The ITO, TDS-1, RAJKOT-GUJARAT V. M/s Leamak Healthcare Private Ltd., Surendranagar

ITA 439/RJT/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6635 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 22-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Reasonable cause
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY , MEMBER ITA NO. 439 / RJT /201 5 : ASS T. YEAR : 2013 - 14 ITO, TDS - 1, RAJKOT (APPELLANT) VS M/S. LEAMAK HEALTHCARE PVT. LTD. 3, KUMBHARPARA, SURENDRANAGAR, PAN : AAACL6538K (RESPONDENT) APPELLANT BY : SMT. USHA SHROTE, DR RESPONDENT BY : SHRI M.J. RANPURA, CA DATE OF HEARING : 2 3 /0 3 /201 7 DATE OF PRONOUNCEMENT : 24 /0 3 /201 7 O R D E R PER K. NAR A SIMHA CHARY, MEMBER, JM : THIS IS AN APPEAL BY THE REVENUE CHALLENGING THE ORDER DATED 27.7.2015 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 1, RAJKOT (FOR SHORT HEREINAFTER REFERRED TO AS LD. CIT(A) ) IN APPEAL NO.CIT(A) - I/RJT/T431/14 - 1 5. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CONTRACT MANUFACTURING OF BRANDED PHARMACEUTICAL PRODUCTS. THEY HAVE BEEN PAYING REMUNERATION TO THE DIRECTORS AND DEDUCTING TAX AS PER THE PROVISIONS OF SEC. 192 OF THE INCOME TAX ACT, 1961 (FOR SHORT HEREINAFTER REFERRED 2 M / S L E A M A K H E A L T H C A R E P . L T D . I T A N O . 4 3 9 / R J T / 2 0 1 5 TO AS THE ACT ) TILL 31.6.2012, BUT DUE TO INSERTION OF CLAUSE (BA) TO SEC. 194J(1) W.E.F. 1.7.2 012 BY THE FINANCE ACT, 2012, ASSESSEE STARTED DEDUCTING TAX FROM PAYMENT OF REMUNERATION AS PER SEC. 194J OF THE ACT INSTEAD OF SEC. 192 OF THE ACT. ON 16.8.2013, THERE WAS A SPOT VERIFICATION U/S 133A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE AND IT WAS FOUND THAT THE REMUNERATION PAID TO THE DIRECTORS IS SUBJECT TO TAX DEDUCTION U/S 192 AND NOT SEC. 194J OF THE ACT AND THE ASSESSEE MADE A SHORT - DEDUCTION OF TAX TO AN EXTENT OF RS.18,17,271/ - AND INTEREST U/S 201(1) AND 201(1A) OF THE ACT WAS P ROPOSED TO BE LEVIED. HOWEVER, AFTER HEARING THE ASSESSEE, THE SHORTFALL OF TDS WAS WORKED OUT AT NIL, BUT INTEREST U/S 201(1A) OF THE ACT WAS CHARGED AT RS.11,811/ - . SUBSEQUENTLY, THE JCIT, TDS RANGE, RAJKOT VIDE LETTER DATED 21.7.2014 PASSED U/S 271C O F THE ACT WORKED OUT THE SHORT - DEDUCTION OF TAX AT RS.19,32,800/ - AND LEVIED PENALTY TO THAT EXTENT. CHALLENGING THE PENALTY, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) BY WAY OF THE IMPUGNED ORDER, DELETED THE SAME HOL DING THAT THE ASSESSEE WAS NOT IN DEFAULT WITHIN THE MEANING OF SEC. 271C OF THE ACT. 3. CHALLENGING THIS IMPUGNED ORDER, REVENUE IS IN APPEAL BEFORE US STATING