M/s. Merino Industries Ltd., Meerut V. Addl. CIT (TDS), Ghaziabad

ITA 6150/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3616 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RK GARG
• Keywords: Non-deduction of tax
• Section: 201(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SMT BEENA PILLAI, JUDICIAL MEMBER ITA NO.6150/DEL/2015 ASSESSMENT YEAR: 2008-09 MERINO INDUSTRIES LTD., C/O R.K. GARG, T-314, GANGA PLAZA, BEGUM BRIDGE ROAD, MEERUT. PAN: AAACC9186C VS. ADDL.CIT (TDS), GHAZIABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.K. GARG, ADVOCATE DEPARTMENT BY : SHRI ATIQ AHMAD, SR. DR DATE OF HEARING : 15.11.2017 DATE OF PRONOUNCEMENT : 16.11.2017 ORDER PER R.S. SYAL, VP: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE CIT(A) ON 09.09.2015 CONFIRMING PENAL TY OF RS.55,219/- ITA NO.6150/DEL/2015 2 U/S 271C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER A LSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2008-09. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THA T THE ASSESSEE PAID A SUM OF RS.5,935/- ON WHICH NO DEDUCTION OF TAX AT SOURC E WAS MADE U/S 194A OF THE ACT. SIMILARLY, ANOTHER SUM OF RS.5,30,068/ - WAS PAID TO CERTAIN PERSONS WITHOUT MAKING DEDUCTION OF TAX AT SOURCE U /S 194H OF THE ACT. THE ASSESSING OFFICER TREATED THE APPELLANT AS ASSE SSEE IN DEFAULT BY PASSING ORDER U/S 201(1) AND 201(1A). THE ASSESSEE EXPLAINED ITS POSITION AND PAID THE TAX DUE THEREON ALONG WITH TH E REQUISITE AMOUNT OF INTEREST. THEREAFTER, THE ASSESSING OFFICER IMPOSE D PENALTY U/S 271C EQUAL TO THE AMOUNT OF TDS AT RS.55,219/-. THE LD. CIT(A) AFFIRMED THE ORDER OF THE ASSESSING OFFICER, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. IN SO FAR AS THE FIRST DEFAULT U/S 194A IS CONCERNED, IT IS SEEN THAT THE ASSESSEE, APART FROM CARRYING ON MANUFACTURING AND WHOLESALE TRADING OF LAMINATED SHEET, ALSO STARTED TO DEVELOP A NEW VARIETY OF ITA NO.6150/DEL/2015 3 POTATO SEEDS ON ITS LAND FOR THE FIRST TIME. AN AG REEMENT WAS MADE WITH MOHAMMAD SALIM FOR SUPPLYING THE POTATO SEEDS, WHIC H WERE TO BE DEVELOPED BY IT. ADVANCES OF RS.50,000/- AND RS.80 ,000/- WERE RECEIVED FOR THIS PURPOSE. SINCE THE ASSESSEE COMP ANY COULD NOT SUCCESSFULLY PRODUCE THE POTATO SEEDS, IT RETURNED THE ADVANCE EARLIER RECEIVED ALONG WITH INTEREST OF RS.5,935/-. IT IS T HIS AMOUNT OF RS.5,935/- ON WHICH THE APPELLANT WAS TREATED AS ASSESSEE IN D EFAULT FOR NON- DEDUCTION OF TAX AT SOURCE U/S 194A OF THE ACT. 4. IT IS OBSERVED THAT THE ASSESSEE CANVASSED A VIEW THAT NO LOAN WAS TAKEN BY IT AND, HENCE, THE ADVANCE DEPOSITED AGAIN ST THE SUPPLY AND THE EXCESS INTEREST WAS IN THE NATURE OF COMPENSATION T HEREBY NOT REQUIRING ANY DEDUCTION OF TAX AT SOURCE. IN ALL OTHER CASES OF INTEREST ON LOANS, THE ASSESSEE ADMITTEDLY DEDUCTED TAX AT SOURCE. 5. SECTION 271C IS SUBJECT TO THE PROVISIONS OF SECTION 273B. THE LATER PROVISION ENVISAGES THAT IN CASE OF DEFAULT UNDER T HE RESPECTIVE PROVISIONS ON A BONA FIDE BASIS, NO PENALTY SHOULD BE IMPOSED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE INST ANT CASE, WE ARE ITA NO.6150/DEL/2015 4 SATISFIED THAT THE FAILURE OF THE ASSESSEE TO DEDUC T TAX AT SOURCE U/S 194A ON THE SUM OF RS.5,935/- WAS BONA FIDE AND, HENCE, THE ASSESSEE SHOULD NOT HAVE BEEN VISITED WITH PENALTY U/S 271C OF THE ACT. SUCH PENALTY IS DIRECTED TO BE DELETED. 6. THE OTHER DEFAULT IS U/S 194H OF THE ACT. THE A SSESSEE PAID COMMISSION TO ITS REGULAR COMMISSION AGENT. INVARI ABLY, THE ASSESSEE DEDUCTED TAX AT SOURCE ON SUCH COMMISSION PAYMENTS. HOWEVER, IN CASE OF K. MARKETING SERVICES LTD., THE AGENT WAS NOT PA ID COMMISSION BY THE COMPANY, BUT, SALE PROCEEDS WERE RECEIVED AFTER DED UCTION OF COMMISSION. THE ACCOUNTANT DID NOT SPECIFICALLY DEB IT THE COMMISSION AMOUNT AND CREDIT THE PARTY BUT SHOWED NET AMOUNT A S SALE CONSIDERATION. THIS LED TO NON-DEDUCTION OF TAX AT SOURCE ON COMMISSION PAID TO THIS PERSON. 7. HERE, AGAIN, WE FIND THAT FAILURE TO DEDUCT TAX AT SOURCE U/S 194H OF THE ACT WAS BONA FIDE BECAUSE OF THE WRONG DEPICTION OF SALE PROCEEDS ON NET BASIS BY THE ACCOUNTANT WITHOUT SEPARATELY S HOWING THE AMOUNT OF COMMISSION. SIMILAR IS THE POSITION REGARDING SALE MADE BY THE ASSESSEE ITA NO.6150/DEL/2015 5 TO M/S PARVEEN TRADING CO., RAMNEEK LAL G SAH AND R AM LAL CHANAN DAS, WHO SENT THE NET SALE PROCEEDS AFTER DEDUCTING EXPENSES INCLUDING THE AMOUNT OF COMMISSION. THE ACCOUNTANT RECORDED SALE PROCEEDS ON NET BASIS WHICH LED TO NON-DEDUCTION OF TAX AT SOUR CE ON COMMISSION CHARGED BY THE SELLER. FOLLOWING THE VIEW TAKEN FO R COMMISSION PAID TO K. MARKETING SERVICES LTD., WE HOLD THAT THE APPELL ANT CANNOT BE CONSIDERED AS ASSESSEE IN DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE ON COMMISSION RETAINED BY THE OTHER PARTIES AS WELL. 8. TO SUM UP, WE OVERTURN THE IMPUGNED ORDER A ND DIRECT TO DELETE THE ENTIRE PENALTY CONFIRMED U/S 271C OF THE ACT. 9. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2017. SD/- SD/- [BEENA PILLAI] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 16 TH NOVEMBER, 2017. DK ITA NO.6150/DEL/2015 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.