The ITO, Ward-TDS-4, Ahmedabad V. Excel Industries Ltd., Bhavnagar

ITA 56/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72887 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 1993-1994
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NOS.56 & 57/AHD/2011 A.YS. 1993-94 AND 1994-95 THE ITO, TDS-4, AHMEDABAD. V/S. EXCEL INDUSTRIES LTD., 6/2, RUVAPARI ROAD, BHAVNAGAR. (APPELLANT) (RESPONDENT) CO NOS.34 & 35/AHD/2011 (ARISING OUT OF ITA NOS.56 & 57/AHD/2011) A.YS. 1993-94 AND 1994-95 EXCEL INDUSTRIES LTD., 6/2, RUVAPARI ROAD, BHAVNAGAR. V/S. THE ITO, TDS-4, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J.P. JHANGID, SR.D.R. ASSESSEE(S) BY : SHRI DHINAL SHAH, AR / DATE OF HEARING : 20/01/2014 / DATE OF PRONOUNCEMENT: 24/01/2014 / O R D E R PER BENCH: REVENUE HAS FILED THE APPEALS AND THE ASSESSEE IS IN CROSS OBJECTIONS ARISING FROM A CONSOLIDATED ORDER OF LEA RNED CIT(A)- XXI, AHMEDABAD FOR A.Y. 1993-94 & 1994-95 AND THE G ROUNDS OF THE REVENUE FOR THE YEARS INVOLVED ARE REPRODUCED B ELOW. A. ASSESSMENT YEARS 1993-94 . THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS O F THE CASE IN DELETING THE PENALTY ORDER PASSED U/S.272A(2)(G) OF THE IT ACT OF RS.17,95,800/- FOR A.Y. 1993-94 BY THE AO. ITA NOS.56, 57/AHD/2011 AND CO NO.34, 35/AHD/2011 EXCEL INDUSTRIES LTD., BHAVNAGAR VS. ITO, WARD TDS- 4, AHMEDABAD A.YS. 1993-94 AND 1994-95 - 2 - B. ASSESSMENT YEAR 1994-95 THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS O F THE CASE IN DELETING THE PENALTY ORDER PASSED U/S.272A(2)(G) OF THE IT ACT OF RS.49,09,700/- FOR A.Y. 1994-95 BY THE AO. 2. AT THE OUTSET, WE HAVE BEEN INFORMED THAT THE FA CTS FOR THE PURPOSE OF LEVY OF IMPUGNED PENALTY FOR BOTH THE YE ARS ARE IDENTICAL. WHILE LEVYING THE PENALTY U/S. 272A(2)(G ) VIDE TWO SEPARATE ORDERS DATED 20 TH AND 21 ST OF NOVEMBER, 1995 IT WAS NOTED BY THE AO AS UNDER: IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSED AT LENGTH IN DETAIL IN FOREGOING PARAS, IT IS ESTABLISHED AND PROVED BEYON D DOUBT THAT THE ASSESSEE HAS CLEARLY AND OBVIOUSLY COMMITTED THE DE FAULT IN TERMS OF PROVISIONS OF SECTION 203 OF THE ACT BY ISSUING CER TIFICATES OF TAX DEDUCTED AT SOURCE FROM THE CREDIT/PAYMENTS OF INCO ME BY WAY OF ANY SUM TO THE ACCOUNT OF RESPECTIVE CONTRACTORS IN PUR SUANCE OF A CONTRACT U/S. 194-C OF THE ACT BEYOND THE STIPULATE D TIME LIMIT OF ONE MONTH AND FOURTEEN DAYS FROM THE DATE OF SUCH SUM C REDITED/PAID PRESCRIBED UNDER THE PROVISIONS OF RULE 31 OF THE I T RULES, 1962 WITHOUT ANY SUFFICIENT AND REASONABLE CAUSE AND SUC H THE DEFAULT AS COMMITTED ARE PUNISHABLE U/S. 272A(2)(G) READ WITH SECTION 272A(3)(C) OF THE ACT. I AM, THEREFORE, SATISFIED T HAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S.272A(2)(G) OF THE ACT. ON V ERIFICATION OF THE ANNUAL RETURN IN FORM NO.26-C ALONGWITH COPY OF CER TIFICATE OR TDS SUBMITTED BY THE ASSESSEE FOR THE PERIOD OF F.Y.199 2-93 IT IS NOTICED THAT THE ASSESSEE ISSUED 21 (TWENTY ONE) CERTIFICAT E OF TDS TO THE CONTRACTORS SHOWING CREDIT/PAYMENTS OF SUM OF CONTR ACT TO THE ACCOUNT OF CONTRACTORS U/S.194-C OF THE ACT. IT IS SEEN THA T THE ASSESSEE ISSUED 21 COMBINED AND CONSOLIDATED SHOWING 92 PAYMENTS MA DE TO THE CONTRACTORS ON DIFFERENT DATES DURING THE PERIOD F. Y. 1992-93 AND THE TAX WAS DEDUCTED AT SOURCE ACCORDINGLY. THUS, THE D UE DATE FOR ISSUE ON TDS CERTIFICATE IN EACH PAYMENT OF CONTRACT AMOU NT WAS DIFFERENT. HOWEVER, THE COMBINED AND CONSOLIDATED CERTIFICATES OF TDS SHOWING THE CREDIT/PAYMENT OF CONTRACT AMOUNT TO THE ACCOUN T OF EACH CONTRACTOR WERE ISSUED AS LATE AS ON 31.05.1993 IN CASE OF 92 PAYMENTS/CREDIT THEREOF. THE AGGREGATE DAYS OF DEFA ULT IN RESPECT OF 92 PAYMENTS/CREDIT OF CONTRACT AMOUNT TO THE ACCOUNTS TO CONTRACTORS WORKED OUT AT 17958 DAYS. THE MINIMUM PENALTY U/S. 272A(2)(G) OF THE ACT COMES TO RS.17,95,800/- WORKED OUT AT RS.100/- PER DAY AS AGAINST MAXIMUM PENALTY COMES TO RS.35,91,600/- AT RS.200/- PER DAY FOR 17958 DAYS OF DEFAULT FOR F.Y. 1992-93. CONSIDERING AND KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE IS DIS CUSSED HEREINABOVE, I IMPOSE PENALTY U/S. 272A(2)(G) OF THE ACT FOR THE AMOUNT AMOUNTING TO RS.17,95,800/- (RUPEES SEVENTEEN LACS NINETY FIV E THOUSAND EIGHT ITA NOS.56, 57/AHD/2011 AND CO NO.34, 35/AHD/2011 EXCEL INDUSTRIES LTD., BHAVNAGAR VS. ITO, WARD TDS- 4, AHMEDABAD A.YS. 1993-94 AND 1994-95 - 3 - HUNDRED ONLY) WORKED OUT AT RS.100 PER DAY FOR 1795 8 DAYS OF DEFAULT AS AGAINST MAXIMUM PENALTY OF RS.35,91,600/- LEVIAB LE IN THIS CASE FOR A.Y. 1992-93. 2.1 IN AN IDENTICAL MANNER FOR A.Y.1994-95, THE AO HAS COMPUTED THE DATES OF DELAY AND IMPOSED A PENALTY O F RS.49,09,700/-. FOR BOTH THE YEARS, THE LEVY OF PEN ALTY WAS CHALLENGED BEFORE LEARNED CIT(A), WHO HAS DELETED T HE PENALTY THROUGH A CONSOLIDATED ORDER IN THE FOLLOWING MANNE R:- 9. THE CRUX OF THE MATTER THEREFORE IS WHETHER THE FAILURE OF THE ASSESSEE TO FURNISH THE CERTIFICATE IN RESPECT OF T AX DEDUCTED AT SOURCE WITHIN THE TIME PRESCRIBED