EMC, MUMBAI V. ADDL CIT TDS RG-1, MUMBAI

ITA 5577/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1339 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 17-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 12-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Opportunity of being heard; Question of law; Non-deduction of tax; Reasonable cause; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI A.L. GEHLO T ,(AM) SL.NO. ITA NO. APPELLANT RESPONDENT ASSESSMENT YEAR 1. 5574/MUM/2009 M/S. EMC C/O. HINDUSTAN STEEL & METAL WORKS, GALA NO.2 B/H ACME INDUSTRIAL ESTATE, SEWARI BUNDER ROAD, MUMBAI-400 015. P.A. NO. (AAAFE 8003 D) ADDL. CIT TDS RANGE-1, AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400 001. 2000-01 2. 5577/MUM/2009 M/S. EMC MUMBAI-15 ADDL. CIT, TDS, RANGE-1, MUMBAI-1 2001-02 3. 5579/MUM/2009 M/S. EMC MUMBAI-15 ADDL. CIT, TDS, RANGE-1, MUMBAI-1 2002-03 4. 5580/MUM/2009 M/S. EMC MUMBAI-15 ADDL. CIT, TDS, RANGE-1, MUMBAI-1 2003-04 APPELLANT BY : SHRI VIPUL JOSHI RESPONDENT BY : SHRI JI TENDRA YADAV O R D E R PER D.K. AGARWAL (JM). ALL THESE FOUR APPEALS PREFERRED BY THE ASSESSEE ARE DIRE CTED AGAINST THE SEPARATE ORDERS DATED 15.4.2008 PASSED BY T HE LD. CIT(A) FOR THE ASSESSMENT YEARS 2000-01, 2001-02, 2002-03 AND 2 003-04. ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 2 SINCE FACTS ARE IDENTICAL AND ISSUE INVOLVED IS COMMON, A LL THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED THE FACTS OF THE CASE EXTRACTED FROM ITA NO.5574/MUM/2009 FOR THE ASSESSMENT YEAR 2000-01 ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM WAS ENGAGED IN THE BUSINESS OF PROVIDING EVENT MANAGEMENT SERVICES TO VARIOUS CLIENTS AND CUSTOMERS. A SURVEY U/S.133A OF THE INCOME TAX ACT, 1961 (THE ACT) WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20.2.2004. DUR ING THE COURSE OF SURVEY IT WAS NOTICED THAT THE ASSESSEE HAD NOT DE DUCTED TAX AT SOURCE U/S.194C / 194J IN RESPECT OF CERTAIN PAYMENTS. THE ASSESSING OFFICER, THEREFORE, TREATED THE ASSESSEE IN DEFAUL T U/S.201(1) IN RESPECT OF TAX NOT DEDUCTED AND CHARGED CONSEQUENTIAL INTEREST U/S. 201(1A) FOR THE ASSESSMENT YEARS 2000-01, 2001-02, 2002 -03 AND 2003-04. THE ASSESSING OFFICER WHILE COMPUTING THE TAX LI ABILITY ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE TREATED THE ASSE SSEE AS A CONTRACTOR LIABLE TO DEDUCT TDS INCLUDING SURCHARGE @ 2.2 % U/S.194C(1) AND IN RESPECT OF CERTAIN FUNCTIONS I.E. ART WORK AND PHOTOGRAPHY TREATED THE PARTIES AS PROFESSIONALS LIABLE TO DEDUCT TDS @ 5.5% U/S.194J. ON APPEAL, THE LD. CIT(A) , WHILE O BSERVING THAT THE NATURE OF PAYMENTS MADE BY THE ASSESSEE ARE CENTAINLY CONTRACTUAL AS ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 3 WELL AS PROFESSIONAL, UPHELD THE ACTION OF THE ASSESSING OF FICER APPLYING THE PROVISIONS OF SEC.194C AND 194J. ON FURTH ER APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL IN EMC VS. ITO , T DS (2010) 37 SOT 31(MUM) READ WITH ORDER PASSED IN MA NO.258 TO 261/M/ 2010 DATED 11.6.2010 HAS HELD THAT IN THE CASES IN WHICH THE ASSESSE E HAD BEEN TREATED BY THE CLIENTS AS PROFESSIONAL U/S.194J IN RESPECT OF PAYMENT MADE TO IT, THE ASSESSEE WILL BE TREATED AS CONTRACTOR AN D TAX WILL BE DEDUCTABLE U/S.194C(1) AND IN CASES IN WHICH THE ASSESSEE HAD BEEN TREATED BY THE CLIENTS AS A CONTRACTOR THE ASSESSEE WILL TRE ATED AS SUB- CONTRACTOR AND TAX WILL BE DEDUCTABLE U/S.194C(2). THE ASSESSING OFFICER WILL PASS A FRESH ORDER AFTER NECESSARY VERIFICATI ON AND AFTER OPPORTUNITY TO THE ASSESSEE AND ACCORDINGLY ALLOWED THE APPEAL FOR STATISTICAL PURPOSES. 3. SINCE THE ASSESSEE HAS NOT FILED TDS RETURNS WITHIN THE TIME PRESCRIBED, THE ASSESSING OFFICER TREATED THE ASSESSEE IN DEF AULT ATTRACTING LEVY OF PENALTY U/S.272A(2)(C) OF THE ACT. ACCORDINGLY THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE LEVIED. IN REPLY IT WAS STATED BY THE ASSESSEE THAT (I) IN THE ORDER U/S.201/201(1A) THE ASSESSING OFFICER HAS NOT RECORDED ANY FINDING OF PENALTY AND HAS NOT ISSUED ANY NOTICE INITIATING PENAL TY PROCEEDING, THEREFORE ,PENALTY PROCEEDING IS BAD IN LAW; (II) THE ASSESSEES APPEALS ARE PENDING BEFORE THE TRIBUNAL, HENCE, LEVY OF PENA LTY IS PRE-MATURE ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 4 AND (III) THE ASSESSEE HAS NOT DEDUCTED ANY TAX AT SOURCE A ND HENCE, NO RETURN WAS FILED. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION. HE WAS OF THE VIEW THAT THE ASSESSEE'S CONTENTION THAT TAX HAS NOT BEEN DEDUCTED, HENCE, NO T DS RETURN HAS BEEN FILED IS ABSURD BECAUSE THE FIRST OBLIGATION CAST UPON BY THE STATUTE ON ANY PERSON IS TO DEDUCT TAX IN RESPECT OF THE INCOME IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER-XVII, THEN TO FILE RETURN IN RESPECT THEREOF, AND THEN OTHER OBLIGATIONS STATED THER EIN. THE ASSESSING OFFICER FURTHER OBSERVED THAT IN THE ABSENCE OF A NY REASONABLE CAUSE FOR SUCH DEFAULT, THE ASSESSEE IS LIABLE TO PENALTY U/S.272A(2)(C) OF THE ACT AND ACCORDINGLY HE IMPOSED PEN ALTY OF RS.78,192/- BEING RS.100/- PER DAY, VIDE ORDER DATED 24.3.2008 PASSED U/S. 272A(2)(C) OF THE ACT. ON APPEAL, THE LD. C IT(A), WHILE OBSERVING THAT THE ASSESSEE HAS NOT GIVEN SUFFICIENT REASO N FOR NON- COMPLIANCE OF TDS PROVISIONS, HELD THAT IT IS A FIT CASE F OR LEVY OF PENALTY U/S.272A(2)(C). HOWEVER, HE DIRECTED THE ASSESSI NG OFFICER TO REDUCE THE QUANTUM OF PENALTY IN VIEW OF HIS ORDER PA SSED IN THE APPEALS FILED AGAINST ORDER U/S.201(1) / 201(1A) OF T HE ACT. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US TAKING FOUR GROUNDS OF APPEAL, CHALLE NGING IN ALL THE GROUNDS THE VALIDITY OF THE ORDER PASSED BY THE ASSESSING OFFICER AND THE LD. CIT(A) . HOWEVER, AT THE TIME OF HEARING T HE LD. COUNSEL FOR ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 5 THE ASSESSEE HAS ARGUED GROUND NO.3 ONLY COMMON IN ALL TH E APPEALS WHICH READS AS UNDER : 3. THE LD. CIT(A) FAILED TO ADJUDICATE ON THE PLEA OF YOUR APPELLANT THAT THE LD. ADDITIONAL CIT FAILED T O APPRECIATE THAT THERE WAS NO OBLIGATION ON YOUR APPELLANTS TO FILE THE TDS RETURN INASMUCH AS THE Y HAD NEITHER DEDUCTED ANY TAX AT SOURCE NOR PAID ANY SUC H TAX AND THUS ERRED IN LEVYING PENALTY ON NON-EXISTENT G ROUND OF FAILURE TO FILE TDS RETURN. 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE ASSESSEE HAVING NOT DEDUCTED ANY TAX AT SOURCE, THERE WAS NO OCCASION FOR HIM TO FILE DETAILS OF TAX OR THE RETURN A ND, THEREFORE, PENALTY U/S.272A(2)(C) IS NOT LEVIABLE FOR THE ASSESSME NT YEARS 2000-01, 2001-02 AND 2002-03 AND FOR THIS PROPOSITIO N THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS: 1. CIT VS. SAHARA INDIA MUTUAL BENEFIT CO. LTD. (2006) 157 TAXMAN 52 (ALL.). 2. CIT VS. SHRI RAM MEMORIAL EDUCATION PROMOTION SOCIETY (2006) 150 TAXMAN 58(ALL.) AND 3. CIT VS. SAHARA INDIA FINANCIAL CORPORATION LTD.(2007 ) 158 TAXMAN 435 (ALL.) HE FURTHER SUBMITS THAT FOR THE ASSESSMENT YEAR 2003-04 TH E ASSESSEE HAS DEDUCTED TDS AND HAS FILED TDS RETURN ON 7.9.2004, THEREFORE, THE PENALTY ON ACCOUNT OF DELAYED PAYMENT OF TDS IS NOT LEVIABLE IN VIEW OF THE ABOVE DECISIONS OR IN ALTERNATIVE, HE SUBMI TS THAT SINCE THE ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 6 ASSESSING OFFICER HAS NOT CONSIDERED THE ABOVE FACTS, THEREF ORE, THE MATTER FOR THE ASSESSMENT YEAR 2003-04 MAY BE SET ASIDE T O THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE AFORESAID DECISIONS. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER O F THE ASSESSING OFFICER AND LD.CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER CO NSIDERING THE RELEVANT PROVISIONS OF SECTION 272A(2)(C) OF THE ACT WE F IND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT PENAL TY IS NOT LEVIABLE IF THE TAX HAS NOT BEEN DEDUCTED AT SOURCE. IN THE CASE OF THE ASSESSEE ADMITTEDLY THE TAX HAS NOT BEEN DEDUCTED FOR THE ASSESSMENT YEARS 2000-01, 2001-02 AND 2002-03. 8. IN CIT VS. SAHARA INDIA MUTUAL BENEFIT CO. LTD . (2006) 157 TAXMAN 52 (ALL.) THEIR LORDSHIPS AFTER CONSIDERING THE JUDGMENTS IN CIT VS. SAHARA AIRLINES LTD. AND CIT VS. SRI RAM MEMOR IAL EDUCATION PROMOTION SOCIETY SINCE REPORTED IN (2006) 152 TAXMAN 646 (ALL.) AND (2006) 152 TAXMAN 257 (ALL.) HAVE OBSERVED AND H ELD IN PARA 6, 7, 8 AND 9 OF THE ORDER AS UNDER : 6. HOWEVER, SHRI WASEEQUDDIN, THE LEARNED COUNSEL F OR THE RESPONDENT HAS SUBMITTED THAT THE MATTER STANDS ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 7 CONCLUDED BY THE JUDGMENTS OF THIS COURT RENDERED I N INCOME-TAX APPEAL NO.163 OF 2005, CIT V. SAHARA AIR LINES LTD. DECIDED ON 9-12-2005 AND INCOME-TAX APPEAL NO. 49 OF 2005, CIT V. SRI RAM MEMORIAL EDUCATION PROMOTIO N SOCIETY DECIDED ON 26-5-2005 AND THERE IS NO SUBSTA NTIAL QUESTION OF LAW NOW TO BE DECIDED AND THESE APPEALS ARE LIABLE TO BE DISMISSED. THE COPY OF THE JUDGMENT AND ORDERS OF THE SAID TWO APPEALS HAVE BEEN PLACED BEF ORE US. IN SRI RAM MEMORIAL EDUCATION PROMOTION SOCIET YS CASE(SUPRA) IN WHICH ONE OF US (R.P.YADAV,J) WAS A MEMBER, THE VIEW TAKEN BY THIS COURT WAS THAT ONCE A PERSON PRESCRIBED OR CONCERNED OR THE ASSESSEE HAS BEEN SUBJECTED TO A PENALTY UNDER SECTION 271C, FOR NOT DEDUCTING THE TAX AT SOURCE, THERE WOULD NOT ARISE ANY OCCASION FOR LEVYING A PENALTY UNDER SECTIONS 272A( C) AND 272A(G) FOR NON-COMPLIANCE OF THE PROVISIONS OF SEC TIONS 203 AND 206. IN OTHER WORDS, IN CASE THE TAX HAS N OT BEEN DEDUCTED AT SOURCE, THE QUESTION OF ISSUING TH E CERTIFICATE OF TAX UNDER SECTION 203 OR THAT OF FIL ING OF RETURN UNDER SECTION 206 WOULD NOT ARISE AT ALL. TH AT BEING SO, THE QUESTION OF IMPOSING PENALTY FOR VIOL ATION OF THE AFORESAID PROVISIONS, WOULD ALSO NOT ARISE. 7. IN SAHARA AIRLINES LTD.S CASE(SUPRA), THE AFOR ESAID VIEW WAS REITERATED WITH THE FOLLOWING ADDITION THA T IF THE TAX HAS NOT BEEN DEDUCTED AT SOURCE, THERE ARISES N O QUESTION FOR IMPOSING ANY PENALTY UNDER SECTION 272 A(G) OF THE ACT FOR NOT FURNISHING THE CERTIFICATES FOR TAX TO THE PERSON FROM WHOSE ACCOUNT THE TAX HAS BEEN DEDUCTED . 8. THE LEARNED COUNSEL FOR APPELLANTS HAS STATED T HAT ON INQUIRY, HE HAS COME TO KNOW THAT THE AFORESAID ORD ERS PASSED BY THIS COURT IN THE SAID INCOME-TAX APPEALS HAVE NOT BEEN CHALLENGED BEFORE THE HONBLE APEX COURT BY FILING S.L.P. AND, THEREFORE, THEY HAVE ATTAINED F INALITY. 9. IN VIEW OF THE AFORESAID TWO JUDGMENTS, WHICH H AVE NOT BEEN CHALLENGED BEFORE THE HONBLE SUPREME COURT THE SUBSTANTIAL QUESTIONS OF LAW RAISED BY THE APPE LLANT STAND CONCLUDED AND WE FIND NO ILLEGALITY OR INCORR ECTNESS IN THE ORDER PASSED BY THE TRIBUNAL. SINCE THE MAT TER BEING SQUARELY COVERED BY THE SAID TWO JUDGMENTS, N O INTERFERENCE BY THIS COURT IS REQUIRED. 9. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE ABOVE DE CISION HOLD THAT ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 8 SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE THERE ARISES NO QUESTION FOR IMPOSING PENALTY U/S.272A(2)(C) OF THE ACT FOR NOT FURNISHING THE RETURNS, STATEMENTS OR PARTICULARS UNDER SE CTION 206 OF THE ACT AND ACCORDINGLY THE PENALTY IMPOSED BY THE ASSES SING OFFICER AND SUSTAINED BY THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2 000-01, 2001-02 AND 2002-03 IS DELETED. 10. WITH REGARD TO THE IMPOSITION OF PENALTY FOR TH E ASSESSMENT YEAR 2003-04 WE FIND THAT THE ASSESSING OFFICER HAS IMPOSE D PENALTY U/S.272A(2)(C) ON THE GROUND THAT THE ASSESSEE HAD NOT D EDUCTED TAX AT SOURCE AND NO TDS RETURN HAS BEEN FILED. BEFORE TH E LD. CIT(A) IT WAS CONTENDED BY THE ASSESSEE THAT THE ASSESSEE HAD FILED TDS RETURN ON 7.9.2004. THE LD. CIT(A) ACCEPTED THE PLEA TAKEN BY THE ASSESSEE AND RESTRICTED THE PENALTY FOR THE PERIOD FROM 30.6.2 003 TO 7.9.2004 I.E. FOR 434 DAYS. SINCE THE RELEVANT FACTS HAVE NOT B EEN EXAMINED BY THE ASSESSING OFFICER, THEREFORE, WE ARE OF THE VIEW THA T IN THE INTEREST OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE REVE NUE AUTHORITIES FOR THE ASSESSMENT YEAR 2003-04 AND SEND BACK THE MATTER TO THE FILE OF ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF THE OUR AFORESAID OBSERVATIONS AND ACCORDING T O LAW INCLUDING THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. THE ITA NO.5574, 5577, 5579 & 5580/M/09 A.Y:00-01 TO 03-04 9 GROUND TAKEN BY THE ASSESSEE IS THEREFORE, PARTLY ALLOWE D FOR STATISTICAL PURPOSES. 11. IN THE RESULT THE APPEALS FOR THE ASSESSMENT YEARS 20 00-01, 2001-02 AND 2002-03 ARE ALLOWED AND THE APPEAL FOR THE ASSESSMENT YEAR 2003-04 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 26.6.2010 SD/- SD/- (A.L. GEHLOT) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.6. 2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.