M/s Modi Industries Ltd., Meerut V. JCIT, New Delhi

ITA 5233/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1363 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S M
• Assessee Lawyers: P S KASHYAP
• Keywords: Bonafide belief; Non-deduction of tax; Reasonable cause
• Section: 143(3); 201(1)

Judgement Text

1 ITA NO. 5233/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 5233/DEL/20 16 (A.Y 2008-09) MODI INDUSTRIES LTD. C/O. KASHYAP & CO. C.A 214, CITI CENTER, BEGUM BRIDGE R ROAD, MEERUT AAACM2063Q (APPELLANT) VS JCIT RANGE-75 NEW DELHI. (RESPONDENT) APPELLANT BY SH. P. S. KASHYAP, CA RESPONDENT BY SH. S. M. PANDEY SR (DR) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 20/7/2016 PASSED BY CIT(A)-41, NEW DELHI FOR ASSESSMENT YEAR 2008-09. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON FACTS AND IN LAW IMPOSITION OF PENA LTY UNDER SECTION 271C FOR RS. 10,58,313/- IS TOTALLY WRONG, UNJUSTIFIED AND I LLEGAL. THE APPELLANT COMPANY IS NOT LIABLE TO PENALTY U/S 271C ON THE FO LLOWING GROUNDS: I) THAT THE LD CIT (A) HAS NOT CONSIDERED THE VARIOUS FACTS BEFORE PASSING THE ORDER. II) THAT ASSESSEE HAD BONA FIDE REASONS FOR NOT DEDUCT ING TDS. III) THAT THE ASSESSEE HAD DEPOSITED TDS WITH INTEREST WHERE EVER APPLICABLE AND IN ANOTHER CASE THE DEDUCTEE HAS DUL Y DEPOSITED DUE TAX DATE OF HEARING 22.11.2018 DATE OF PRONOUNCEMENT 29.11.2018 2 ITA NO. 5233/DEL/2016 BY OFFERING FULL INCOME IN ITS INCOME TAX RETURN AN D THE ASSESSMENT OF DEDUCTEE WAS COMPLETED U/S 143(3) OF THE ACT. IV) THAT NO ORDER U/S 201(1) IS PASSED IN ASSESSEES C ASE WHICH SHOWS THAT ASSESSEE IS NOT IN DEFAULT FOR NOT DEDUCTING T DS. THE SAME HAS NOT BEEN ADJUDICATED BY THE LD CIT (A). THEREFORE THE BASIS TAKEN AND METHOD ADOPTED BY THE ASSESSING OFFICER FOR IMPOSING PENALTY U/S 271C FOR RS. 10,58,313/- AND C ONFIRMED BY CIT (A) IS TOTALLY WRONG, UNJUSTIFIED AND UNWARRANTED AND T HE SAME DESERVES TO BE DELETED IN FULL. 3. THE ASSESSMENT WAS COMPLETED U/S 143(3) AND THE ASSESSING OFFICER ISSUED NOTICE U/S 271C ON 15/12/2014 FOR IMPOSITION OF PENALTY U/S 271C OF THE ACT. IN RESPONSE TO THE SAID NOTICE, THE ASSES SEE FILED WRITTEN SUBMISSIONS STATING THEREIN THAT THE ASSESSEE COMPANY IS A SICK COMPANY AS PER BIFR PROVISIONS. THEREAFTER, THE ASSESSING OFFICER IMPO SED PENALTY U/S 271C FOR RS. 11,52,144/-. 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY GRANTED RELIEF TO THE AS SESSEE BY REDUCING THE PENALTY AMOUNT OF RS.93,08,31/- AND CONFIRMED THE BALANCE P ENALTY OF RS.10,58,313/-. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE IS PUBLIC LIMITED COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED. THE ASS ESSEE COMPANY IS A SICK INDUSTRIAL UNIT DULY REGISTERED WITH BIFR. THE LD. AR FURTHER SUBMITTED THAT NON DEDUCTION OF TDS ON CANE COMMISSION WAS ON ACCO UNT OF THE ISSUE BEING LITIGATED BY THE ASSESSEE AND THE INDIAN SUGAR MANU FACTURERS ASSOCIATION BY WAY OF SLP IN THE HON'BLE SUPREME COURT. THE AMOUN T WAS OF CONTINGENT NATURE. THE AMOUNT WAS REVERSED IN SUBSEQUENT YEAR S WHICH ARE ON RECORD. THE LD. AR FURTHER SUBMITTED THAT NON DEDUCTION OF TDS ON ACCOUNT OF INTEREST PAYABLE TO MODERATE LEASING AND CAPITAL SERVICES LT D. WAS ON ACCOUNT OF BONAFIDE BELIEF THAT NO TDS IS TO BE DEDUCTED IN VI EW OF CERTIFICATE U/S 197(1) OF 3 ITA NO. 5233/DEL/2016 THE INCOME TAX ACT FOR NIL DEDUCTION. THE LD. AR SU BMITTED THAT THE ASSESSEE COMPANY COMPLIED WITH THE PROVISIONS OF THE ACT BY DEPOSITING THE TDS WHERE IT WAS DUE AND HAD ADDED BACK TO ITS INCOME. THE GR OSS AMOUNT OF EXPENDITURE AND THE RECEIVING ENTITIES OFFERED THE AMOUNT IN SH ORT INCOME AND PAID DUE TAXES ON IT. THE LD. AR FURTHER SUBMITTED THAT THE RE IS NO ORDER U/S 201 (1) WAS PASSED BY THE ASSESSING OFFICER WHICH WAS DULY REFLECTED IN THE ORDER WHEREIN THE ASSESSING OFFICER HELD THAT NOT PASSIN G ORDER U/S 201(1) BEFORE INITIATION OF PROCEEDINGS U/S 271C WOULD MAKE IMPOS ITION OF PENALTY INVALID. THE LD. AR RELIED UPON THE DECISION OF INDO NISSIN FOODS LTD. VS. CIT (2004) 3 SOT 495 (BANG), SAHARA INDIA FINANCIAL CORPORATION LTD. VS. CIT (2009) 30 SOT 149 (DELHI). THUS, THE LD. AR SUBMITTED THAT T HE PENALTY PROCEEDINGS U/S 271C IS ILLEGAL AND LIABLE TO BE QUASHED. THE LD. AR FURTHER SUBMITTED THAT IN BOTH THE CASES THERE WAS BONAFIDE BELIEF FOR NOT DE DUCTING/DEPOSITING TDS. THERE WAS NO MALA FIDE INTENTION FOR NOT DEPOSITING THE TDS. THE LD. AR RELIED UPON THE DECISION OF CIT(A) VS. MUTHOOT FINANCIALS 286 ITR 71 (COCH. TRI.) WHEREIN IT IS HELD THAT INTEREST PAID TO SISTER CON CERN WITHOUT DEDUCTION OF TAX AND WHEN IT IS FOUND THAT PAYEE CONCERN WAS ASSESSE D TO TAX AND IT HAD SHOWN FULL INTEREST IN ITS INCOME, THERE WAS NO LOSS OF R EVENUE. THUS, IT WAS HELD THAT LEVY OF PENALTY U/S 271C WAS NOT JUSTIFIED. THE LD . AR FURTHER SUBMITTED THAT IN CASE OF SUKHDEO SINGH VS. JCIT ITA NO. 116/CHD/2 014 ORDER DATED 29/9/2014 WHEREIN IT IS HELD THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT NO TDS IS TO BE DEDUCTED ON INTEREST PAID TO NDFCS AS PAID TO BANKS. THE TRIBUNAL HELD THAT THE ASSESSEE WAS NOT BONAFIDE BE LIEF THAT NO TDS IS TO BE DEDUCTED ON INTEREST PAYMENT TO NBFC AS IN CASE OF BANKS, HENCE PENALTY ORDER U/S 271C IS NOT TO BE LEVIED. THUS, THE LD. AR SUBMITTED THAT THE ASSESSEES CASE IS IDENTICAL AS THE ASSESSEE WAS UN DER BONAFIDE BELIEF THAT DUE TO THE CERTIFICATE OBTAINED U/S 197 (1) OF THE ACT, WHICH WAS FOR NIL DEDUCTION FOR OPENING BALANCE, NO TDS IS TO BE DEDUCTED DURIN G THE YEAR. THE LD. AR FURTHER RELIED UPON THE DECISION IN CASE OF WIPRO G E MEDICAL SYSTEMS LTD. VS. ITO (2005) 3 SOT 627 (BANG) WHEREIN IT IS HELD THA T WHERE TAX HAS ALREADY BEEN PAID BY THE PAYEE NO PENALTY CAN BE LEVIED ON THE ASSESSEE PAYER FOR THE 4 ITA NO. 5233/DEL/2016 FAILURE TO TAX AT SOURCE. 6. THE LD. DR RELIED UPON THE PENALTY ORDER U/S 271 C AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER: 5.8 TPS ON INTEREST PAYABLE TO M/S MODERATE LEASIN G AND CAPITAL SERVICES LTD.: 5.8.1 THE APPELLANT HAD NOT DEDUCTED TAX ON THE INTEREST OF RS. 41,00,515/- PAYABLE TO THIS COMPANY. THE TAX DEDUCT IBLE ON THE SAME WAS RS. 9,29,177/-. THE APPELLANT HAS CLAIMED THAT A N IL DEDUCTION OF TAX CERTIFICATE HAD BEEN ISSUED BY THE DEPARTMENT TO TH E DEDUCTEE ON THE OPENING BALANCE. THE APPELLANT WAS UNDER BONAFIDE BELIEF TH AT NO TDS WAS TO BE DEDUCTED IN VIEW OF THE CERTIFICATE. HENCE, NO TAX WAS DEDUCTED BY THE APPELLANT. IT WAS FURTHER CONTENDED THAT THE PAYEE/ DEDUCTEE IS REGULARLY ASSESSED TO TAX AND THE INTEREST RECEIVED FROM THE APPELLANT HAS BEEN OFFERED TO TAXATION BY THE DEDUCTEES. HENCE, THERE IS NO LO SS OF REVENUE. 5.8.2 ADMITTEDLY, THE LOWER TDS CERTIFICATE HAD BEEN ISS UED ONLY IN RESPECT OF THE OPENING BALANCE. HOWEVER, THE APPELL ANT HAS NOT DEDUCTED TAX ON THE INTEREST PAYMENT ON SUBSEQUENT LOANS, DESPIT E THE FACT THAT NO LOWER TDS CERTIFICATE WAS AVAILABLE ON THE SUBSEQUENT AMO UNTS. AS THE FACTS WERE FULLY IN THE KNOWLEDGE OF THE APPELLANT, PENALTY U/ S 271C IS UPHELD IN RESPECT OF THE INTEREST ON BALANCE AMOUNT, OVER AND ABOVE T HE OPENING BALANCE. THE AO IS DIRECTED TO RE-CALCULATE THE AMOUNT OF PENALT Y IMPOSABLE U/S 271C ACCORDINGLY. 5.8.3 THE EXPLANATION THAT THE DEDUCTEE HAS PAID TAX ON T HE RECEIPT AND THAT THERE IS NO LOSS OF REVENUE IS NOT ACCEPTABLE. 5.8 CLAIM OF THE APPELLANT THAT IT IS SICK COMPANY, AN D THAT IT HAD SUO MOTO ADDED BACK THE AMOUNTS ON WHICH TAX HAD NOT BEEN DE DUCTED CANNOT COME TO THE DEFENSE OF THE APPELLANT COMPANY. THE APPELLANT IS A LOSS MAKING 5 ITA NO. 5233/DEL/2016 COMPANY DECLARING NET LOSS. EVEN AFTER ADDING BACK THE AMOUNT U/S 40A(IA) IT HAD SHOWN NET LOSS AND THERE WAS NO TAX PAYABLE BY THE APPELLANT. HENCE, THIS ACTION CANNOT ABSOLVE THE APPELLANT FORM THE R ESPONSIBILITY OF DEDUCTION OF TAX. THE APPELLANT HAS CLAIMED THAT NO ORDER U/S 201(1) HAS BEEN PASSED IN ITS CASE, HOLDING IT ASSESSEE-IN-DEFAULT, AND IN THE AB SENCE OF THIS PENALTY U/S 271C IS NOT LEVIABLE. THE APPELLANT HAS RELIED ON S EVERAL DECISIONS IN SUPPORT OF THIS CLAIM. ' (1) SAHARA INDIA FINANCIAL CORPORATION LTD. VS. CIT (2009) 30 SOT 149 (DELHI) (2) INDO NISSIN FOODS LTD. VS. CIT (2204) 3 SOT 495 (BANG) 5.8 IN ALL THE ABOVE MENTIONED DECISIONS QUOTED BY THE APPELLANT, THE JUDICIAL AUTHORITIES HAVE HELD THAT FOR NON APPLICABILITY OF PENAL PROVISIONS U/S 271C, THERE HAS TO BE A REASONABLE CAUSE FOR NON DEDUCTIO N OF TAXES AND THE REASONABLE CAUSE WILL DEPEND ON THE FACTS AND CIRCU MSTANCES IN EACH CASE. HENCE FROM THIS ANALYSIS IT CAN BE REASONABLY AFFIR MED THAT THE CASE LAWS QUOTED BY THE APPELLANT IN ITS DEFENCE CANNOT AND D OES NOT APPLY STRICTLY TO THE FACTS AND CIRCUMSTANCES OF THE GIVEN CASE. 5.9 THUS, IN VIEW OF THE ABOVE FACTS IT IS CONCLUDED TH AT THE SUBMISSION OF THE APPELLANT DOES NOT CONSTITUTE REASONABLE CAUSE FOR NON DEDUCTION OF TDS. WHILE IT IS TRUE THAT PENALTY U/S 271C IS NOT AUTOM ATIC CONSEQUENCE OF NON DEDUCTION OR SHORT DEDUCTION OF TAX AT SOURCE BUT T HE SAME IS LEVIABLE IF THERE IS NO REASONABLE CAUSE FOR SUCH TAXES NOT DEDUCTED OR SHORT DEDUCTED. THE APPELLANT IS CLEARLY AN ASSESSEE IN DEFAULT. HENCE PENALTY ORDER U/S 271C DATED 06.02.2015 PASSED BY THE JCIT IS PARTLY CONFI RMED AS DISCUSSED IN THE ABOVE PARAGRAPHS. 6. IN THE RESULT, APPEAL IS PARTLY ALLOWED. THE AO IS DIRECTED TO TAKE CONSEQUENTIAL ACTION AT THE TIME OF GIVING EFFECT T O THIS ORDER ACCORDINGLY. 6 ITA NO. 5233/DEL/2016 THE PROVISIONS OF SECTION 271C IS AS UNDER:- 271C. (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 DEDUC T OR PAY AS AFORESAID. (2) ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1) SHA LL BE IMPOSED BY THE JOINT COMMISSIONER. FROM THE PERUSAL OF THE SECTION 271C, IF THERE IS A FAILURE TO DEDUCT TAX AT SOURCE THEN SUCH PERSON IS LIABLE TO PAY THE PENALT Y UNDER THIS SECTION. MERELY BEING UNDER BONAFIDE BELIEF THAT THE TAX WAS NOT DE DUCTED AT SOURCE WILL NOT BE A GROUND FOR EXONERATING THE ASSESSEE FROM THE PROV ISIONS OF THIS SECTION. THE CASE LAWS REFERRED BY THE LD. AR WILL ALSO NOT BE A PPLICABLE IN CASE OF ASSESSEE AS THE SAME ARE ON DIFFERENT FOOTING AND FACTS. THE REFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). HENCE, A PPEAL OF THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2018 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 29/11/2018 R. NAHEED * 7 ITA NO. 5233/DEL/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 22 .1 1 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26 .11.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 2 9 .11.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 9 .11.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 9 .11.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK