF INCOME AND HE HAS COMPUTED TAX LIABILITY AND HAS PAID THE TAX, THE PAYER REFERRED TO 6 UNDER SECTION 201 OF THE ACT SHALL NOT BE TREATED A S ASSESSEE IN DEFAULT, MEANING THEREBY THAT THE PAYER WOULD NOT BE LIABLE FOR PAYMENT OF TAX OR DEDUCTION OF TAX. THIS VIEW HAS BEEN UPHELD BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF REMCO (BHEL) HOUSE BUILDING CO -OPERATIVE SOCIETY LTD. VS. ITO (2015) 273 CTR 0057 (KAR) WHEREIN IT WAS HELD A T PARA 30 OF ITS ORDER: AS PER SECTION 201 IF RETURNS HAS BEEN FILED BY THE RECIPIENT AND HE HAS COMPUTED TAX LIABILITY AND/OR HAS PAID THE TAX, THE PAYER RE FERRED TO UNDER SECTION 201 OF THE ACT WAS NOT LIABLE FOR PAYMENT OF TAX OR TO DEDUCT. 11. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAS NOT BEEN TREATED AS AN ASSESSEE IN DEFAULT AS PER SECTION 201 OF THE ACT AND IS THEREFORE NEITHER LIABLE TO DEDUCT NOR PAY ANY TAX AS PER CHAPTER XVII B. IN SUCH CIRCUMSTANCES, WE FIND THAT THE QUESTION OF LEVY OF PENALTY U/S 271C, DOES NOT ARISE. THIS VIEW HAS BEEN UPHELD BY THE HONBLE ITAT HYDERABAD IN THE CASE OF ACIT VS. M/S GOOD HEALTH PLAN LIMITED IN MA NO. 155/HYD/2013, WHEREIN PENALT Y LEVIED U/S 271 C WAS DELETED SINCE THE ASSESSEE WAS NOT HELD TO BE AN AS SESSEE IN DEFAULT. THE HONBLE TRIBUNAL WHILE DELETING THE PENALTY HELD AS FOLLOWS: 22. WHEN THE AO HIMSELF TREATED THE ASSESSEE AS A N ASSESSEE NOT IN DEFAULT IN RESPECT OF THE AMOUNTS OF TDS TO BE DEDUCTED, THEN THERE CANNOT BE ANY SCOPE FOR LEVYING PENALTY U/S 271C OF THE ACT. AS IN THIS CASE THE AMOUNT OF TAX HAS BEEN PAID BY THE RECIPIENT OF THE INCOME. BEING SO, THE PROVISION OF SECTION 271C CANNOT BE APPLIED TO THE ASSESSEES CASE AS THESE P ROVISIONS CLEARLY STATE THAT IF ANY PERSON FAILS TO DEDUCT WHOLE OR ANY PART OF THE TAX AS REQUIRED UNDER THE PROVISIONS OF CHAPTER XVII B , THEN SUCH PERSON SHA LL BE LIABLE TO PAY BY WAY OF PENALTY AN AMOUNT EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT OR PAY AS ABOVE SAID. BEING SO, IN THE PRESE NT CASE THE ASSESSEE BEING NOT IN DEFAULT IN RESPECT OF THE AMOUNT OF TAX ITSE LF, THERE CANNOT BE ANY LEVY OF PENALTY U/S 271C, MORE SO, WHERE THERE WAS A REASON ABLE CAUSE FOR NOT DEDUCTING THE TDS ON THE PAYMENT MADE BY THE ASSESS EE. CONSIDERING THE CUMULATIVE EFFECT OF ALL THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE ARE INCLINED TO CONFIRM DELETION OF PENALTY BY THE CIT(A). IN VIEW OF THE SAME WE HOLD THAT NO PENALTY U/S 271 (C) COULD BE LEVIED IN THE PRESENT CASE. MOREOVER THE FACT THAT THE TAX ON THE IMPUGNED SUMS HAD BEEN REIMBURSED TO PGCIL HAS NOT BEEN CONTROVERTED BY THE REVENUE. IN SUCH CIRCUMSTANCES THE BELIEF HARBOURED BY THE ASSESSEE THAT BY DEDUCTING FURTHER TDS, IT WOULD 7 TANTAMOUNT TO DOUBLE TAXATION, APPEARS TO BE A REAS ONABLE AND BONAFIDE BELIEF. THE HONBLE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD. VS. CIT 253 ITR 745 HAS EXPLAINED THE TER M REASONABLE CAUSE AS FOLLOWS: REASONABLE CAUSE AS APPLIED TO HUMAN ACTION IS T HAT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENC E. IT CAN BE DESCRIBED AS A PROBABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED U PON REASONABLE GROUNDS OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES, WHICH AS SUMING THEM TO BE TRUE WOULD REASONABLY LEAD ANY ORDINARY PRUDENT AND CAUTIOUS M AN PLACED IN THE POSITION OF THE PERSON CONCERNED TO COME TO THE CONCLUSION THAT SAME WAS THE RIGHT THING TO DO. THE CAUSE SHOWN HAS TO BE CONSIDERED AND ONLY I F IT IS FOUND TO BE FRIVOLOUS, WITHOUT SUBSTANCE OR FOUNDATION, THE PRESCRIBED CON SEQUENCE FOLLOW. IN VIEW OF THE SAME WE FIND NO MERIT IN THE CONTENT ION OF THE LD. DR THAT THE ASSESSEE HAD NO REASONABLE CAUSE FOR NOT DEDUCTING TAX AT SOURCE. FURTHER WE HOLD THAT IN LIEU OF THE PROVISIONS OF SECTION 273B WHICH STATES THAT NO PENALTY SHALL BE LEVIABLE IN CASES WHERE REASONABLE CAUSE F OR THE DEFAULT COMMITTED HAS BEEN DEMONSTRATED, THE PENALTY LEVIED U/S 271C IS LIABLE TO BE DELETED. THE HONBLE APEX COURT IN THE CASE OF CIT VS. ELI LILLY & CO. PVT. LTD. 312 ITR 225 HAS UPHELD THIS VIEW WHILE DEALING WITH THE SCOPE OF SE CTION 271C READ WITH SECTION 273B AS FOLLOWS : 35. SECTION 271C INTER ALIA STATES THAT IF ANY PERSON FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY THE PROVISIONS O F CHAPTER XVII-B 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. IN THESE CA SES WE ARE CONCERNED WITH SECTION 271C(1)(A). THUS SECTION 271C(1)(A) MAKES I T CLEAR THAT THE PENALTY LEVIABLE SHALL BE EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT. WE CANNOT HOLD THIS PROVISION TO BE MANDATORY OR CO MPENSATORY OR AUTOMATIC BECAUSE UNDER SECTION 273B PARLIAMENT HAS ENACTED T HAT PENALTY SHALL NOT BE IMPOSED IN CASES FALLING THEREUNDER. SECTION 271C F ALLS IN THE CATEGORY OF SUCH CASES. SECTION 273B STATES THAT NOTWITHSTANDING ANY THING CONTAINED IN SECTION 271C, NO PENALTY SHALL BE IMPOSED ON THE PERSON OR THE ASSESSEE FOR FAILURE TO DEDUCT TAX AT SOURCE IF SUCH PERSON OR THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. THEREFORE, T HE LIABILITY TO LEVY OF PENALTY CAN BE FASTENED ONLY ON THE PERSON WHO DO NOT HAVE GOOD AND SUFFICIENT REASON FOR NOT DEDUCTING TAX AT SOURCE. ONLY THOSE PERSONS WIL L BE LIABLE TO PENALTY WHO DO NOT HAVE GOOD AND SUFFICIENT REASON FOR NOT DEDUCTI NG THE TAX . IN VIEW OF THE ABOVE WE HOLD THAT THE ASSESSEE NOT BEING IN DEFAULT IN RESPECT OF THE AMOUNT OF TAX ITSELF, THERE CANNOT BE ANY LEVY OF PENALTY U/S 271C, MORE SO WHERE THERE WAS A REASONABLE CAUSE FOR NOT DEDUCTIN G THE TDS ON THE PAYMENT MADE. 8 12. WE THEREFORE DELETE THE PENALTY LEVIED U/S 271C AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE FOR THE RESPECTIVE YEARS. 13. IN GROUND NO. 2 THE ASSESSEE HAS RAISED THE PLE A THAT THE PENALTY LEVIED WAS BARRED BY LIMITATION. SINCE THE PENALTY LEVIED UNDER SECTION 271C HAS BEEN DELETED BY US, THIS GROUND REMAINS ACADEMIC IN NATU RE AND WE DO NOT CONSIDER IT FIT TO ADJUDICATE UPON THE SAME. 14. IN THE RESULT THIS GROUND OF APPEAL OF THE ASSE SSEE IS DISMISSED. 15. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/12/2015 SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 10/12/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR