M/s. The Directorate of Distance Education, Rohtak V. JCIT, Karnal

ITA 4518/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4715 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Non-deduction of tax; Reasonable cause
• Section: 273B; 194C; 201(1)

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL, DELHI BENCH A , NEW DELHI BEFORE : SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 4518/DEL./2014 ASSESSMENT YEAR: 2011 - 12 THE DIRECTORATE OF DISTANCE EDUCATION, MAHARISHI DAYANAND UNIVERSITY, ROHTAK. (PAN - AAAJM0531A) (APPELLANT) VS. J.C.I.T. (TDS) RANGE, KARNAL. (RESPONDENT) APPELLANT S BY SHRI VED JAIN, ADVOCATE RESPONDENT BY SHRI ARUN KUMAR YADAV, SR. DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), KARNAL DATED 05.12.2013 FOR THE AY 2011 - 12 ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD, BOTH IN THE EYE OF LAW AND ON THE FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE PENALTY AMOUNTING TO RS.30,66,318/ - LEVIED BY THE JCIT, UNDER SECTION 271C OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE PENALTY IG NORING THE FACT THAT IT IS NOT A CASE OF FAILURE TO DEDUCT TAX BUT DEDUCTION OF TAX AT THE RATE OF 2% UNDER SECTION 194C UNDER A DATE OF HEARING 08.08.2017 DATE OF PRONOUNCEMENT 3 1 .08.2017 ITA NO. 4518/DEL./2014 2 BONAFIDE BELIEF, AS AGAINST 10% DEDUCTIBLE UNDER SECTION 194J OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN IGNORING THE FACT THAT IT IS THE ASSESSEE ITSELF WHICH BROUGHT THE MATTER TO THE KNOWLEDGE OF THE TDS OFFICER SEEKING CLARIFICATION ABOUT THE CORRECT SECTION UNDER WHICH TAX IS TO BE DEDUCTED. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE PENALTY REJECTING THE CONTENTION OF THE ASSESSEE THAT THE NON - DEDUCTION OF TAX BY THE ASSESSEE WAS ON ACCOUNT OF A REASONABLE CAUSE IN TERMS OF P ROVISION OF SECTION 273B, AS SUCH THE PENALTY IS NOT LEVIABLE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE PENALTY REJECTING THE EXPLANATION AND EVIDENCES BROUGHT ON RECORD BY THE A SSESSEE TO SHOW THAT THE ACTION OF THE ASSESSEE WAS BONAFIDE AND ON REALIZING THE MISTAKE, THE SAME WAS RECTIFIED IMMEDIATELY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DIRECTORATE OF DISTANCE EDUCATION OF MAHARISHI DAYANAND UNIVERSITY, ROHTAK. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S NYSA COMMUNICATIONS PVT. LTD. FOR PROVID ING VARIOUS SERVICES RELATED TO COMPUTER HARDWARE AND SOFTWARE. THE ACTIVITIES MAINLY INCLUDED COMPUTERIZATION OF ALL DEPARTMENTS OF THE UNIVERSITY, CREATION OF WEBSITE OF UNIVERSITY, E - ADMISSION PROCEDURE, ESTABLISHMENT OF INTERNET IN THE PREMISES OF THE UNIVERSITY, SOFTWARE FOR RECORD KEEPING OF UNIVERSITY, ELECTRONIC SUPPORT SERVICES AND DATA MAINTENANCE ETC. ALL THE ABOVE ACTIVITIES WERE TO BE EXECUTED WITH THE MANPOWER, MATERIAL AND SUPPLIES BY M/S NYSA ITA NO. 4518/DEL./2014 3 COMMUNICATIONS PVT. LIMITED. FOR THIS WORK, THE A SSESSEE MADE PAYMENTS TO M/S. NYSA COMMUNICATION (P) LTD., DELHI AMOUNTING TO RS.3,83,29,004/ - ON WHICH TDS WAS DEDUCTED @ 2% U/S. 194C INSTEAD OF 10% AS APPLICABLE DURING THE YEAR ON FEES PAID FOR PROFESSIONAL & TECHNICAL SERVICES AS PER SECTION 194J OF T HE IT ACT. ACCORDINGLY, A DEMAND OF RS.30,66,318/ - WAS RAISED AGAINST THE ASSESSEE ON ACCOUNT OF SHORT DEDUCTION OF TAX AT SOURCE AND FOR THIS DEFAULT A PENALTY EQUIVALENT TO THE SHORT DEDUCTION OF TAX WAS IMPOSED BY THE AO U/S. 271C OF THE IT ACT. THE LD. CIT(A) IN APPEAL OF THE ASSESSEE, CONFIRMED THE PENALTY IMPOSED BY THE AO. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 4. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE WHILE MAKING THE PAYMENT AS PER T HE TERMS OF CONTRACT WITH THE SAID COMPANY , WAS UNDER A CONFUSION WITH RESPECT TO THE RATE AT WHICH TAX WAS DEDUCT I BLE AT SOURCE I.E. WHETHER U/S 194C OR 194J. THE FIRST BILL OF THE SAID PARTY BECAME DUE ON 01.02.2011. THE ASSESSEE PROPOSED TO DEDUCT TAX A T SOURCE @10% BUT ON THE FOLLOWING THREE REASONS THE SAME WAS DEDUCTED @2% I.E. CONTRACTUAL PAYMENT: ITA NO. 4518/DEL./2014 4 (I). A CONTRACTUAL AGREEMENT WAS ENTERED BETWEEN THE ASSESSEE AND NYSA COMMUNICATIONS WHICH COVERED VARIOUS ASPECTS BEING CONTRACTUAL IN NATURE. (II). WHE N PROPOSED TO DEDUCT TAX AT SOURCE @ 10% U/S 194J IT WAS SPECIFICALLY STATED BY NYSA COMMUNICATIONS THAT IT HAD ENTERED INTO A CONTRACTUAL AGREEMENT WITH THE ASSESSEE WHICH INCLUDED SUPPLY OF MAN, MATERIAL ALONG WITH VARIOUS SERVICES AND THUS WAS COVERED U /S 194C @2%. (III). EXPERT O PINION WAS TAKEN FROM A CA FIRM WHICH ADVISED THAT THE TAX WAS TO BE DEDUCTED @2% U/S 194C. 4.1 HOWEVER, STILL REMAINING IN CONFUSION, THE ASSESSEE IN ORDER TO SEEK CLARIFICATION IN THIS RESPECT VIDE ITS LETTER SOUGHT GUIDAN CE FROM THE INCOME TAX DEPARTMENT. THE ITO TDS, ROHTAK VIDE HIS LETTER DATED 13.05.2011 ADVI S ED THE ASSESSEE THAT THE SERVICES RENDERED BY NYSA COMMUNICATIONS FELL UNDER THE CATEGORY OF TECHNICAL AND PROFESSIONAL SERVICES AND THUS THE ASSESSEE WAS LIABLE T O DEDUCT TAX AT SOURCE @10% U/S 194J. THEREAFTER VIDE LETTER D ATED 13 . 07 . 2011, ITO ( TDS ) ASK ED THE ASSESSEE FOR DETAILS FOR TDS DEDUCTED OF M/S NYSA COMMUNICATIONS AS PER SECTION 194J AND DETAILS OF TDS DEPOSITED. IN RESPONSE TO THE SAME ASSESSEE FILED ITS REPLY ON 01 . 08 . 2011 ENCLOSING DETAILS OF PAYMENT S SO MADE. SIMILAR QUERY WAS RAISED FROM NODAL OFFICE ALSO. IN RESPONSE TO THE SAME, NODAL OFFICER SUBMITTED THE DETAILED REPLY ITA NO. 4518/DEL./2014 5 REFE R RING THE ABOVE NOTICE ISSUED TO DDE, STATING ITS INABILITY TO DEDUCT TDS @ 2%. 4.2 HOWEVER, ITO (TDS) ROHTAK ON THE BASIS OF INFORMATION PROVIDED BY THE ASSESSEE ISSUED A SHOW CAUSE NOTICE D ATED 25.8.2011 ASKING THE ASSESSEE TO EXPLAIN WHY TAX WAS DEDUCTED BY IT @2% AS AGAINST 10%. THEREAFTER THE ASSESSEE VIDE ITS LETTER DATED 0 1.09.2011 ASKED THE ITO (TDS) TO SPECIFY THE RATE OF INTEREST APPLICABLE ON THE QUANTUM OF SH ORT TAX DEDUCTED AT SOURCE BY IT I.E. BY 8%. THE ASSESSEE VIDE CHALLAN NO. 9678662 DATED 06.09.2011 DEPOSITED THE COMPLETE DEMAND ALONG WITH INTEREST RAISED BY THE ITO (TDS) ROHTAK IN THIS RESPECT. THEREAFTER THE ASSESSEE DEDUCTED THE TAX AT SOURCE @10% ON THE NEXT BILL OF NYSA COMMUNICATIONS AND ALSO DEPOSITED THE SAME. THE SAID ACTION WAS DONE BY THE ASSESSEE TO ABIDE WITH THE ADVICE OF THE ITO (TDS). HOWEVER, THE JCIT, TDS RANGE, KARNAL INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271C OF THE ACT IN RESPECT OF ABOVE SHORT DEDUCTION OF TDS OF RS. 30,66,318/ - .THE ASSESSEE FILED DETAILED REPLY BEFORE THE JCIT STATING THAT THE LOWER DEDUCTION OF TAX WAS MADE DUE TO BONAFIDE BELIEF OF THE ASSESSEE AND UNDER CONFUSION AS THE SUPPLIER AS WELL AS THE CONSULTANT OF THE ASSESSEE HAD ADVISED IT TO DEDUCT TAX @2%.THE ASSESSEE FURTHER STATED THAT DUE TO CONFUSION A CLARIFICATION IN THIS RESPECT WAS SOUGHT FROM THE I T DEPART MENT AND THE OPINION OF THE DEPARTMENT WAS ACCORDINGLY COMPLIED WITH . THE LD. JCIT ITA NO. 4518/DEL./2014 6 IGNORING THE FACTS ENUMERATED ABOVE WRONGLY LEVIED THE PENALTY U/S 271C. THE LD. AR, THEREFORE, URGED FOR CANCELLATION OF PENALTY SUSTAINED BY THE LD. CIT(A), AS THERE WAS REASONABLE CAUSE FOR SHORT DEDUCTION OF TAX AT SOURCE. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF MATERIAL ON RECORD, WE FIND THAT THERE WAS BONAFIDE AND REASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR SHORT DEDUCTION OF TDS AS THE ASSESSEE WAS UNDER A GENUINE AND BONAFIDE BELIEF FOR NOT DEDUCTIN G THE TAX AT SOURCE U/S 194J INSTEAD OF 194C AS STATED BY THE COMPANY M/S NYSA COMMUNICATIONS P LTD ON THE BASIS OF THEIR PREVIOUS INVOICES AND AS PER THE EXPERT OPINION OF CHARTERED ACCOUNTANT. BOTH CONFIRMED THAT THE TDS WAS DEDUCT I BLE @2% AND THE SAME W AS ACCORDINGLY DEDUCTED. STILL BEING DISSATISFIED, THE ASSESSEE ASKED THE ITO TDS TO ADVICE ON THE SAID ISSUE WHO ADVISED TO DEDUCT TAX @10%. ACCORDINGLY, THE ASSESSEE DEDUCTED THE TAX @10% AND PAID THE DIFFERENCE ALONG WITH INTEREST ON THE AMOUNT SHORT DE DUCTED BY IT. LD. AR FURTHER INVITED OUR ATTENTION TO THE PROVISO TO SECTION 201(1) OF THE ACT AND SUBMITTED THAT THE CONTRACTOR HAS OFFERED THE AMOUNT RECEIVED FROM THE ASSESSEE AS ITS INCOME IN THE RETURN OF INCOME FOR THE SAME ASSESSMENT YEAR AND THE SA ME ARE ITA NO. 4518/DEL./2014 7 VERIFIABLE FROM THE DOCUMENT ENCLOSED IN THE PAPER BOOK. HE FURTHER INVITED OUR ATTENTION TO THE COPY OF CERTIFICATE ISSUED U/S 197 OF THE ACT TO M/S NYSA COMMUNICATIONS P LTD BY THE ITO TDS @2% FOR THE SUBSEQUENT PERIOD FOR THE AMOUNT TO BE RECEIVED BY THE ASSESSEE. LD. AR SUBMITTED THAT FOR THE AFORESAID REASONS THERE IS REASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR DEPOSITING SHORT PAYMENT OF TDS. THE FACT THAT THE ASSESSEE ITSELF OBTAINED THE OPINION FROM DEPARTMENT ITSELF CLEARLY SHOWS THAT THERE WAS BONAFIDE INTENTION ON THE PART OF THE ASSESSEE NOT TO MAKE ANY DEFAULT AND THE CORRECT TDS WAS DEDUCTED OUT OF THE NEXT PAYMENT MADE TO NYSA COMMUNICATIONS (P) LTD AND PAID ACCORDINGLY. HE ALSO PLACED RELIANCE ON THE VARIOUS JUDGMENTS OF JURISDICTIONAL HIGH COURT A ND APEX COURT WHEREIN IT HAS BEEN HELD THAT UNLESS THERE WAS CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE PENALTY U/S 271C IS NOT LEVIABLE. THIS VIEW FURTHER STANDS SUPPORTED BY THE PROVISIONS OF SECTION 273B OF THE ACT, WHICH UNEQUIVOCALLY SPEAKS THAT NO PENALTY SHALL BE IMPOS A BLE ON THE ASSESSEE FOR ANY FAILURE REFERRED TO IN SECTION 271C IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACTED BONA FIDE AND HENCE IT IS NO T A FIT CASE FOR LEVYING PENALTY. WE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE TAX WAS DEDUCTED AT A LOWER RATE UNDER THE BONA FIDE BELIEF. THE LEARNED AR HAS CITED A NUMBER OF JUDGMENTS WHICH WE ARE NOT QUOTING HEREIN SINCE ALL OF THOSE ARE ITA NO. 4518/DEL./2014 8 ON T HE PROPOSITION THAT IF FOR A REASONABLE CAUSE EXISTS FOR THE DEFAULT OF DEDUCTING TDS AT A LOWER RATE, THE SAME SHOULD NOT BE EXIGIBLE FOR PENALTY UNDER SECTION 271C. ACCORDINGLY THE PENALTY IMPOSED BY THE AO AND SUSTAINED BY LD. CIT(A) IS FOUND FIT TO B E CANCELLED IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.2017 . SD/ - SD/ - ( AMIT SHUKLA ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 31.08.2017 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI