M/s DAYALBAGH EDUCATIONAL INSITITUTE, Agra V. JCIT (TDS), Kanpur

ITA 406/AGR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9962 (ITAT-AGRA)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 21-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAHIB P SATSANGI
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 273B; 133A; 201(1); 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NOS.404, 405 & 406/AG/2015 ASSESSMENT YEARS:2008-09 TO 2010-11 DAYALBAGH EDUCATIONAL INSTITUTE, VS. THE JCIT (DEEMED UNIVERSITY) (TDS), DAYALBAGH, AGRA KANPUR TAN NO. AGRD10436G PAN NO. AAAAD2579 (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SAHIB P. SATSANGI RESPONDENT BY : SH. WASEEM ARSHAD DATE OF HEARING : 01/02/2016 DATE OF PRONOUNCEMENT :09/02/2016 ORDER PER ANNAPURNA MEHROTRA A.M. THESE THREE APPEALS HAVE BEEN FILED AGAINST THE COM BINED ORDER OF LD. CIT(A)-I AGRA, FOR THE THREE ASSESSMENT YEARS INVOL VED I.E; 2008-09, 2009-10 & 2010-11, DATED 27/03/2015 UPHOLDING THE LEVY OF PE NALTY UNDER SECTION 271 C OF THE ACT. 2. SINCE SIMILAR ISSUE IS INVOLVED IN THESE APPEALS THEREFORE THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 3. THE ASSESSEE HAS RAISED COMMON GROUNDS OF APPEA L IN ALL THE THREE YEARS AND FOR THE SAKE OF CONVENIENCE WE HEREBY REPRODUCE D THE GROUNDS PERTAINING TO AY 2008-09: 1. BECAUSE THE LEARNED AUTHORITIES BELOW HAVE ERRED BOTH ON FACTS AND IN LAW IN IMPOSING PENALTY UNDER SECTION 271C OF THE I NCOME TAX ACT, 1961 AMOUNTING TO RS. 6,296/- WITHOUT APPRECIATING THE R EASONABLE CAUSE OF DEFIANCE OF THE PROVISIONS OF LAW FOR FAILURE OF THE ASSESSE E TO DEDUCT TAX AT SOURCE. THE PENALTY IMPOSED IS LIABLE TO BE DELETED. 2. BECAUSE THE LEARNED AUTHORITIES BELOW HAVE ERRED BOTH ON FACTS AND IN LAW IN RELYING UPON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF U.S. TECHNOLOGIES INTERNATIONAL (P) LTD. VS. CIT (2010) 195 TAXMAN 323 WITHOUT APPRECIATING THAT FACTS THEREIN ARE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEE. FURTHER IN AY 2009-10, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND ALSO : 2. BECAUSE THE LEARNED AUTHORITIES BELOW HAVE ERRED BOTH ON FACTS AND IN LAW IN CONSIDERING AN AMOUNT OF RS. 1,54,072 /- INCORRECTLY TAKEN FOR THE IMPOSITION OF PENALTY UNDER SECTION 271C WHICH WAS SUBSEQUENTLY REDUCED IN PROCEEDINGS UNDER SECTION 201(1)/201(1A)/154 VIDE O RDER DATED 16.05.2012 AND THEREBY NOT CONSIDERED ASSESSEE IN DEFAULT UNDER SE CTION 201 OF THE INCOME TAX ACT, 1961. THE PENALTY IMPOSED IS LIABLE TO BE DELE TED. