The Hoshiarpur Central Coop. Bank Ltd., Hoshiarpur V. The Joint Commissioner of Income Tax, Ludhiana

ITA 412/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0593 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISRA
• Assessee Lawyers: J S BHASIN
• Keywords: Bonafide belief; Question of law; Bonafide mistake; Ignorance of law
• Section: 80C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JA LANDHAR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NOS.411 TO 413(ASR)/2015 ASSESSMENT YEAR: 2007-08 TO 2009-10 THE HOSHIARPUR CENTRAL CO - OPERATIVE BANK LTD., RAILWAY ROAD, HOSHIAPUR. PAN: JLDT00043B VS. JT. CIT (TDS), LUDHIANA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.S. BHASIN (ADV.) RESPONDENT BY: SH. A. N. MISRA (DR) DATE OF HEARING: 24.06. 2016 DATE OF PRONOUNCEMENT : 30.06.2016 ORDER PER T.S.KAPOOR (AM): THIS IS A BUNCH OF THREE APPEALS FILED BY A SSESSEE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A) DATED 06.05.2015 FOR ASST. YEARS: 2007- 08 TO 2009-10 RESPECTIVELY. 2. THE ONLY ISSUE RAISED BY ASSESSEE IN THESE APPEA LS IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAD CONFIRMED THE PENALT Y LEVIED BY ASSESSING OFFICER U/S 271C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE PENA LTY ORDER ARE THAT ASSESSEE IS A CO-OPERATIVE BANK AND IT WAS NOTED BY ITS,(TDS)-I, JALANDHAR THAT ASSESSEE HAD FAILED TO DEDUCT TAX ON SALARY TO EMPLOYEES AND THEREFORE, THE ASSESSING OFFICER PASSED ORDER U /S 201(1)/201(1A) OF ITA NO.41 1 TO 412 (ASR)/2015 ASST. YEARS: 2007-08 TO 2009-10 2 THE INCOME TAX ACT. IN VIEW OF THE DEMANDS CREATED U/S 201(1A), THE ASSESSE WAS SHOW CAUSED AS TO WHY THE PENALTY U/S 2 71C MAY NOT BE IMPOSED. THE COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT INTEREST ON HOUSING LO AN UP TO RS.1,50,000/- WAS QUALIFIED FOR DEDUCTION U/S 80C AND THEREFORE, ASSESSEE HAD GIVEN BENEFIT OF RS.1.50 LACS TO EMPLOYEES AS INTEREST ON HOUSING LOAN WHO HAD AVAILED HOUSING LOAN AND THIS HAS RESULTED INTO SHO RT DEDUCTION OF TAX. THE ASSESSEE DURING PENALTY PROCEEDINGS SUBMITTED T HAT MISTAKE WAS A BONAFIDE MISTAKE WHICH IS FURTHER PROVED FROM THE F ACTS THAT DURING REGULAR ASSESSMENT PROCEEDINGS FOR THESE YEARS NO A DDITION WAS MADE ON ACCOUNT OF SHORT DEDUCTION OF TAX AND NEITHER THE S AME WAS POINTED OUT BY ASSESSING OFFICER AND NOR AUDITORS WHILE PREPARI NG REPORT U/S 44AB BROUGHT THIS TO NOTICE OF ASSESSEE. HOWEVER, THE AS SESSING OFFICER WAS NOT SATISFIED WITH REPLY AND HE IMPOSED PENALTY U/S 271(C) FOR THREE YEARS. 4. AGGRIEVED WITH THE ORDER THE ASSESSEE FILED APPE AL BEFORE LEARNED CIT(A) AND LEARNED CIT(A) ALSO CONFIRMED THE PENALT Y AND FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR, AT THE OUTSET, SUBMITTED THAT AS SESSEE WAS UNDER A BONAFIDE BELIEF THAT INTEREST ON HOUSING LOAN UP TO RS.1.50 LACS WAS ENTITLED AS DEDUCTION U/S 24(B) & 80C OF THE I.T. A CT AND THEREFORE, WHILE COMPUTING THE TAX DEDUCTION FROM SALARY OF THE EMPL OYEES, THE ASSESSEE ITA NO.41 1 TO 412 (ASR)/2015 ASST. YEARS: 2007-08 TO 2009-10 3 ALLOWED THIS BENEFIT, TO ALL SUCH PERSONS WHO HAD A VAILED HOUSING LOANS. THE LEARNED AR FURTHER SUBMITTED THAT DURING AUDIT U/S 44AB, THE AUDITORS ALSO DID NOT POINT OUT THIS DEFAULT IN ANY YEAR AND THE DEFAULT CAME TO LIGHT ONLY WHEN ITO (TDS) POINTED OUT AFTER SURVEY CONDUCTED ON 11.02.2010 AND 15.02.2010. THE LEARNED AR FURTHER S UBMITTED THAT DEMAND CREATED U/S 201(1)/201(1A) WAS PAID IN FULL TO AVOID ANY CONTROVERSY AND ALSO TO SAVE PENALTY, DESPITE THE F ACT THAT ALL THE RESPECTIVE EMPLOYEES HAD ALSO FILED THEIR INDIVIDUA L RETURNS AND HAD DISCHARGED THEIR TAX LIABILITY AND EVEN THE BENEFIT OF APEX COURT DECISION IN HINDUSTAN COCA COLA BEVERAGE PVT. LTD. WAS NOT A VAILED. 6. CONTINUING HIS ARGUMENTS THE LEARNED AR SUBMITTE D THAT THE PERSON RESPONSIBLE WAS NOT TAX EXPERT AND THEREFORE THE OBSERVATION OF CIT(A) THAT PR WAS ASSISTED BY ADVOCATES/CA, WOULD RATHER LEND SUPPORT TO PRS CLAIM THAT EVEN THEY TOO APPROVED THE LATTER S STANDPOINT. 7. HE FURTHER SUBMITTED THAT THE OBSERVATIONS OF LE ARNED CIT(A) THAT EVEN THOUGH IGNORANCE OF LAW IS NO EXCUSE, IT CANNO T BE PRESUMED THAT EVERYBODY KNOWS THE LAW, AND THAT TOO THE MOST COMP LICATE INCOME TAX LAW. RELYING UPON THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF CIT VS. ELI LILLY & CO. INDIAN PVT. LTD. (312 ITR 2 25), THE LEARNED AR SUBMITTED THAT PENALTY U/S 271C WAS NOT SUSTAINABLE IN AS MUCH AS IT IS ATTRACTED ONLY IF THE ASSESSEE HAS NO REASONABLE CA USE TO EXPLAIN THE DEFAULT. HE FURTHER SUBMITTED THAT HONBLE SUPREME COURT HAS HELD THAT ITA NO.41 1 TO 412 (ASR)/2015 ASST. YEARS: 2007-08 TO 2009-10 4 THE PENALTY U/S 271C IS NOT MANDATORY AND COMPENSAT ORY OR AUTOMATIC. HE FURTHER SUBMITTED THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ITOCHU CORPORATION, 268 ITR 172 (DEL.), FOLLOWING I TS EARLIER DECISION IN WOOD WORD GOVERNOR INDIA PVT. LTD. VS. CIT, 253 ITR 745 (DEL) ALSO HELD THAT NO PENALTY WAS LEVIABLE WHERE A REASONABLE CA USE IS PLEADED. IT WAS SUBMITTED THAT THIS DECISION OF DELHI HIGH COURT HA S BEEN ENDORSED BY THE HONBLE SUPREME COURT IN A RECENT CASE OF CIT V S. BANK OF NOVA SCOTIA, 380 ITR 550 (SC). IN VIEW OF THE FACTS AND CIRCUMSTANCES, THE LEARNED AR ARGUED THAT THE PENALTY SUSTAINED BY LEA RNED CIT(A) BE DELETED. 8. THE LEARNED DR, ON THE OTHER HAND, HEAVILY PLACE D HIS RELIANCE ON THE ORDER OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSEE IS A CO-OPERATIVE BANK AND WHILE COMPUTING THE TAX DEDUCTIBLE AT SOURCE TH E PERSON RESPONSIBLE GAVE CREDIT OF DEDUCTION OF RS.1,50,000/- AVAILABLE U/S 24(B) AND 80C OF THE ACT FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE. IT IS ALSO A FACT THAT THE EMPLOYEES OF THE ASSESSEE HAD DECLARED THEIR IN COMES IN THEIR INCOME TAX RETURNS AND HAD CLAIMED THAT DEDUCTION OF RS.1, 50,000/- AND THEREFORE, THE FACT REMAINS THAT THE DEDUCTION FOR INTEREST ON HOUSING LOAN WAS AVAILABLE TO THE ASSESSEE THOUGH IT IS ANO THER MATTER THAT PERSON RESPONSIBLE FOR MAKING PAYMENT WAS NOT ALLOW ED TO CONSIDER THIS ITA NO.41 1 TO 412 (ASR)/2015 ASST. YEARS: 2007-08 TO 2009-10 5 DEDUCTION FOR THE PURPOSES OF CALCULATION OF TAX AT SOURCE. FURTHER WE FIND THAT EVEN AUDITORS DURING TAX AUDIT U/S 44AB O F THE ACT DID NOT POINT THIS MISTAKE OF THE ASSESSEE AND MOREOVER, WE FIND THAT WHEN THE ASSESSEE WAS CONFRONTED WITH THE SHORT DEDUCTION IT IMMEDIATELY DEPOSITED THE AMOUNTS AND EVEN THE BENEFIT OF THE A PEX COURT DECISION IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD. WAS ALSO NOT AVAILED. FROM THE ABOVE FACTS AND CIRCUMSTANCES, IT CANNOT B E SAID THAT ASSESSEE WAS NOT HAVING A REASONABLE BELIEF THAT DEDUCTION O F RS.1,50,000/- WAS TO CONSIDERED BY IT WHILE CALCULATING THE TAX AT SO URCE LIABILITY. THE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. ELI L ILLY & CO. INDIA PVT. LTD. (SUPRA) WHILE DEALING WITH SEC.271C HAS HELD A S UNDER: SEC. 271C INTER ALIA STATES THAT IF ANY PERSON FAI LS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY THE PROVISIONS OF CHAPTER XVII-8 THEN SUCH PERSONS SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT. THUS SEC.271C(1)(A) MAKES IT CLEAR THAT THE PENALTY LEVIABLE SHALL BE EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT. THIS PROVISION CANNOT BE HELD TO BE MANDATORY OR COMPE NSATORY OR AUTOMATIC BECAUSE UNDER S.273B PARLIAMENT HAS ENACTE D THAT PENALTY SHALL NOT BE IMPOSED IN CASES FALLING THERE UNDER. SE C.271C FALLS IN THE CATEGORY OF SUCH CASES. THEREFORE, THE LIABILITY TO LE VY OF PENALTY CAN BE FASTENED ONLY ON THE PERSONS WHO DO NOT HAVE GOOD AND SUFFICIENT REASON FOR NOT DEDUCTING TAX AT SOURCE. 10. SIMILARLY, THE HONBLE SUPREME COURT IN THE CAS E OF CIT VS. BANK OF NOVA SCOTIA 380 ITR 550 HAS HELD AS UNDER: PENALTY U/S 271C-DELETION OF PENALTY-ASSESSEE COLLE CTED TAX U/S 201(1) OR COMPENSATORY INTEREST U/S 201(1A)-ASSESSEE SUBMITTED THAT AMOUNTS IN QUESTION HAD ALREADY BEEN PAID SO AS TO END DISPUTE WITH REV ENUE-AO LEVIED PENALTY U/S 271(1)(C) ON ASSESSEE AND SAME WAS DELETED BY CIT(A )- ITAT ALLOWED ASSESSEES APPEAL AND DELETED PENALTY LEVIED ON ASSESSEE-HELD, ITAT HELD THAT WITH REGARD TO LEVY OF PENALTY U/S 271-C IT WAS NECESSARY TO ESTAB LISH THAT THERE WAS CONTUMACIOUS CONDUCT ON PART OF ASSESSEE- ON SIMILA R FACTS DELHI HIGH COURT DELETED LEVY OF PENALTY U/S 271-C IN CASE OF M/S. ITOCHU CORPORATION, REPORTED IN 268 ITR 172(DEL) AND IN CASE OF CIT VS. MITSUI & COMPANY LTD. REPORT ED IN ITA NO.41 1 TO 412 (ASR)/2015 ASST. YEARS: 2007-08 TO 2009-10 6 272 ITR 545- RESPECTFULLY FOLLOWING AFORESAID JUDGMEN TS OF DELHI HIGH COURT AND DECISION OF ITAT, DELHI IN CASE OF TELEVISION EIGHTE EN INDIA LTD., ITAT ALLOWED ASSESSEES APPEAL AND CANCELLED PENALTY AS LEVIED U /S 271-C HIGH COURT REJECTED APPEAL OF REVENUE ONLY ON GROUND THAT NO SUBSTANTIA L QUESTION OF LAW AROSE IN MATTER- SUPREME COURT CONVINCED THAT THERE WAS NO S UBSTANTIAL QUESTION OF LAW AROSE AND FACTS AND LAW HAVING PROPERLY AND CORRECT LY BEEN ASSESSED AND APPROACHED BY CIT(A) AS WELL AS BY ITAT-SUPREME COUR T FOUND NO MERITS IN APPEAL-REVENUES APPEAL DISMISSED. 11. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES A ND IN VIEW OF THE ABOVE JUDICIAL PRECEDENTS, WE DO NOT HAVE ANY HESIT ATION IN REVERSING THE ORDER OF LEARNED CIT(A). 12. IN THE RESULT, THE APPEALS FILED BY ASSESSEE AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:30.06.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER