M/s Eskay Shipping Pvt., Ltd.,, Visakhapatnam V. THE JCIT, Visakhapatnam

ITA 631/VIZ/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6589 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 11-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V MADHUVANI
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 273B; 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 631 / VIZ /201 4 (ASST. YEAR : 20 13 - 14 ) M/S. ESSKAY SHIPPING PVT. LTD., D.NO. 25 - 40 - 40, GANGULAVARI STREET, VISAKHAPATNAM. V S . JCIT, RANGE - 6(TDS), VISAKHAPATNAM. TAN : VPN00074E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FC A. DEPARTMENT BY : SMT. V. MADHUVANI CIT DR DATE OF HEARING : 30 / 0 8 /201 7 . DATE OF PRONOUNCEMENT : 18 / 1 0 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VISAKHAPATNAM , DATED 1 4 / 11 /201 4 FOR THE ASSESSMENT YEAR 20 13 - 14 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THERE WAS A SURVEY CONDUCTED IN THE CASE OF THE ASSESSEE UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') BY THE ASSESSING OFFICER - TDS ON 22/01/2013 . IT IS FOUND TH A T THE ASSESSEE DEDUCTOR HAD DEDUCTED TAX AT SOURCE OF AN AMOUNT OF 1,18,91,009/ - IN RESPECT OF PAYMENTS MADE BY IT UNDER DIFFERENT HEADS DURING THE FINANCIAL YEAR 2012 - 13, BUT 2 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) THE ASSESSEE - DEDUCTOR HAD NOT REMITTED THE SAME INTO THE GOVERNMENT ACCOUNT AS ON THE DATE OF SURVEY . THE ASSESSING OFFICER HAS ALSO NOTED THAT TDS WAS NOT DEDUCTED ON THE FOLLOWING PAYMENTS: - A) THE BERTH HIRE CHARGES OF 45,51,891/ - WAS PAID BY THE DEDUCTOR , BUT TAX DEDUCTIBLE ON SUCH EXPENDITURE AS REQUIRED UNDER SECTION 194 - I AMOUNTING TO 4,55,189/ - WAS NOT DEDUCTED AS ON THE DATE OF SURVEY. B) AN AMOUNT OF 34,314/ - WAS MADE BY THE DEDUCTOR TO SAKSHI PAPER TOWARDS ADVERTISEMENTS CHARGES, BUT TDS DEDUCTIBLE FO 686/ - WAS NOT DEDUCTED AS REQUIRED UNDER SECTION 194 - C OF TH E ACT. C) THE ASSESSEE - DEDUCTOR HAS PAID AN AMOUNT OF 1,30,000/ - TOWARDS LEGAL EXPENSES BUT TDS DEDUCTIBLE ON SUCH EXPENDITURE TO THE TUNE OF 43,000/ - WAS NOT DEDUCTED AS REQUIRED UNDER SECTION 194 - J OF THE ACT. D) DURING THE YEAR , AS SUM OF 45,05,990/ - WAS PAID BY THE DEDUCTOR TO DR. K. NAGESWARA RAO, PRESIDENT OF THE COMPANY TOWARDS REMUNERATION AND 1,99,758/ - WAS PAID TO SMT. K. KRISHNA KUMARI, ONE OF THE DIRECTORS OF THE COMPANY BUT TAX DEDUCTIBLE UNDER SECTION 192 OF THE ACT ON SUCH REM UNERATION PAID TO THE DEDUCTOR AMOUNTING TO 13,30,61// - WAS NOT DEDUCTED. E) THE ASSESSEE - DEDUCTOR HAS PAID TAXI HIRE CHARGES TO THE TUNE OF 1,76,937/ - TO DIFFERENT PERSONS BUT TDS DEDUCTIBLE OF 3,539/ - WAS NOT DEDUCTED AS REQUIRED UNDER SECTION 194 - I OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER TDS HAS IN I TIATED PROCEEDINGS UNDER SECTION 201(1) & 201(1A) , WHICH