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SPOT VERIFICATION / SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 18/11/2009. AS A RESULT OF THE PROCEEDINGS CONDUCTED, THE ASSES SEE WAS FOUND TO HAVE DEFAULTED ON THE TDS PROVISIONS AND CONSEQUENTLY PE NALTY PROCEEDINGS UNDER SECTION 271 C OF THE ACT WERE INITIATED BY THE AO. THEREAFTER PENALTY WAS LEVIED VIDE ORDER DT. 08/08/2013 FOR THE FINANCIAL YEAR 20 07-08, 2008-09 & 2009-10 AS FOLLOWS: FINANCIAL YEAR AMOUNT OF SHORT DEDUCTION AFTER RELIEF / AMOUNT OF PENALTY LEVIABLE IN (RS.) 3 2007-08 RS. 6296/- 2008-09 RS. 1,62,280/- 2009-10 RS. 7,187/- FOR THE REASON THAT THE ASSESSEE HAD ADDUCED NO REA SONABLE CAUSE FOR NOT DEPOSITING THE TAX DEDUCTED INTO THE ACCOUNT OF GOV ERNMENT OF INDIA IN THE PRESCRIBED TIME. FURTHER THE AO RELIED UPON THE DEC ISION OF THE KERALA HIGH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL (P) LTD. VS. COMMISSIONER OF INCOME-TAX (2010) 195 TAXMAN 323 WHEREIN IT WAS HEL D THAT FAILURE TO DEDUCT TAX AT SOURCE OR FAILURE TO REMIT RECOVERED TAX BOTH A TTRACTED PENALTY UNDER SECTION 271 C. THE MATTER WAS TAKEN UP IN APPEAL BEFORE THE LD. CIT(A) WHERE THE ASSESSEE PLEADED REASONABLE CAUSE FOR THE DEFAULT. THE SAME WAS NOT FOUND CONVINCING BY THE LD. CIT(A) AND THEREFORE THE PENA LTY LEVIED WAS UPHELD. 5. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US. 6. BEFORE US THE LD. AR PLEADED THAT THERE WAS NO C AUSE FOR LEVY OF PENALTY UNDER SECTION 271C IN THE PRESENT CASE SINCE THE AS SESSEE HAD REASONABLE CAUSE FOR NOT DEDUCTING THE TDS. LD. AR STATED THAT PRIMARILY THE ASSESSEE HAD DEFAULTED IN DEDUCTION OF TDS RELATING TO ADVERTISE MENT, SALARY, AND AMC CHARGES. LD. AR STATED THAT THE DEFAULT IN DEDUCTIO N OF TDS ON ADVERTISEMENT HAD OCCURRED ON ACCOUNT OF THE FACT THAT THE ASSEES SEE WAS IGNORANT OF ITS OBLIGATION TO DEDUCT TDS ON THE PAYMENTS MADE. LD. AR CLARIFIED THAT THE AMOUNT ON ACCOUNT OF ADVERTISEMENT HAD BEEN PAID TO M/S MARKET CREATORS, AGRA AND AAJ PRAKASHAN PVT. LTD. AGRA FOR ANNOUNCEM ENT OF DATE FOR ADMISSION 4 OF STUDENTS AND APPOINTMENT OF STAFF. LD. AR STATED THAT THE ASSESSEE WAS UNDER THE IMPRESSION THAT THESE PAYMENT WERE MADE JUST TO ANNOUNCE THE LAST DATE OF RECEIVING OF APPLICATION FOR ADMISSION OF STUDENTS AND APPOINTMENT OF STAFF AND WAS NOT IN ANY WAY TO ADVERTISE THE INSTITUTION. TH EREFORE LD. AR STATED THE ASSESSEE HAD NOT DEDUCTED TAX ON THE SAME. HOWEVER THE LD. AR STATED THAT AS SOON AS THE DEFAULT WAS POINTED OUT TO THE ASSESSEE BY THE SURVEY TEAM, THE ASSESSEE IMMEDIATELY DEPOSITED THE ENTIRE AMOUNT AL ONGWITH INTEREST. LD. AR FURTHER SUBMITTED THAT THEREAFTER THE ASSESS EE HAD BEEN REGULARLY DEDUCTING TAX ON SUCH SIMILAR ADVERTISEMENT EXPENSE S. AS FOR THE DEFAULT IN PAYMENT OF TDS WITH REGARD TO SALARY, LD. AR SUBMIT TED THAT THE SAME WAS ATTRIBUTABLE TO THE SOFTWARE OF THE ASSESSEE WHICH DID NOT CONTAIN PROVISION FOR LEVYING SURCHARGE ON INCOME ABOVE RS. 10 LACS . LD. AR SUBMITTED THAT THIS WAS SO ON ACCOUNT OF THE FACT THAT NEITHER IN EARLIER Y EARS NOR IN LATER YEARS, THE ASSEESSEE HAS PAID SALARY EXCEEDING RS. 10 LACS AND THEREFORE THE SOFTWARE OF THE ASSESSEE WAS NOT PROGRAMMED CORRECTLY. LD. AR S UBMITTED THAT IN THE IMPUGNED YEAR CERTAIN EMPLOYEES OF THE ASSESSEE INS TITUTE HAD RECEIVED ARREARS OF SALARY DUE TO WHICH THEIR INCOME EXCEEDED RS. 10 LACS, BUT SINCE THE SOFTWARE WAS NOT PROGRAMMED CORRECTLY, SURCHARGE WA S NOT CALCULATED ON THE TAX LEVIABLE AND AS A RESULT TAX WAS CALCULATED SHO RT AND CONSEQUENTLY DEDUCTED SHORT ON THE SALARY PAID. 5 LD. AR SUBMITTED THAT IN THIS CASE ALSO WHEN NON DE DUCTION OF SURCHARGE WAS POINTED OUT BY THE SURVEY TEAM ON 18/11/2009 THE AS SESSEE IMMEDIATELY DEDUCTED TAX FROM THEIR SALARY FOR NOVEMBER ITSELF AND DEPOSITED IT ON 01/12/2009. LD. AR THEREFORE SUBMITTED THAT SINCE T HERE WAS REASONABLE CAUSE WITH THE ASSESSEE FOR NOT DEDUCTING TDS, PENALTY UN DER SECTION 271 C WAS NOT LEVIABLE. LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. BANK OF NOVA SCOTIA 2016(1) T MI 583 (SC) IN THIS REGARD. LD. AR FURTHER ARGUED THAT IN THE CASE OF SALARY THE TA X HAD BEEN DEPOSITED BY THE PAYEE THEMSELVES AS IS EVIDENT FROM THE ORDER PASSE D U/S 154 AND THEREFORE THE ASSESSEE COULD NOT BE TREATED AS A ASSESSEE IN DEFA ULT AS PER THE PROVISIONS OF SECTION 201OF THE ACT AND IN SUCH CIRCUMSTANCES NO PENALTY UNDER SECTION 271C WAS LEVIABLE. LD. AR PLACED RELIANCE ON THE ORDER O F THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSH IP (P) LTD. (DELHI HC IN ITA NO. 160/2015 DT. 26/08/2015, AND ON THE DECISION OF THE HONBLE AGRA BENCH OF THE ITAT IN THE CASE OF RAJEEV KUMAR AGARWAL VS. ACIT ( AGRA BENCH OF ITAT) IN ITA NO. 337/AGRA/2013 DT. 29/05/2013 IN THIS REGARD. 7. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F THE LD .CIT(A) AND STATED THAT NO REASONABLE CAUSE HAD BEEN FORWARDED BY THE ASSESSEE FOR THE DEFAULT IN DEDUCTION OF TDS AND PENALTY UNDER SECTI ON 271C HAD BEEN RIGHTLY LEVIED. 6 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 9. THE FACTS EMERGING IN THE PRESENT CASE ARE THAT THE ASSESSEE WAS FOUND TO HAVE DEFAULTED IN DEDUCTION OF TAX ON PAYMENT M ADE ON ACCOUNT OF ADVERTISEMENT IN THREE FINANCIAL YEARS AS FOLLOWS : FINANCIAL YEAR AMOUNT OF TAX SHORT DEDUCTED 2007-08 RS. 6,296/- 2008-09 RS. 7,910/- 2009-10 RS. 7,928/- ON BEING CONFRONTED WITH THE SAME DURING THE COURSE OF TDS SURVEY CARRIED OUT AT THE ASSESSEES PREMISES ON 18/11/2009, THE ASSES SEE PAID THE TDS ALONGWITH INTEREST ON 19/12/2009. SUBSEQUENTLY AN ORDER UNDER SECTION 201(1) / 201(1A)/ 154 WAS PASSED STATING THAT SINCE THE ENTIRE PAYMEN T OF TDS HAD BEEN MADE BY THE ASSESSEE NO DEMAND WAS TO BE PAID UNDER THIS HE AD. AT THE SAME TIME PENALTY PROCEEDINGS UNDER SECTION 271C WERE INITIAT ED FOR THE DEFAULT COMMITTED OF NON DEDUCTION OF TDS AND PENALTY LEVIE D ON THE SAME. 10. WE FIND THAT THE ASSESSEE HAD OFFERED AN EXPLAN ATION FOR NOT DEDUCTING TDS ON ADVERTISEMENT PAYMENT MADE, STATING THAT SIN CE THE PAYMENT HAD BEEN MADE FOR ANNOUNCING DATES FOR RECEIVING APPLICATION FOR ADMISSION OF STUDENTS AND FOR APPOINTMENT OF STAFF, THE ASSESSEE WAS UNDE R THE BELIEF THAT THE SAME DID NOT AMOUNT TO ADVERTISEMENT FOR THE PURPOSE OF DEDUCTING TAX AT SOURCE 7 THEREON. LD. CIT(A) WE FIND, REJECTED THIS EXPLANAT ION AS NOT CONSTITUTING REASONABLE CAUSE. IT IS PERTINENT THEREFORE TO UNDERSTAND WHAT IS MEA NT BY REASONABLE CAUSE. REASONABLE CAUSE FOR THE PURPOSE OF APPLICATION O F SECTION 271C IN THE BACKDROP OF SECTION 273B HAS BEEN EXPLAINED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNORS INDIA (P) LTD. VS . CIT (2002) 253 ITR 0745 TO MEAN A PROBABLE CAUSE, AN HONEST BELIEF FOUNDED ON REASONABLE GROUNDS, OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES, WHICH AS SUMING THEM TO BE TRUE, WOULD REASONABLY LEAD ANY ORDINARILY PRUDENT AND CA UTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED TO COME TO THE CON CLUSION THAT SAME WAS THE RIGHT THING TO DO. THE CAUSE SHOULD NOT BE FOUND TO BE FRIVOLOUS, WITHOUT SUBSTANCE OR FOUNDATION. MEASURED ON THIS TOUCHSTONE, WE FIND THAT THE EXPLA NATION OFFERED BY THE ASSESSEE CONSTITUTES REASONABLE CAUSE FOR NON DEDUC TION OF TDS. ADVERTISEMENT IN THE ORDINARY SENSE MEANS A NOTICE OR ANNOUNCEM ENT IN A PUBLIC MEDIUM PROMOTING A PRODUCT SERVICE OR EVENT THEREFORE IT WAS REASONABLE AND LOGICAL ENOUGH FOR THE ASSESSEE TO BELIEVE THAT ANNOUNCEMEN T OF DATE FOR ADMISSION OF STUDENT AND APPOINTMENT OF STAFF IS NOT IN THE NATU RE OF ADVERTISEMENT. BY ANY STRETCH OF LOGIC THE EXPLANATION OF THE ASSESSEE CA NNOT BE SAID TO BE FRIVOLOUS OR UNREASONABLE. 