THAT THE LD. CIT(A) FAILED TO APPRECIATE THE FACTS AND WRONGLY OPINED THAT IT IS A CASE OF D IFFERENCE IN INTERPRETATION OF THE NEWLY INTRODUCED PROVISIONS OF SEC. 194J BY THE FINANCE ACT, 2012 AND THE ASSESSEE WAS PREVENTED FROM SUFFICIENT AND REASONABLE CAUSE IN NOT DEDUCTING THE TAX AT SOURCE U/S 192 OF THE ACT. IT IS FURTHER ARGUED THAT THE F INDINGS OF LD. CIT(A) THAT THE ENTIRE TAX AND INTEREST WAS RECOVERED WITHOUT ANY LOSS TO THE EXCHEQUER ARE IN DISREGARD TO THE FACT THAT THE 3 M / S L E A M A K H E A L T H C A R E P . L T D . I T A N O . 4 3 9 / R J T / 2 0 1 5 ASSESSEE HAD DEDUCTED LESS TAX IN VIEW OF WRONG INTERPRETATION OF PROVISIONS OF SECTION 194J OF THE ACT THAN WHAT T HEY ARE SUPPOSED TO DEDUCT UNDER SECTION 192 OF THE ACT, AND HE PRAYED TO RESTORE THE PENALTY. 4. PER CONTRA , THE LD. AR WHILE PLACING RELIANCE ON THE DECISION OF HON BLE DELHI HIGH COURT REPORTED IN HINDUSTAN COLA COLA BEVERAGES (P.) LTD. VS JCIT, [2016] 73 TAXMANN.COM 71 (DELHI) AND THE HON BLE APEX COURT IN CIT - XVII, DELHI VS BANK OF NOVA SCOTIA, [2016] 66 TAXMANN.COM 175 (SC) SUBMITTED THAT WHEN THE FIRST APPELLATE AUTHORITY REACHED A RIGHT CONCLUSION ON THE LEVIABILITY OF PENALTY U/S 271C OF THE ACT O N PROPER APPRECIATION OF FACT AND LAW, THE SAID FINDING MAY NOT BE INTERFERED. 5. FACTS ARE ADMITTED. BETWEEN THE PERIOD APRIL, 2012 TO JUNE, 2012 AN AMOUNT OF RS. 48 LACS WAS PAID TO THE DIRECTORS AFTER DEDUCTING TAX AT SOURCE U/S 192 OF THE ACT. HOWEV ER, SUBSEQUENTLY, FOR THE PERIOD BETWEEN JULY, 2012 AND MARCH, 2013, THE AMOUNT OF TAX DEDUCTED AT SOURCE WAS @ 10% U/S 194J OF THE ACT. AS A MATTER OF FACT, THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PASSED AN ORDER DATED 9. 1.2014 U/S 201(1) AND 201(1A) OF THE ACT WORKING OUT THE SHORTFALL IN THE TDS AT NIL AND INTEREST U/S 201(1A) OF THE ACT AT RS.11,811/ - . HOWEVER, THE JCIT, TDS RANGE, RAJKOT WORKED OUT THE SHORTFALL OF TAX AT RS.19,32,800/ - . AFTER CONSIDERING THE ENTIRE M ATTER, WHICH SHALL INCLUDE THESE FACTS AND FIGURES, THE LD. CIT(A) NOTED THAT THE ENTIRE TAX AND INTEREST WAS RECOVERED WITHOUT ANY LOSS TO THE EXCHEQUER. IN THIS CONTEXT, THE LD. CIT(A) OBSERVED THAT THE ENTIRE 4 M / S L E A M A K H E A L T H C A R E P . L T D . I T A N O . 4 3 9 / R J T / 2 0 1 5 CONTROVERSY ERUPTS DUE TO AMENDMENT TO SEC. 194J OF THE ACT BY FINANCE ACT, 2012 AND THE YEAR UNDER CONSIDERATION WAS THE FIRST YEAR OF IMPLEMENTATION. THE LD. CIT(A) NOTICED THAT THE AUDIT REPORT SHOWS THAT THE AUDITOR HIMSELF WAS UNDER THE BELIEF THAT THE REMUNERATION FALLS IN THE CATEGORY OF F EES FOR PROFESSIONAL OR TECHNICAL SERVICES , AND AS SUCH, TAX WAS DEDUCTED U/S 194J OF THE ACT FROM JULY, 2012. WHILE CONSIDERING THE FACT THAT THIS IS ONLY A TECHNICAL DEFAULT FOR ALL PRACTICAL PURPOSES WITHOUT ANY LOSS TO THE REVENUE, LD. CIT(A) REACHED TO THE CONCLUSION THAT THE FACTS AND CIRCUMSTANCES OF THE CASE DO NOT SUPPORT THE CONCLUSION THAT THE ASSESSEE HAS WILLFULLY COMMITTED ANY DEFAULT AND THE ASSESSEE CANNOT BE BRANDED AS ASSESSEE - IN - DEFAULT. 6. THE FACT THAT FOR THE PERIOD BETWEEN APRIL, 2012 TO JUNE, 2012, TAX WAS DEDUCTED AT SOURCE U/S 192 OF THE ACT HIGHLY PROBABLISES THE CONTENTION OF THE ASSESSEE THAT IT IS ONLY UNDER MISTAKEN IMPRESSION IN VIEW OF THE INSERTION OF CLAUSE (BA) TO SEC. 194J(1 ) W.E.F. 1.7.2012 BY THE FINANCE ACT, 2012 THAT THE REMUNERATION FOR THE SUBSEQUENT PERIOD, I.E. BETWEEN JULY, 2012 TO MARCH, 2013 WAS PAID/CREDITED TO THE DIRECTORS AFTER WITHHOLDING/DEDUCTING TAX AT SOURCE @ 10% U/S 194J OF THE ACT . IT DOES NOT SUFFER A NY INHERENT IMPROBABILITY, MORE PARTICULARLY IN VIEW OF THE FACT THAT THE TDS RETURNS WERE FILED IN RESPECTIVE FORM NO. 24Q AND THEREAFTER IN FORM 26Q FOR THE SALARY PAYMENTS U/S 192 UPTO JUNE, 2012. IT WAS FURTHER NOTICED FROM THE RECORD THAT THE DEDUCTI ON OF TAX AT SOURCE @ 10% U/S 194J OF THE ACT FALLS SHORT AS COMPARED TO DEDUCTIBLE U/S 192 OF THE ACT AND THE DIRECTORS SQUARED UP THE SHORTFALL BY MAKING THE PAYMENTS UNDER THE HEAD ADVANCE TAX AND PENALTY U/S 140A OF THE ACT AS IS EVIDENCED BY THE ORD ER DATED 9.1.2014 OF THE 5 M / S L E A M A K H E A L T H C A R E P . L T D . I T A N O . 4 3 9 / R J T / 2 0 1 5 ASSESSING OFFICER U/S 201(1) AND 201(1A) OF THE ACT WORKING OUT THE SHORTFALL IN PAYMENT OF TAX IN THE HANDS OF DIRECTORS AS NIL. ALL THESE CIRCUMSTANCES UNMISTAKABLY INDICATE THAT IT IS ONLY DUE TO AMENDMENT OF SEC. 194J OF THE A CT BY THE FINANCE ACT, 2012, IN THE FIRST YEAR OF ITS IMPLEMENTATION THE ASSESSEE WAS UNDER THE MISTAKEN IMPRESSION IN SHIFTING THE DEDUCTION FROM SEC. 192 TO SEC. 194J OF THE ACT, AS SUCH NO WILLFUL DEFAULT COULD BE ATTRIBUTED TO THE ASSESSEE. 7. WE, THE REFORE, HOLD THAT IT IS NOT A FIT CASE TO INVOKE THE PROVISIONS OF SEC. 271C OF THE ACT, AS SUCH, WE FIND THAT THE REASONING OF LD. CIT(A) IS UNASSAILABLE . WE, ACCORDINGLY, CONFIRM THE SAME. THE GROUNDS OF APPEAL ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH, 2017. SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NARASIMHA CHARY ) JUDICIAL MEMBER RAJKOT , DATE : 24 TH MARCH , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, RAJKOT 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, RAJKOT