Mr. Lalit Modi, New Delhi V. JCIT, New Delhi

ITA 5424/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0833 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 19-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Non compliance
• Section: 201(1)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 5424/DEL/2016 ASSTT. YEAR 2012-13 O R D E R PER AMIT SHUKLA: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 6.9.2016, PASSED BY LD. CIT(APPEALS) XXVI, NEW DELHI, IN RELATION TO THE PENALTY PROCEEDINGS U/S 271C FOR THE ASSESSMENT YEAR 2012-13, WHEREIN THE ASSESSEE HAS CHALLENGED THE PENALTY OF RS. 26,98,520/- FOR NON COMPLIANCE OF PROVISIONS OF SECTION 194A. SHRI LALIT MODI C/O SEKHRI & ASSOCIATES, FLATS NO. 104-105, 28 FEROZE GANDHI ROAD, LAJPAT NAGAR-III NEW DELHI 110024. PAN AALPM7800R VS. JCIT, CENTRAL RANGE-4, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESS EE BY: SHRI R.S. SINGHVI,CA SHRI SATYAJEET GOEL, CA DEPARTMENT BY : SHRI AMIT JAIN, SR. DR DATE OF HEARING 20/06 /201 8 DATE OF PRONOUNCEMENT 14 / 09 /2018 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AS WELL AS IN THE BUSINESS OF REAL ESTATE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ENSUED U/S 143(3), THE AO NOTICED THAT ASSESSEE HAS PAID INTEREST AMOUNTING TO RS. 2,69,85,207/- TO M/S. DELHI BRASS & METAL WORKS; WANS INVESTMENT AND FINANCE PVT. LTD.; AND SPAN HOLDINGS PVT. LTD., BUT HAD NOT DEDUCTED TAX AT SOURCE ON INTEREST PAID OF THE SAID AMOUNT. IN RESPONSE TO THE SHOW CAUSE NOTICE BY THE ASSESSING OFFICER, ASSESSEE SUBMITTED THAT HE HAS TAKEN PERSONAL LOAN FROM THE SAID COMPANIES AND THE INTEREST AMOUNTING TO RS.2,69,85,207/- WAS PAID OUT OF HIS DRAWING ACCOUNT AND THE SAID AMOUNT HAS NOT BEEN CLAIMED AS BUSINESS EXPENSE IN THE PROFIT AND LOSS ACCOUNT, HENCE PROVISIONS OF TDS WERE NOT APPLICABLE. AO THOUGH ACCEPTED THAT ASSESSEE HAS NOT CLAIMED THE SAID AMOUNT AS BUSINESS EXPENSE, BUT, SINCE THE ASSESSEE IS SUBJECT TO AUDIT U/S 44AB, THEREFORE, HE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON THE SAID INTEREST PAYMENT. ACCORDINGLY, PENALTY U/S 271C WAS INITIATED. 3. IN THE COURSE OF PENALTY PROCEEDINGS IN RESPONSE TO THE SHOW CAUSE NOTICE BY THE ASSESSING OFFICER, ASSESSEE STATED THAT HE IS NOT LIABLE FOR PENALTY, BECAUSE, FIRSTLY , TAX HAVE ALREADY PAID THE TAX BY THE PAYEES ON INTEREST RECEIVED FROM THE ASSESSEE AND NO LOSS HAS BEEN SUFFERED TO THE REVENUE; AND SECONDLY , ASSESSEE HAS NOT BEEN TREATED AS ASSESSEE IN DEFAULT U/S 201(1) AND THEREFORE, PENALTY U/S 271C CANNOT BE LEVIED. IN SUPPORT OF SUCH CONTENTION, ASSESSEE HAD STRONGLY RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DEWAN CHAND, 17 DTR 337 AND CATENA OF OTHER DECISIONS AS INCORPORATED IN THE IMPUGNED ORDERS. LD. AO HOWEVER HELD THAT PENALTY U/S 271C IS INDEPENDENT FROM PROVISION OF SECTION 201 AND THERE IS NO CONDITION IN THE STATUTE THAT PENALTY U/S 271C WILL BE LEVIED ONLY WHEN THE ASSESSEE IS TREATED AS ASSESSEE IN DEFAULT IN 3 TERMS OF SECTION 201. ACCORDINGLY, AFTER DETAILED DISCUSSION HE HELD THAT PENALTY IS LEVIABLE AND ASSESSEES PLEA THAT HE WAS NOT AWARE OF THE LAW IS NO EXCUSE. 4. LD. CIT (A) TOO HAS CONFIRMED THE PENALTY AFTER REJECTING THE ASSESSEES SUBMISSIONS AND THE JUDGMENTS RELIED UPON BY THE ASSESSEE. HE HELD THAT THE AMENDMENT IN SECTION 201(1A) AS RELIED UPON BY THE ASSESSEE THAT WHEN THE PAYEES HAVE SHOWN THE INTEREST AS THEIR INCOME AND HAVE PAID THE TAXES THEN ASSESSEE IS NOT GUILTY OF CONTUMACIOUS CONDUCT AND IT IS ONLY MECHANISM FOR COLLECTION OF DUE TAX AND THERE IS NO CORRESPONDING AMENDMENT IN THE PROVISION OF SECTION 271C. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOW THIS ISSUE, THAT IF THE PAYEES HAVE SHOWN THE INTEREST INCOME IN THE RETURN OF INCOME AND HAVE PAID TAX THEREON, THEN NO PENALTY U/S 271C CAN BE LEVIED AND IN SUPPORT HE RELIED UPON THE FOLLOWING DECISIONS :- A. CIT V. H P STATE ELECTRICITY BOARD (HP HIGH COURT) (31/05/2017); B. ACIT VS. M/S. GOOD HEALTH PLAN LTD. (ITAT HYDERABAD); C. M/S. ASHA BUILDERS LTD. V. JCIT (ITAT AMRITSAR); D. ITA V. DLF SOUTHERN HOMES PVT. LTD. (DELHI ITAT) (15/12/17); E. CIT VS. BANK OF NOVA SCOTIA (2016) 380 ITR 550 (SC). 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE LD. CIT (A). 7. AFTER CONSIDERING THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER AND THE MATERIAL PLACED ON RECORD, WE FIND THAT PENALTY HAS BEEN LEVIED ON THE GROUND THAT ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FOR THE INTEREST PAYMENT MADE TO THE VARIOUS PARTIES. ASSESSEES CASE HAS BEEN THAT, FIRSTLY , THE INTEREST EXPENSE HAS NOT BEEN CLAIMED AS BUSINESS EXPENSE BUT DEBITED TO CAPITAL ACCOUNT, 4 THEREFORE HE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE; SECONDLY , THE PAYEES HAVE ALREADY SHOWN THE INTEREST INCOME IN THEIR INCOME TAX RETURN AND HAVE ALSO PAID THE TAX AND COPY OF CERTIFICATE IN FORM 26 WAS FILED; AND LASTLY , ASSESSEE WAS NEVER TREATED AS ASSESSEE IN DEFAULT AND THEREFORE, IN VIEW OF VARIOUS DECISIONS THE PENALTY COULD NOT BE LEVIED. WE FIND THAT NOW THERE IS CATENA OF JUDGMENT INCLUDING THAT OF HONBLE HIMACHAL PRADESH IN THE CASE OF H.P. STATE ELECTRICITY BOARD (SUPRA) WHEREIN THEIR LORDSHIPS HAVE HELD THAT IF THE ASSESSEE HAS NOT BEEN TREATED AS ASSESSEE IN DEFAULT IN TERMS OF SECTION 201(1), THEN IT COULD NOT BE HELD ASSESSEE HAS FAILED TO DEDUCT AT SOURCE IN TERMS OF PROVISION CONTAINED IN CHAPTER XVIIB AND ACCORDINGLY, THERE IS NO QUESTION OF LEVY OF PENALTY U/S 271C. HONBLE SUPREME COURT ALSO IN THE CASE OF CIT VS. BANK OF NOVA SCOTIA (SUPRA) HAS UPHELD THE DELETION OF PENALTY BASED ON JUDGMENTS OF HONBLE DELHI HIGH COURT IN THE CASE OF ITOCHU CORPORATION 268 ITR 172 (DEL) AND IN THE CASE OF CIT VS. MITSUI & COMPANY LTD. 272 ITR 545, THAT THERE COULD NOT BE CONTUMACIOUS CONDUCT BY THE ASSESSEE. HERE IN THIS CASE ALSO THERE IS NO CONTUMACIOUS CONDUCT BY THE ASSESSEE FOR NOT DEDUCTING THE TDS FOR THE REASONS GIVEN ABOVE, THAT IS, INTEREST PAID WAS NOT CLAIMED AS BUSINESS EXPENSE ALBEIT PAID FROM HIS CAPITAL ACCOUNT AND PAYEES HAVE PAID THE TAXES ON SUCH INTEREST INCOME IN THEIR INCOME TAX RETURN. EVEN OTHERWISE ALSO, THE PENALTY U/S 271C IS LEVIED WHEN ASSESSEE FAILS TO DEDUCT WHOLE OR ANY PART OF THE DEDUCTION AS REQUIRED UNDER THE PROVISION OF CHAPTER XVIIB. IF THE TAX WHICH WAS REQUIRED TO BE DEDUCTED HAS BEEN PAID BY THE PAYEE, THEN IN VIEW OF PROVISION CONTAINED IN SECTION 201(1) READ WITH AMENDMENT BROUGHT BY THE FINANCE ACT 2012, ASSESSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT AND NO TAX IS RECOVERABLE FROM HIM. IN SUCH A SITUATION IT CANNOT BE HELD THAT HE IS TO BE LIABLE FOR PENALTY 5 U/S 271C. ACCORDINGLY, WE DELETE THE PENALTY AS CONFIRMED BY THE LD. CIT (A). 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER, 2018. SD/- SD/- (G.D.AGRAWAL) (AMIT SHUKLA) PRESIDENT JUDICIAL MEMBER DATED: 14/09/2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI