M/s. MAG Construction Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 6518/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6754 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 29-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: SM MATHUR
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 194C; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SH. S.V. MEHROTRA, AM AND SH. C.M. GARG, J.M ITA NO. 6518/ /DEL/201 3 ASSTT. YEAR: 2009 - 10 APPELLANT BY : SHRI. S.M. MATHUR, CA RESPONDENT BY: SH. K.K. JAISWAL, SR. DR DATE OF FINAL HEARING : 29 .12.2015 DATE OF PRONOUNCEMENT : 26. 02.2016 ORDER PER C.M. GARG, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - IX, NEW DELHI DATED 05.01.2013 PASSED IN FIRST APPEAL NO. 21/12 - 13 FOR AY 2009 - 10. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: THAT ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON BLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN CONFIRMING THE PENALTY OF RS. 1,08,150/ - U/SEC. 27(1)(C) OF THE INCOME TAX ACT, 1961 WHICH THE LEARNED ASSESSING OFFICER HAS IMPOSED IN THIS CASE . MAG CONSTRUCTION PVT. LTD. 95, AAKRITI APARTMENT, 62, I.P. EXTENSION DELHI VS ITO WARD - 6(1) NEW DELHI APPELLANT RESPONDENT PAN NO. AADCM9692G THAT THE HON BLE COMMISSIONER OF INCOME TAX (APPEALS) WHILE UPHOLDING THE AFORESAID PENALTY DID NOT APPRECIATE THE REASONABLE CAUSE PUT FORTH BEFORE HIM REGARDING THE IGNORANCE OF THE ASSESSEE ABOUT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND THUS THE ORDER PASSED BY THE HON BLE COMMISSIONER OF INCOME TAX (APPEALS) ARE MERELY BASED ON CONJECTURES AND SURMISES WHICH IS BAD IN LAW. 1. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE FILED WRITTEN OF INCOME ON 26.09.2 009 DECLARING AN INCOME OF RS. 6,36,140/ - AND THE SAME WAS PROCESSED AND ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT) AND INCOME OF RS. 9,86,145/ - WHICH INCLUDES DISALLOWANCE OUT OF COMMISSION/PROFESSIONAL C HARGES AND ACCOUNTANCY CHARGES OF RS. 3,50,000/ - UNDER SECTIO N 40(A)(IA) OF THE ACT, FOR DEF AULT OF NON - PAYMENT OF TDS. THE SAID DISALLOWANCE AND ADDITION ATTAINED FINALITY AS THE ASSESSEE DID NOT FILE ANY APPEAL BEFORE HIGHER AUTHORITY IN THIS REGARD. SUB SEQUENTLY THE AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR FILING OF INACCURATE PARTICULARS OF INCOME AGAINST THE ASSESSEE. THE ASSESSING OFFICER IMPOSED PENALTY OF RS. 1,18,145/ - VIDE PENALTY ORDER DATED 31.05.2012 BUT SUBSEQUEN TLY THE AO CORRECTED HIS MISTAKE BY PASSING ORDER UNDER SECTION 154 READ WITH SECTION 271(1)(C) OF THE ACT ON 04.03.2013 AND PENALTY WAS RECTIFIED TO RS. 1,08,150/ - . THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A) WHICH WAS ALSO DISMISSED. NOW TH E EMPTY HANDED ASSESSEE IS BEFORE THIS TRIBUNAL IN THIS SECOND APPEAL WITH THE GROUNDS AS REPRODUCED HEREIN ABOVE. 