8 FURTHER THE SUBSEQUENT ACTION OF THE ASSESSEE OF D EPOSITING TDS ON BECOMING AWARE OF THE DEFAULT AND OF DEDUCTING TDS IN FUTURE YEARS ALSO ON SUCH PAYMENT LENDS CREDENCE TO THE BONAFIDE OF THE ASSESSEE IN H ARBORING A BELIEF THAT SUCH PAYMENTS WERE NOT TO BE SUBJECTED TO TDS. IT IS EVI DENT THAT THAT THERE WAS NO CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE AN D HENCE PENALTY UNDER SECTION 271 C CANNOT BE LEVIED IN SUCH CIRCUMSTANC ES. THE HONBLE APEX COURT IN THE CASE OF CIT VS. BANK OF NOVA SCOTIA (SUPRA) HAS HELD THAT FOR THE LEVY OF PENALTY UNDER SECTION 271 C, IT IS NECESSARY TO EST ABLISH CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE. 11. IN VIEW OF THE ABOVE WE DELETE THE PENALTY LEVI ED ON ACCOUNT OF DEFAULT COMMITTED BY THE ASSESSEE OF NON DEDUCTION OF TAX O N PAYMENTS MADE ON ACCOUNT OF ADVERTISEMENT. 12. BESIDES THE ABOVE WE FIND THAT IN FY 2008-09 TH E ASSESSEE WAS FOUND TO HAVE FAILED TO DEDUCT TAX ON PAYMENT MADE ON ACCOUN T OF SALARY AMOUNTING TO RS. 1,54,072/-. SUBSEQUENTLY AN ORDER UNDER SECT ION 154/201(1)/201(1A) WAS PASSED STATING THAT SINCE THE ENTIRE AMOUNT HAD EIT HER BEEN PAID BY THE DEDUCTEES OR WAS NOT REQUIRED TO BE PAID BY THE DED UCTEES AFTER CLAIMING RELIEF UNDER SECTION 89 OF THE ACT, THE ENTIRE DEMAND RAIS ED ON THE ASSESSEE WAS DELETED AND ONLY INTEREST ON ACCOUNT OF DELAY IN PA YMENT OF TDS WAS LEVIED UNDER SECTION 201(1A) AMOUNTING TO RS. 499/-. WE FI ND THAT THE ASSESSEE HAD GIVEN AN EXPLANATION FOR NON DEDUCTION OF TDS AS ST ATED ABOVE BY THE LD. AR 9 WHICH HAS NOT BEEN FOUND TO BE FALSE BY THE AUTHORI TIES BELOW. THE SAME WE FIND IS A GOOD AND SUFFICIENT REASON FOR NOT DEDUCT ING TAX. NO CONTUMACIOUS CONDUCT CAN THEREFORE BE ATTRIBUTED TO THE ASSESSEE AND THEREFORE APPLYING THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CA SE OF CIT VS. BANK OF NOVA SCOTIA (SUPRA) WE HOLD THAT NO PENALTY UNDER SECTIO N 271 C IS LEVIABLE FOR NON- DEDUCTION OF TDS ON SALARY. FURTHER SINCE WE HAVE DIRECTED THE DELETION OF PENA LTY ON THE GROUND OF REASONABLE CAUSE HAVING BEEN FURNISHED BY THE ASSES SEE. WE ARE NOT ADJUDICATING THE GROUND RAISED BY THE ASSESSEE CHAL LENGING THE LEVY OF PENALTY U/S 271C SINCE THE ASSESSEE WAS NOT FOUND TO BE AN ASSESSEE IN DEFAULT U/S 201 OF THE ACT. 13. IN FY 2008-09 WE FIND THAT THE ASSESSEE HAS ALS O FAILED TO DEDUCT TDS ON AMC CHARGES AMOUNTING TO RS. 288/- FOR WHICH NO EXP LANATION HAS BEEN OFFERED. IN THE ABSENCE OF ANY EXPLANATION WE UPHOL D THE LEVY OF PENALTY ON THE SAME. 14. IN THE RESULT APPEALS OF THE ASSESSEE FOR AY 20 08-09 AND 2010-11 IN ITA NO. 404/AG/2015 AND ITA NO. 406/AG/2015 RESPECTIVELY AR E ALLOWED WHILE APPEAL FOR AY 2009-10 IN ITA NO. 405/AG/2015 IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :09/02/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, THE CIT( A), THE DR