UNDER THE RELEVANT SECTI ON 203 READ WITH RULE 31 DISCLOSES AN OFFENCE FOR THE PURPOSE OF SEC TION 272A(2)(G). IT IS SUBMITTED THAT THE ONLY OFFENCE COVERED BY THE P ROVISION OF THE SECTION 272A(2)(G) IS THE CASE WHERE AN ASSESSEE HA VING DEDUCTED TAX AT SOURCE DOES NOT FURNISH CERTIFICATE OF TAX DEDUC TED AT SOURCE TO THE PERSON CONCERNED. THE FAILURE TO FURNISH THE AFORES AID CERTIFICATE WITHIN THE PRESCRIBED TIME IS NOT AN OFFENCE WHICH IS PUNISHABLE UNDER THE PROVISIONS OF THE SECTION 272A(2)(G). THIS IS C LEAR WHEN ON READS THE LANGUAGE OF THE 272(2)(G) AND COMPARES IT WITH THE OTHER PROVISIONS OF THE ACT DEALING WITH PENALTY. WHEREVE R A PENALTY OR PROSECUTION IS IMPOSABLE FOR THE OFFENCE OF THE FAI LURE TO FURNISH WITHIN PRESCRIBED TIME, A SPECIFIC PROVISION IS MADE IN TH E ACT FOR THE SAME. BY WAY OF ILLUSTRATION, ATTENTION IS INVITED TO THE PROVISIONS CONTAINED IN SECTION 271(1)(A) (NOW OMITTED) WHICH READ AS UN DER .. 18. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT. IN THE PRESENT CASE, IT IS CLEAR THAT TH ERE WAS A REASONABLE CAUSE FOR DELAY OF ISSUE OF TDS CERTIFICATES SINCE THE FORMS WERE NEW AND WERE NOT READILY AVAILABLE. THE TAX DEDUCTED AT SOURCE HAD BEEN PAID IN TIME AND THE NECESSARY RETURN OF THE SAME W AS DULY FILED IN TIME. NO LOSS OF REVENUE HAS OCCURRED ON ACCOUNT OF LATE ISSUE OF TAX DEDUCTION CERTIFICATES AND NONE OF THE CONTRACTORS/ DEPOSIT HOLDERS HAD RAISED ANY GRIEVANCE ON ACCOUNT OF LATE RECEIPT OF TDS CERTIFICATES. KEEPING IN VIEW THE FACTS IN THE PRESENT CASE, I AG REE THAT THE DEFAULT IS MERELY TECHNICAL OR VENIAL IN NATURE AND ACCORDINGL Y, NO PENALTY OUGHT TO BE LEVIED. FOR THIS PURPOSE, I FIND SUPPORT FROM THE OBSERVATIONS OF THE SUPREME COURT IN CASE OF HINDUSTAN STEEL LTD. V . STATE OF ORISSA (SUPRA). SIMILAR VIEW WAS ALSO EXPRESSED BY THE JUR ISDICTIONAL HIGH COURT IN CASE OF CIT V. HARSIDDH CONSTRUCTION PVT. LTD (SUPRA) RELYING ON THE OBSERVATIONS OF THE APEX COURT. HENCE, I AM OF THE VIEW THAT THE PENALTY LEVIED U/S.272A(2)(G) OUGHT TO BE DELETED. ITA NOS.56, 57/AHD/2011 AND CO NO.34, 35/AHD/2011 EXCEL INDUSTRIES LTD., BHAVNAGAR VS. ITO, WARD TDS- 4, AHMEDABAD A.YS. 1993-94 AND 1994-95 - 4 - 19. IN VIEW OF THE ABOVE LEGAL POSITION, I SET ASID E THE ORDERS DATED 21.11.1995 FOR A.Y.1993-94 AND DATED 20.11.1995 FOR A.Y. 1994-95 PASSED BY THE DCIT, BHAVNAGAR RANGE AND ALLOW BOTH THE APPEALS WITH CONSEQUENTIAL RELIEF TO THE APPELLANT. 