2. WE HAVE HEARED ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE MATERIAL PLACED BEFORE US ON RECORD INTER - ALIA, QUANTUM ORDER, PENAL TY ORDER AND IMPUGNED FIRST APPELLANT ORDER. THE LD ASSESSEE S REPRESENTATIVE (AR) PLACING RELIANCE ON THE ORDER OF HON BLE SUPREME COURT IN THE CASE CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158(SC) SUBMITTED THAT MERELY BECAUSE CLAIM OF THE ASSESSE E WAS NOT ACCEPTED OR NOT FOUND TO ACCEPTABLE BY THE REVENUE DOES NOT AUTOMATICALLY ATTRACT PENALTY UNDER SECTION 271(1) OF THE ACT. FURTHER PLACING RELIANCE ON THE ORDERS OF THE ITAT DELHI F BENCH IN THE CASE OF NEW HORIZON INDIA LTD. VS. DCIT REPORTED A S (2011) 12 ITR (TRIB) 332 (ITAT - DELL) SUBMITTED THAT THE ASSESSEE COULD NOT BE HELD TO BE GUILTY OF CONCEALMENT OF FURNISHING OF INCOME ON FAILURE TO DEDUCT TAX AT SOURCE AS THE ASSESSEE IS DISCLOSING AMOUNTS IN THE ACCOUNTS THEN THE CASE OF CONCEALMENT C ANNOT BE ESTABLISHED AGAINST THE ESSESSEE. THE LD AR FURTHER PLACING RELIANCE ON THE DECISION OF ITAT DELHI SMC - 1 BENCH ORDER DATED 21.10.2015 IN THE CASE OF M/ SYNDICATE LABELS VS ACIT IN ITA NO. 4386/DEL/2014 AND SUBMITTED THAT WHEN THE DISPUTE IS ONLY A BOUT DEDUCTION OR NON DEDUCTION OF TAX FROM THE PAYMENT MADE BY THE ASSESSEE FOR WHICH DISALLOWANCE HAS BEEN MADE U/S 40(A)(IA) OF THE ACT, THEN UNDER NO CIRCUMSTANCES SUCH A DISALLOWANCE BE BROUGHT WITHIN THE AMBIT OF PENAL PROVISION OF UNDER SECTION 271( 1)(C) OF THE ACT AS THE ASSESSEE MADE A PROPER DISCLOSURE ABOUT THE EXPENSE CLAIM BY IT AS DEDUCTION WHICH WAS NEITHER BOGUS NOR OTHERWISE NON DEDUCTIBLE BUT FOR THE APPLICATION OF SECTION 40(A)(IA) OF THE ACT. THE LD AR VEHEMENTLY POINTED OUT THAT THE ASS ESSING OFFICER IMPOSED PENALTY WITHOUT ANY JUSTIFIED REASON AND ON INCORRECT PREMISE WHICH WAS WRONGLY UPHELD BY THE CIT(A) THEREFORE, PENALTY ORDER MAY KINDLY BE SET ASIDE. 3. REPLY TO THE ABOVE THE LD DR SUPPORTED THE PENALTY ORDER AS WELL WAS IMPUGNED FIRST APPELLANT ORDER AND CONTENDED THAT IT WAS THE DUTY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENTS OR CREDITING THE SAME TO THE RESPECTIVE PAYEES ACCOUNT AND SUCH FAILURE ATTRACTS PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4. ON CARE FUL CONSIDERATION ABOVE RIVAL SUBMISSIONS OF BOTH THE SIDES AT THE OUTSET ADMITTEDLY AND UNDISPUTEDLY THE IMPUGNED DISALLOWANCE AND ADDITION WAS MADE UNDER SECTION 40(A)(IA) OF THE ACT, BECAUSE THE ASSESSEE FAILED TO DEDUCT AND DEPOSIT DUE TAX ON THE EXPEN SES CLAIMED AS COMMISSION, PROFESSIONAL CHARGES AND ACCOUNTING CHARGES. IN THE LIGHT OF THIS FACT WHEN WE CONSIDER THE DICTA THE PREPOSITION RENDERED BY ITAT DELHI SMC - 1 BENCH IN THE CASE OF M/S SYNDICATE LABELS VS. ACIT (SUPRA) THEN IT IS AMPLE CLEAR THAT IN A SITUATION WHEN DISALLOWANCE HAS BEEN MADE UNDER SECTION 40(A)(IA) OF THE ACT, FOR NON DEDUCTION OF TAX AT SOURCE FROM PAYMENTS MADE OR CREDITED TO THE RESPECTIVE PAYEES AND THE ASSESSEE MADE A PROPER DISCLOSURE ABOUT THE EXPENSES CLAIMED BY IT AS DED UCTION WHICH WAS NEITHER BOGUS NOR OTHERWISE NON DEDUCTIBLE THEN PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS NOT VALIDLY IMPOSABLE. THE RELEVANT OPERATIVE PART OF THE TRIBUNAL ORDER (SUPRA) IS BEING REPRODUCED BELOW FOR THE SAKE COMPLETENESS IN OUR CONCL USION: AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSING RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE INSTANT PENALTY HAS BEEN IMPOSED ONLY IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE ASSESSEE ENTERTAINED A BONA - FIDE BELIEF ABOUT THE NON - DEDUCTION OF TAX AT SOURCE FROM THE AMOUNT PAID TO M/S MAERSK INDIA PVT. LTD. ON THE BASIS OF CIRCULAR, AS PER WHICH, THE FOREIGN SHIPPING COMPANIES AND THEIR AGENTS WERE GOVERNED BY THE PROVISIONS OF SECTION 172 AND NOT BY SECTION 194C OF THE ACT. THO UGH IT IS AN MAERSK INDIA PVT. LTD. BEING M/S A.P. MOLLER - MAERSK A/,S DENMARK, WAS GIVEN 100% DIT RELIEF, COPY OF WHICH LETTER ISSUED BY THE OFFICE OF DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) DATED 23.04.2007, HAS BEEN PLACED ON RECORD. THESE FACTS INDICATE THAT THE ASSESSEE WAS UNDER A BONA - FIDE BELIEF THAT THE AMOUNT PAID TO M/S MAERSK INDIA PVT. LTD. WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. BE THAT AS IT MAY, I AM CONCERNED WITH IMPOSITION AND CONFIRMATION OF PENALTY U/S 271(1)(C) OF THE ACT WHICH PRESUPPOSES CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HERE IS A CASE IN WHICH THE ASSESSEE NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTICULARS. DEDUCTION ON ACCOUNT OF M/S MAERSK INDIA PVT. LTD. WA S CLAIMED AFTER MAKING DUE PAYMENTS. THE DISPUTE IN ONLY ABOUT DEDUCTION OF NON - DEDUCTION OF TAX AT SOURCE FROM PAYMENT TO M/S MAERSK INDIA PVT. LTD. FOR WHICH DISALLOWANCE HAS BEEN MADE U/S 40(A)(IA) OF THE ACT. UNDER NO CIRCUMSTANCE CAN SUCH A DISALLOWAN CE BE BROUGHT WITHIN THE AMBIT OF SECTION 271(1)(C) OF THE ACT. THE ASSESSEE MADE A PROPER DISCLOSURE ABOUT THE EXPENSE CLAIMED BY ITS AS DEDUCTION WHICH WAS NEITHER BOGUS NOR OTHERWISE NON - DEDUCTIBLE BUT FOR THE APPLICATION OF SECTION 40(A)(IA) OF THE ACT . OVERTURNING THE IMPUGNED ORDER, I ORDER FOR THE DELETION OF THE INSTANCE PENALTY. 5. IN THE LIGHT OF FOREGOING DISCUSSION, IN OUR CONSIDERED VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE QUITE SIMILAR TO THE CASE OF M/S SYNDICATE LAB ELS VS. ACIT (SUPRA) AND THUS GROUNDS OF ASSESSEE ARE SQUARELY COVERED IN ITS FAVOUR BY THE SAID ORDER OF THE TRIBUNAL AND OUR CONCLUSION ALSO GETS STRONG SUPPORT FROM THE DECISION HON BLE APEX COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS (SUPRA) HEN CE , WE ALLOW BOTH THE GROUNDS OF APPEAL AND CONSEQUENTLY THE AO IS DIRECTED TO DELETE THE IMPUGNED PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN COURT ON 26 T . 02.2016 S D / - S D / - (S.V. MEHROTRA) (C.M GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER * RES. DESKTOP COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT (APPEALS) 5 . DR: ITAT