ULTIMATELY RESULT ED IN PASSING OF 3 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) THE ORDERS AND RAISING DEMAND OF 1,36,94 , 034/ - UNDER SECTION 201(1) AND 11,09,603/ - UNDER SECTION 201(1A) OF THE ACT. 3 . SUBSEQUENTLY , JCIT, RANGE - 6, VISAKHAPATNAM HAS ISSUED A NOTICE TO THE ASSESSEE AND SHOW - CAUSED WHY PENALTY UNDER SECTION 271 C OF THE ACT SHOULD NOT BE LEVIED FOR THE DEFAULTS COMMITTED. IN RESPONSE, THE ASSESSEE IN HIS REPLY DATED 16/06/2013 SUBMITTED AS UNDER: - 'THE COMPANY'S MAJOR INCOME IS GENERATING FROM STEVEDORING OPERATIONS. SINCE THE LAST TWO YEARS THE COMPANY IS FACING ACUTE FINA NCIAL CRISIS DUE TO CHANGES IN THE SHIPPING INDUSTRY BY PRIVATIZATION OF VISAKHAPATNAM PORT BERTHS TO M/S. VEDANTA GROUP, M/S. VIZAG SEA PORT AND M/S. ADANI GROUP, ETC. AS A RESULT THE ORTHODOX STEVEDORING OPERATION GRADUALLY DECREASED IN PORT AND 100% MECHANIZATION OF STEVEDORING OPERATION S OF CARGO DISCHARGES FROM VESSELS ARE IN PLACE BY OFFERING MEGA CRANES AND IS BEING SHIFTED CONVEYORS. HENCE THE LOGISTICS, OPERATIONS ARE BEING MINIMIZED. IN ADDITION TO THE ABOVE DEEP WATER PORT M/S. GANGAVARAM PORT LTD, STARTED OPERATIONS WITH 100% MEC HANIZATION. DUE TO HEAVY TRAFFIC AND CONGESTION IN VISAKHAPATNAM PORT OUR MAJOR COAL IMPORTERS HAVE SHIFTED TO GANGAVARAM PORT. IT WAS BADLY A FFECTED OUR BULK COA L STEVEDORING OPERATION OF THE COMPANY. FURTHER TO THIS DUE TO RECESSION IN THE SHIPPING INDUS TRY AND BAN OF IRON ORE EXPORTS OUR OTHER EQUIPMENT OPERATIONS BILLS ARE NOT REALIZED AS PER THE SCHEDULE AND IT WAS BADLY EFFECTED ON OUR CASH FLOWS OF THE COMPANY. AS A RESULT WE COULD PAY THE SALARIES TO THE STAFF, DEFAULTING PAYING INTEREST ON BANK LOA NS AND OTHER STATUTORY OBLIGATIONS AS PER SCHEDULE. HENCE THE COMPANY IS DEFAULT THE PAYMENT OF TDS FOR THE FINANCIAL YEAR 2012 - 13.' THE JCIT (TDS) DID NOT FIND ANY REASONABLE CAUSE FOR THE ABOVE DEFAULTS COMMITTED BY THE ASSESSEE AND BY FOLLOWING THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL P. LTD., VS. CIT (195 TAXMANN 323 KER.) HELD TH A T THE PROVISIONS OF SECTION 271C ARE APPLICABLE NOT ONLY FOR FAILURE TO DEDUCT TAX , BUT ALSO FAILURE TO REMIT THE TAX DEDUCTED INTO GOVERNMENT ACCOUNT. ACCORDINGLY, PENALTY OF 1,36,94,034/ - WAS LEVIED . 4 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) 4 . ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 271C WOULD NOT BE APPLICABLE TO A CASE OF NON - REMITTANCE OF TDS , AS IT DEALS WITH THE DEFAULT FOR NON - DEDUCTION OF TAX . IT WAS FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT THE PROVISIONS OF SECTION 271C WOULD APPLY FOR NON - REMITTANCE OF TDS ONLY , WHEN IT REL A TED TO SECTION 115 - O OR SECTION 194 - B OF THE ACT. IT WAS FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL P. LTD., (SUPRA) HAS NO APPLICATION TO THE ASSESSEES CASE . ALTERNATIVELY, EVEN IT APPLIES THEN THE MITIGATING FACTS AS CONSIDERED BY THE HONBLE HIGH COURT HAVE TO BE FOLLOWED IN ASSESSEES CASE ALSO. 5. THE LD. CIT(A) AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEES REPRESENTATIVE OBSERVED THAT SO FAR AS NON - DEDUCTION OF TDS , AMOUNTING TO 18,06,745/ - , THE ARGUMENT OF THE ASSESSEE FOR NON - DEDUCTION OF TDS WAS DUE TO OVERSIGHT BY THE FINANCE MANAGER, THE ASSESSEE FAILED TO DEDUCT TAX AND THERE WAS NO MALAFIDE INTENTION. IN THIS REGARD, IT IS RELEVANT TO NOTE THAT THE ABOVE DEFAULTS WAS POINTED OUT DURING THE COURSE OF SURVEY CONDUCTED IN JANUARY, 2013 , BUT THE ASSESSEE DID NOT CHOOSE TO MAKE ANY PAYMENT IMMEDIATELY. SOME AMOUNTS HAVE BEEN PAID ONLY AFTER PASSING OF THE ORDER UNDER SECTION 20 1(1) & 201(1A) OF THE ACT ON 27/02/2013. ONLY THEREAFTER IN THE MONT H OF MARCH, 2013 FURTHER PAYMENTS HAVE BEEN MADE. THE CORRESPONDING INTEREST UNDER SECTION 201(1A) HAS NOT BEEN PAID TILL 5 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) DATE. THEREFORE, LD. CIT(A) DID NOT FIND MERIT IN THE ARGUMENT RAISED BY THE ASSESSEE THAT DEFAULT WAS DUE TO OVERSIGHT OF THE FINANCE MANAGER AS EVEN AFTER BEING AWARE OF DEFAULT , THE ASSESSEE DID NOT CHOOSE TO MAKE THE PAYMENT IMMEDIATELY. ACCORDINGLY, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER IN RESP ECT OF DEFAULT FOR NON - DEDUCTION OF TDS AMOUNTING TO 18,06,745/ - . 6 . INSOFAR AS PENALTY LEVIED FOR NON - REMITTANCE OF TDS DEDUCTED, THE LD. CIT(A) HAS OBSERVED THAT THE HON'BLE KERALA HIGH COURT ON SIMILAR FACTUAL MATRIX AS THAT OF THE ASSESSEES CASE , HAS SPECIFICALLY REJECTED THE CONTENTION THAT NON - REMITTANCE WOULD NOT FALL WITHIN THE PURVIEW OF S E CTION 271C AND HAS HELD THAT THE FIRST PART OF CLAUSE (B) OF SECTION 271C IS FAILURE TO PAY WHOLE OR ANY PART OF TAX AS REQUIRED, TAKES THE TAX DEDUCTED UN DER SECTION CLAUSE (A) UNDER ANY OF THE PROVISIONS OF CHAPTER XVII - B, AND THE RE FORE FAILURE TO DEDUCT OR FAILURE TO REMIT RECOVERED TAX, BOTH WILL ATTRACT PENALTY UNDER SECTION 271C OF THE ACT. ACCORDINGLY, HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 7 . SO FAR AS ALTERNATIVE ARGUMENT RAISED BY THE ASSESSEE ON THE GROUND THAT NON - REMITTANCE OF TAX WAS DUE TO FINANCIAL CRUNCH FACED BY THE ASSESSEE AND WHICH CONSTITUTES A REASONABLE CAUSE AGAINST LEVY OF THE IMPUGNED PENALTY . THE LD. CIT(A) HAS OBSERVED THAT ASSESSEE HAS NOT EXPLAINED PROPER LY WITH NECESSARY EVIDENCE THAT WHAT IS FINANCIAL CRUNCH BEING FACED BY THE ASSESSEE THAT NET PROFIT DISCLOSED WAS 2.42 CRORES FOR FINANCIAL YEAR 2011 - 12 AND 2.31 CRORES FOR FINANCIAL YEAR 6 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) 2012 - 13 . THEREFORE, AS SUCH THERE IS NO MATERIAL INFORMATION TO INDICATE FINANCIAL CRUNCH FOR NOT DEPOSITING THE TDS AMOUNT INTO THE GOVERNMENT A CCOUNT . THE LD. CIT(A) ALSO CONSIDERED THE OBSERVATIONS MADE BY THE HON'BLE KERALA HIGH COURT TO REDUCE THE PENALTY IN CASE OF MIT IGATING FACTOR THAT THE ASSESSEE HAS NOT REMITTED TO THE GOVERNMENT ACCOUNT WHICH IS ALREADY DEDUCTED ; THE ASSESSEE HAS NOT REMITTED THE INTEREST LIABILITY TILL DATE ; NO REASON WAS GIVEN FOR THE SAME. THEREFORE, THE OBSERVATIONS MADE BY THE HON'BLE KERALA HIGH COURT HAVE NO APPLICATION T O THE FACTS OF THE ASSESSEES CASE, HENCE, APPEAL FILED BY THE ASSESSEE WAS DISMISSED AND CONFIRMED THE ORDER OF THE ASSESSING OFFIC ER. 8. LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED T H A T SECTION 271C APPLIES ONLY FOR NON - DEDUCTION OF TDS AND NO APPLICATION TO TDS DEDUCTED AND NOT DEPOSITED . ALTERNATIVELY, HE SUBMITTED THAT IF THE JUDGMENT OF HON'BLE KERALA HIGH COURT IS APPLIED, IT HAS TO BE IN TOTO THAT MITIGATING CIRCUMSTANCES HAS TO BE CONSIDERED TO REDUCE THE PENALTY. 9 . ON THE OTHER HAND , L EARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELOW. 10 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 7 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) 1 1 . A SEARCH WAS CONDUCTED IN THE CASE OF THE ASSESSEE AND IT IS FOUND T H A T THE ASSESSEE HAS DEDUCTED TDS OF 1,18,91,009/ - , BUT NOT DEPOSITED IN THE GOVERNMENT ACCOUNT AND ALSO NOTED THAT THE ASSESSEE FAILED TO DEDUCT TDS AMOUNT OF 18,06,745/ - . THE ASSESSING OFFICER AFTER FOLLOWING DUE PROCEDURE, ORDER WAS PASSED BY RA I SING DEMAND OF 1,36,94,034/ - UNDER SECTION 201(1) AND 11,09,603/ - UNDER SECTION 201(1A). SUBSEQUENTLY, THE JCIT ( TDS ) ISSUED A SHOW - CAUSE NOTICE WHY PENALTY SHOULD NOT BE LEVIED UNDER SECTION 271C OF THE ACT. IN RESPONSE, ASSESSEE SUBMITTED THAT DUE TO FINANCIAL CRISIS, DEDUCTED TDS WAS NOT PAID TO THE GOVER NMENT ACCOUNT AND SO FAR NON - DEDUCTION OF TDS, IT IS SUBMITTED THAT DUE TO MISTAKE OF THE FINANCE MANAGER, TDS IS NOT DEDUCTED. HOWEVER, JCIT (TDS) NOT ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE AND LEVIED PENALTY UNDER SECTION 271C BY FOLLOWING THE J UDGMENT OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL P. LTD., (SUPRA) . ON APPEAL , LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER BY FOLLOWING THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL P. LTD., (SUPRA). WE FIND THAT WHETHER SECTION 271C APPLIE S FOR FAILURE TO DEDUCT TAX AT SOURCE OR/AND FAILURE TO DEPOSIT THE DEDUCTED TAX IN GOVERNMENT ACCOUNT. THE HON'BLE KERALA HIGH COURT IN THE ABOVE REFERRED TO CASE , HAS CONSIDERED AND HELD THAT BOTH WILL ATTRACT PENALTY UNDER SECTION 271C OF THE ACT. FOR THE SAKE OF CONVENIENCE , THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 8 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) 2. THE FIRST QUESTION RAISED IS WHETHER PENALTY COULD BE LEVIED UNDER SECTION 271C OF THE ACT FOR NON - PAYMENT OF TAX DEDUCTED AT SOURCE. THE CONTENTION OF COUNSEL FOR THE APPELLANT IS THAT SECTION 271C PROVIDES FOR PENALTY ONLY FOR FAILURE TO DEDUCT TAX AS REQUIRED UNDER CHAPTER XVII - B AND FOR NON - PAYMENT OF TAX, PENALTY PROVIDED IS ONL Y FOR VIOLATION OF SUB - SECTION (2) OF SECTION 115 - O OR SECTION 194B OF THE ACT. IN OTHER WORDS, ACCORDING TO HIM IF THE ASSESSEE HAS MADE DEDUCTION FROM SOURCE ON PAYMENTS LIKE SALARY, PAYMENT TO CONTRACTORS, PAYMENT ON RENT, ETC. UNDER VARIOUS PROVISIONS OF CHAPTER XVII - B, THEN NO PENALTY COULD BE LEVIED IF THE ASSESSEE FAILED TO REMIT THE RECOVERED TAX. ACCORDING TO HIM FAILURE TO REMIT TAX ATTRACTS PENALTY UNDER SECTION 271C ONLY IN RESPECT OF TAX PAYABLE UNDER SUB - SECTION (2) OF SECTION 115 - O OR SECTION 194B OF THE ACT. STANDING COUNSEL FOR THE REVENUE CONTENDED THAT SECTION 271C PROVIDES FOR PENALTY BOTH FOR FAILURE TO DEDUCT OR TO REMIT RECOVERED TAX AND FOR BOTH. IN OTHER WORDS, ACCORDING TO HIM, PENALTY PROVIDED UNDER SECTION 271C ALSO COVERS THE SIT UATION WHERE THE ASSESSEE AFTER DEDUCTION AT SOURCE RETAINS THE RECOVERED AMOUNT WITHOUT PAYMENT TO THE DEPARTMENT. IN OUR VIEW, THE TRIBUNAL WHILE CONSIDERING THE APPEAL RECAST THE SECTION IN ITS OWN WAY COMPLETELY DISTORTING ITS MEANING. ORIGINALLY THERE WAS NO PROVISION FOR PENALTY FOR FAILURE TO DEDUCT TAX OR REMIT THE DEDUCTED TAX AND THE PROVISION UNDER SECTION 276B ONLY AUTHORISED PROSECUTION FOR VIOLATION. HOWEVER, SECTION 271C WAS INTRODUCED BY THE DIRECT LAWS (AMENDMENT) ACT, 1987 WITH EFFECT FROM 1 - 4 - 1989 PROVIDING FOR PENALTY FOR FAILURE TO DEDUCT OR REMIT TAX UNDER CHAPTER XVII - B, SUB - SECTION (2) OF SECTION 115 - O AND SECTION 194B OF THE ACT. FOR EASY REFERENCE WE EXTRACT HEREUNDER SECTION 271C. 271C. PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE. (1) IF ANY PERSON FAILS TO (A ) DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDER THE PROVISIONS OF CHAPTER XVII - B; OR (B ) PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRED 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 DEDUCT OR PAY AS AFORESAID. (2) ANY PENALTY IMPOSABLE UNDER SUB - SECTION (1) SHALL BE IMPOSED BY THE JOINT COMMISSIONER. 3. COUNSEL FOR THE APPELLANT HAS DRAWN A DISTINCTION BETWEEN CLAUSES (A) AND (B) OF SECTION 271C(1) OF THE ACT. ACCORDING TO HIM PENALTY UNDER CLAUSE (A) IS ONLY FOR FAILURE TO DEDUCT TAX AS REQUIRED UNDER ANY OF T HE PROVISIONS OF CHAPTER XVII - B. IT IS ARGUED THAT IN THE SURVEY CONDUCTED 9 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) BY THE DEPARTMENT WHAT WAS NOTICED WAS THAT DEDUCTIONS HAVE BEEN MADE AND THE VIOLATION WAS ONLY DELAYED REMITTANCE OF PART OF THE DEDUCTED AMOUNT AND NON - REMITTANCE OF BALANCE AMOU NT. HOWEVER, THE CONTENTION OF COUNSEL FOR THE ASSESSEE IS THAT SINCE THERE IS NO PROVISION FOR PENALTY FOR NON - REMITTANCE OF TAX DEDUCTED AT SOURCE UNDER THE PROVISIONS OF CHAPTER XVII - B, THE LEVY OF PENALTY IS UNAUTHORISED. COUNSEL CONTENDED THAT PENALTY UNDER SECTION 271C(1) FOR NON - REMITTANCE IS ONLY OF TAX, WHETHER RECOVERED OR NOT, UNDER SUB - SECTION (2) OF SECTION 115 - O OR SECOND PROVISO TO SECTION 194B OF THE ACT. WE ARE UNABLE TO ACCEPT THIS CONTENTION BECAUSE THE FIRST PART OF CLAUSE (B) OF SECTION 271C(1), I.E., FAILURE TO PAY WHOLE OR ANY PART OF TAX AS REQUIRED, TAKES IN THE TAX DEDUCTED UNDER CLAUSE (A) UNDER ANY OF THE PROVISIONS OF CHAPTER XVII - B. SO MUCH SO, IN OUR VIEW, FAILURE TO DEDUCT OR FAILURE TO REMIT RECOVERED TAX, BOTH WILL ATTRACT P ENALTY UNDER SECTION 271C OF THE ACT. SO MUCH SO, THE CONTENTION OF THE APPELLANT FAILS AND WE UPHOLD THE FINDING OF THE TRIBUNAL DISMISSING THE CHALLENGE AGAINST LEVY OF PENALTY. 4. THE NEXT QUESTION TO BE CONSIDERED IS THE QUANTUM OF PENALTY WHICH IN T HIS CASE IS ABOVE RS. 1.1 CRORE. COUNSEL FOR THE APPELLANT REFERRED TO SECTION 273B OF THE ACT AUTHORISING THE OFFICER TO WAIVE OR REDUCE THE PENALTY IF THE DEFAULTED ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR SUCH FAILURE WHICH ATTRACTS PENALTY. STANDING COUNSEL HAS REFERRED TO THE FINDINGS ON CASH FLOW AND THE APPLICATION OF FUNDS BY ASSESSEE FOR OTHER PURPOSES AND CONTENDED THAT THERE WAS NO REASONABLE CAUSE JUSTIFYING THE FAILURE ON THE PART OF THE ASSESSEE. HE HAS FURTHER CONTENDED THAT EVEN F OR EARLIER YEAR ASSESSEE HAD REMITTED RECOVERED TAX WITH DELAY. IN OUR VIEW, THE TRIBUNAL HAS NOT CONSIDERED CHALLENGE AGAINST QUANTUM OF PENALTY IN SO MUCH DETAILS PROBABLY BECAUSE IN THE PENALTY ORDER IT IS STATED THAT ONLY MINIMUM PENALTY IS LEVIED. SO FAR AS FAILURE ON THE PART OF THE ASSESSEE TO REMIT THE TAX RECOVERED AT SOURCE IS CONCERNED, WE DO NOT THINK THERE CAN BE ANY JUSTIFYING CIRCUMSTANCE FOR DELAY IN REMITTANCE BECAUSE ASSESSEE CANNOT DIVERT TAX RECOVERED FOR THE GOVERNMENT TOWARDS WORKING C APITAL OR ANY OTHER PURPOSE. SO MUCH SO, IN OUR VIEW, DEFENCE AVAILABLE UNDER SECTION 273B DOES NOT COVER FAILURE IN PAYMENT OF RECOVERED TAX. HOWEVER, IF THERE IS FAILURE TO REMIT ON ACCOUNT OF FAILURE TO RECOVER FOR ANY REASON WHATSOEVER, THEN THE CASE C ALLS FOR REDUCTION OF PENALTY, IF NOT WAIVER. SIMILARLY, WE FEEL RECOVERY AND REMITTANCE OF TAX, THOUGH WITH DELAY BUT WITH INTEREST, BEFORE DETECTION IS CERTAINLY A MITIGATING CIRCUMSTANCE FOR WAIVER OR REDUCTION OF PENALTY. FURTHER, IF FULL AMOUNT OF TAX WITH INTEREST WAS PAID BEFORE LEVY OF PENALTY, WE FEEL QUANTUM REDUCTION IS CALLED FOR BY THE ASSESSING OFFICER. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO RECONSIDER THE QUANTUM OF PENALTY BY GIVING ONE MORE OPPORTUNITY TO THE ASSESSEE TO FURNISH FACT S IN THE LIGHT OF OUR OBSERVATIONS ABOVE. THE APPEAL IS ACCORDINGLY, DISPOSED OF UPHOLDING THE ORDER OF THE TRIBUNAL ON THE LEVY OF PENALTY, BUT WITH DIRECTION TO THE ASSESSING OFFICER TO GRANT FURTHER REDUCTION IN PENALTY, IF ANY, NEW FACT OR CIRCUMSTANCE IS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER BASED 10 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) ON OBSERVATIONS ABOVE OR OTHERWISE IN TERMS OF SECTION 273B OF THE ACT. 11 . THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN THE ABOVE REFERRED TO CASE, WE HOLD THAT SECTION 271C APPLIES TO BOTH THE SITUATIONS WHERE ASSESSEE FAILURE TO DEDUCT TAX AT SOURCE AND FAILURE TO REMIT THE RECOVERED TAX. ACCORDINGLY, THE ARGUMENT ADVANCED BY THE ASSESSEES REPRESENTATIVE IS REJECTED. 12. SO FAR AS ALTERNATIVE PLEA RAISED BY THE ASSESSEE IS CONCERNED I . E. MITIGATING CIRCUMSTANCES FOR NON - DEDUCTION OF TAX , T HE HON'BLE KERALA HIGH COURT HAS HELD THAT TAX DEDUCTED AND NOT REMITTED TO THE GOVERNMENT ACCOUNT, THERE ARE NO JUSTIFYING CIRCUMS TANCES. THEREFORE, ALTERNATIVE PLEA RAISED BY THE ASSESSEE HAS NO APPLICATION S O FAR AS DEFAULT IN RESPECT OF FAILURE TO REMIT THE TAX DEDUCTED TO THE GOVERNMENT ACCOUNT. INSOFAR AS , NON - DEDUCTION OF TDS IS CONCERNED, IT IS SUBMITTED THAT DUE TO MISTAKE OF THE FINANCE MANAGER, TDS WAS NOT DEDUCTED. IN THIS CONTEXT, LD. CIT(A) HAS OBSERVED IN HIS ORDER THAT DEFAULT COMMITTED BY THE ASSESSEE WAS POINTED OUT DURING THE SURVEY IN JANUARY, 2013, BUT ASSESSEE DID NOT CHOOSE TO MAKE PAYMENT IMMED IATELY, SOME AMOUNTS HAVE BEEN PAID ONLY AFTER PASSING OF THE ORDER UNDER SECTION 201(1) & 201(1A) OF THE ACT ON 27/02/2013. ONLY THEREAFTER IN THE MONTH OF MARCH, FURTHER PAYMENTS HAVE BEEN MADE. THE CORRESPONDING INTEREST UNDER SECTION 201(1A) HAS NOT BEEN PAID TILL DATE. THE SURVEY WAS CONDUCTED ON 22/01/2013, THE ASSESSEE ONLY 11 ITA NO. 631 /VIZ/2014 ( M/S. ESSKAY SHIPPING PVT. LTD. ) PAID THE AMOUNTS IN THE MONTH OF MARCH AFTER PASSING OF THE ORD E R UNDER SECTION 201(1) & 201(1A) AND THE RE FORE, IT CANNOT BE CONSIDERED THAT NON - DEDUCTION OF TAX BY OVERSIGHT O F THE FINANCE MANAGER, EVEN IT CAME TO THE NOTICE OF THE ASSESSEE, IT HAS PAID ONLY AFTER TWO MONTHS. THEREFORE, IN OUR OPINION, THE OBSERVATIONS MADE BY THE HON'BLE KERALA HIGH COURT HAVE NO APPLICATION TO THE ASSESSEES CASE. IN VIEW OF THE ABOVE, WE F IND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY INTERFERENCE IS NOT CALLED FOR . ACCORDINGLY, APPEAL FILED BY THE ASSESSEE IS DISMISSED. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 1 8 T H DAY OF OCTOBER , 201 7 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 8 T H OCTOBER , 201 7 . VR/ - COPY TO: 1. THE ASSESSEE - M/S. ESSKAY SHIPPING PVT. LTD., D.NO. 25 - 40 - 40, GANGULAVARI STREET, VISAKHAPATNAM. 2. THE REVENUE JCIT, RANGE - 6(TDS), VISAKHAPATNAM. 3. THE CIT - 2, VISAKHAPATNAM. 4. THE CIT(A) , VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.