3. WITH THIS FACTUAL AND LEGAL BACKGROUND, WE HAVE HEARD BOTH THE SIDES. AT THE OUTSET, WE HAVE BEEN INFORMED THA T ALMOST ON IDENTICAL CIRCUMSTANCES THE PENALTY U/S.272A(2)(G) HAD BEEN DELETED BY THE RESPECTED JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. HARSIDDH CONSTRUCTION PVT. LTD., 118 TAXMANN 760 (GUJ) . 3.1 IN ADDITION TO THE ABOVE DECISIONS, WE HAVE ALS O BEEN INFORMED THAT THE ISSUE OF FURNISHING OF THE REQUIR ED CERTIFICATE KEPT ON CHANGING THROUGH SEVERAL AMENDMENTS IN THE STATU TE ITSELF WHICH HAS CAUSED THIS DEFAULT. LEARNED AR HAS INFOR MED THAT AS PER THE PROVISIONS OF SECTION 272A(2)(G) IF ANY PER SON FAILS TO FURNISH A CERTIFICATE AS REQUIRED U/S.203 OF THE IT ACT THEN HE SHALL PAY BY WAY OF PENALTY A SUM OF RS.100/- FOR EVERY D AY DURING WHICH THE FAILURE CONTINUED. AS PER SECTION 203 OF IT ACT EVERY PERSON DEDUCTING TAX SHALL WITHIN A PERIOD AS PRESC RIBED FURNISH TO THE PERSON, TO WHOSE ACCOUNT SUCH CREDIT IS GIVEN O R PAYMENT IS MADE, A CERTIFICATE TO THE EFFECT THAT TAX HAS BEEN DEDUCTED BY SPECIFYING THE AMOUNT SO DEDUCTED AND SUCH OTHER PA RTICULARS AS PRESCRIBED. THE STATUTE HAS INCORPORATED RULE 31 OF INCOME TAX RULES PRESCRIBING FORM NO.16 AND FORM NO.16A, A CER TIFICATE OF DEDUCTION OF TAX AT SOURCE. RULE 31 OF IT RULES PRE SCRIBES THAT A CERTIFICATE OF DEDUCTION OF TAX AT SOURCE BY THE PE RSON DEDUCTED THE TAX SHALL BE IN FORM NO.16 AFTER THE DEDUCTION IS U /S.192 AND ON FORM NO.16A IF THE DEDUCTION IS UNDER ANY OTHER PRO VISIONS OF ITA NOS.56, 57/AHD/2011 AND CO NO.34, 35/AHD/2011 EXCEL INDUSTRIES LTD., BHAVNAGAR VS. ITO, WARD TDS- 4, AHMEDABAD A.YS. 1993-94 AND 1994-95 - 5 - CHAPTER XVII-B OF IT ACT. THIS RULE 31 WAS SUBSTITU TED ON NUMBER OF OCCASIONS AS IS EVIDENT FROM THE INCOME T AX RULE, 1962. LEARNED AR HAS, THEREFORE, PLEADED THAT AS PE R THE OLD PROVISIONS THE REQUISITE CERTIFICATE WAS REQUIRED T O BE ISSUED BY THE REVENUE DEPARTMENT ON AN APPLICATION BY THE DEDUCTO R BUT LATER ON THAT RULE WAS SUBSTITUTED. FURTHER, THERE WAS AN OL D RULE THAT THE REQUISITE CERTIFICATE WAS TO BE ISSUED ON A PARTICU LAR TIME PERIOD ON EACH DEDUCTION OF TAX DURING ONE FINANCIAL YEAR. AF TER CONSIDERING THE DIFFICULTY IN RULE 31 A PROVISO WAS INSERTED TH AT WHERE MORE THAN ONE CERTIFICATE IS REQUIRED TO BE FURNISHED TO A DEDUCTEE DURING A FINANCIAL YEAR THEN THE PERSON DEDUCTING THE TAX, I.E., DEDUCTOR MAY ON A REQUEST FROM SUCH PAYEE/DEDUCTEE CAN ISSUE WITHIN ONE MONTH FROM THE CLOSE OF THE FINANCIAL YEAR A CONSOL IDATED CERTIFICATE FOR TAX DEDUCTED DURING WHOLE OF SUCH F INANCIAL YEAR. BECAUSE OF THE FREQUENT AMENDMENTS IN RULE 31 OF IT RULES, THE ASSESSEE BEING A DEDUCTOR WAS UNDER A BONA FIDE BEL IEF THAT THE SAID PROVISIONS HAVE GRADUALLY BEEN FOLLOWED FOR THE YEA R UNDER CONSIDERATION. HOWEVER, THE REVENUE DEPARTMENT HAD NOTICED THAT THE RULE GOT CHANGED IN THE LATER YEARS; HENCE, THE ASSESSEE AS A DEDUCTOR HAD COMMITTED IMPUGNED FAULT. 3.1 AFTER CONSIDERING THE TOTALITY OF THE CIRCUMSTA NCES OF THE CASE AND HEARING BOTH THE SIDES, WE ARE OF THE CONS IDERED OPINION THAT THE DEFAULT IN QUESTION WAS COMMITTED UNDER A BONA FIDE BELIEF THAT THE CERTIFICATE IN QUESTION WAS TO BE ISSUED A FTER THE CLOSE OF THE FINANCIAL YEAR; HENCE, A CONSOLIDATED CERTIFICA TE WAS ISSUED TO THE DEDUCTEE. WE ARE, THEREFORE, OF THE OPINION THA T INSTEAD OF HOLDING THAT IT WAS MERELY A TECHNICAL OR DEFAULT O F A VENIAL IN ITA NOS.56, 57/AHD/2011 AND CO NO.34, 35/AHD/2011 EXCEL INDUSTRIES LTD., BHAVNAGAR VS. ITO, WARD TDS- 4, AHMEDABAD A.YS. 1993-94 AND 1994-95 - 6 - NATURE, WE HEREBY HOLD THAT THE FAILURE REFERRED WA S BECAUSE OF A REASONABLE CAUSE; HENCE, IN THE LIGHT OF THE PROVIS IONS OF SECTION 273B, THE ASSESSEE SHOULD NOT BE PENALIZED. WE, THE REFORE, HOLD THAT NO PENALTY IS IMPOSABLE ON THIS ASSESSEE U/S. 272A(2)(G) OF IT ACT. RESULTANTLY, THE GROUNDS RAISED BY THE REVENUE S ARE HEREBY DISMISSED. 4. THROUGH THESE TWO CROSS OBJECTIONS, THE RESPONDE NT/CROSS OBJECTOR HAS OBJECTED THE CALCULATION OF THE PENALT Y LEVIED, FOR READY REFERENCE OBJECTION IS REPRODUCED HEREINBELOW FROM A.Y. 1993-94: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE RESPONDENT SUBMITS THAT IN CASE THE DEPARTMENT SUCC EEDS IN GROUND NO1 OF ITS APPEAL BEARING ITA NO.56/AHD/2011, THEN THE QUANTUM OF PENALTY LEVIABLE OUGHT TO BE RESTRICTED ONLY TO THE AMOUNT OF TAX DEDUCTED. 5. SINCE THE IMPUGNED PENALTY ITSELF NOW STOOD DELE TED AS PER THE ORDERS SUPRA; HENCE, THESE CROSS OBJECTIONS OF THE ASSESSEE DO NOT SURVIVE; HENCE, MAY BE TREATED AS ALLOWED FOR S TATISTICAL PURPOSE ONLY. 6. IN THE RESULT, THE APPEALS OF THE REVENUE DEPART MENT IS HEREBY DISMISSED AND THE CROSS OBJECTIONS IN CONSEQ UENCE THEREUPON DO NOT SURVIVE. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 24/01/2014 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY ITA NOS.56, 57/AHD/2011 AND CO NO.34, 35/AHD/2011 EXCEL INDUSTRIES LTD., BHAVNAGAR VS. ITO, WARD TDS- 4, AHMEDABAD A.YS. 1993-94 AND 1994-95 - 7 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD