ACIT, (TDS), TDS Circle-1(1) ,Hyderabad, Hyderabad V. Image Health Care Limited, Hyd, Hyderabad

ITA 658/HYD/2015

• Counselvise Citation: 65822514 RSA 2015
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-12-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 15-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: S RAMA RAO
• Keywords: Initiation of penalty proceedings; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.658/HYD/2015 : ASSESSMENT YEARS 2012-1 3 ITA NO.659/HYD/2015 : ASSESSMENT YEARS 2013-1 4 ASSTT. COMMISSIONER OF INCOME - TAX(TDS), CIRCLE 1(1), HYDERABAD V/S M/S. IMAGE HEALTH CARE LTD., HYDERABAD (PAN - AAACI 7295 Q ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.SITARAM RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 1 .1 2 .2015 DATE OF PRONOUNCEMENT 1.12.2015 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THESE TWO APPEALS, FILED AT THE INSTANCE OF THE R EVENUE, ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) 8, HYDERABAD AND THEY PERTAIN T O ASSESSMENT YEARS 2012-13 AND 2013-14. SINCE THE ISSUE INVOLVE D IN BOTH THE APPEALS IS IDENTICAL, WE PROCEED TO DISPOSE OF THES E APPEALS BY A COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN RESPECT OF FINANCIAL YEAR 2011-12, ASSESSI NG OFFICER NOTICED DURING THE COURSE OF SURVEY OPERATIONS THAT THE ASSESSEE HAS BEEN POSTPONING THE REMITTANCE OF TDS; THOUGH TAX TO THE TUNE OF RS.1.15 CRORES WAS DEDUCTED DURING THE FINANCIAL YE AR 2011-12, ASSESSEE DID NOT REMIT THE SAME INTO THE GOVERNMEN T OF INDIA ACCOUNT. SINCE THERE WAS DELAY IN THE REMITTANCE OF TDS TO THE GOVERNMENT (TDS) ACCOUNT, ASSESSEE WAS DEEMED TO BE IN DEFAULT IN RESPECT OF SUCH TAX AND SIMPLE INTEREST WAS LEVIED ON THE DEFAULTED AMOUNT. THEREAFTER, PENALTY PROCEEDINGS WERE INITI ATED UNDER S.221 OF ITA NO.658-659/HYD/2015 M/S. IMAGE HEALTH CARE LTD., HYDERABAD 2 THE ACT, BY STATING THAT THE AMOUNT, WHICH WAS NOT REMITTED TO THE GOVERNMENT ACCOUNT WAS RS.1.15 CRORES AND INTEREST THEREON UNDER S.201(1A) WORKED OUT TO RS.14,23,879, AND SINCE THE ASSESSEE HAS NOT PAID INTEREST TILL DATE, IT IS LIABLE TO THE CONSE QUENCES UNDER S.221 OF THE ACT. IN RESPONSE THERETO, ASSESSEE SUBMITTED T HAT ASSESSEE COULD NOT MAKE THE PAYMENT ON ACCOUNT OF CASH CRUNCH AN D THUS, IT IS SUPPORTED BY A REASONABLE CAUSE. THE ASSESSING O FFICER OBSERVED THAT THE TDS AMOUNT OF THE FINANCIAL YEAR 2011-12, WAS REMITTED BY THE ASSESSEE, BELATEDLY IN JUNE, 2012 AND INTEREST UNDER S.201(1A) WAS NOT REMITTED EVEN TILL DATE AND HENCE, IT IS A FIT CASE FOR IMPOSITION OF PENALTY, AND ACCORDINGLY LEVIED A PENALTY OF RS. 10 LAKHS. IN THIS REGARD, HE RELIED UPON THE DECISION OF ITAT (AMRITS AR BENCH) IN THE CASE OF KAPSONS INDUSTRIES LTD. V/S. ITO, WHEREIN T HE BENCH HELD THAT TAX DEPOSITED BELATEDLY AFTER THE DUE DATE WILL NOT ABSOLVE THE DEFAULT FOR WHICH PENALTY IS IMPOSED. 3. SIMILARLY, IN THE FINANCIAL YEAR 2012-13, THE AMOUNT WHICH WAS NOT REMITTED TO THE GOVERNMENT ACCOUNT, THOUGH TAX WAS DEDUCTED, WAS QUANTIFIED AT RS.62,61,048 AND INTERE ST UNDER S.201(1A) TO THE TUNE OF RS.4,15,180, HAVING NOT BE EN PAID TILL THE DATE OF INITIATION OF PENALTY PROCEEDINGS, THE ASSE SSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE AND IMPOSED PENALTY OF RS.10 LAKHS UNDER S.221 OF THE ACT. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT 98% OF ITS REVENUE IS DERIVED FROM THE PATIENTS WHO ARE COVERED BY INSURANCE POLICIES AND PATIENTS REFERRED BY GOVERNM ENT AGENCIES LIKE CGHS, ESIC, AROGYA SREE, APSRTC, SINGARENI COLLIER IES, SOUTH CENTRAL RAILWAY ETC.; WHILE NORMAL CREDIT PERIOD FOR COLLEC TION FROM INSURANCE COMPANIES, IS AROUND THREE MONTHS, FROM GOVERNMENT ENTITIES IT IS FOUR ITA NO.658-659/HYD/2015 M/S. IMAGE HEALTH CARE LTD., HYDERABAD 3 TO SIX MONTHS; DELAY IN REALISATION OF THE REVENUE IS FURTHER AGGRAVATED BY THE PRESSURE FROM THE CREDITORS FOR D RUGS AND DISPOSABLES FOR WHICH THE ASSESSEE WAS GRANTED A CR EDIT PERIOD OF ONLY TWO MONTHS (IN FACT, MOST OF THE SUPPLIERS WERE NO T INTERESTED IN OFFERING CREDIT); ASSESSEE SUFFERED FROM SEVERE C ASH FLOW PROBLEM AND HAD TO STRUGGLE TO MAKE FUNDS AVAILABLE EVEN TO MEE T ITS REGULAR OPERATING EXPENDITURE, WHICH RESULTED IN DELAYED RE MITTANCE OF TDS. IT WAS ALSO CONTENDED THAT DEPARTMENT COLLECTED THE TD S DUES BY MAKING ATTACHMENT OF ASSESSEES BANK ACCOUNTS UNDER S.226(3) AND EVEN ON THE DATE OF ATTACHMENT, THE COMPANY WAS REE LING UNDER SEVERE CASH CRUNCH AND CASH IN ALL THE THREE BANK A CCOUNTS (SBH, INDIAN BANK AND PNKB) TOGETHER WAS BELOW RS. 6 LAKH S. RELIANCE WAS PLACED UPON THE FOLLOWING DECISIONS IN SUPPORT OF I TS CONTENTION THAT WHERE THE ASSESSEE HAS REASONABLE CAUSE OR EXCUSE F OR THE DELAY IN REMITTANCE OF TDS, PENALTY COULD NOT BE LEVIED UNDE R S.221 OF THE ACT. (A) CIT V/S. SMT. VIJAYANTHIMALA (108 ITD 882)-MAD. (B) CIT V/S. DADU VALA & CO. (170 ITR 491)-RAJ. DETAILED ARGUMENTS WERE ADVANCED BEFORE THE CIT(A), EXPLAINING AS TO HOW THE ASSESSEE COMPANY HAD TO SUFFER ON ACCOUNT OF CASH CRUNCH IN THE FORM OF DELAY IN PAYMENT OF SALARIES, PROFE SSIONAL FEE TO DOCTORS AND STAFF BY WHICH ASSESSEE COULD NOT RETAIN QUALI TY PROFESSIONAL AND STAFF AND IN TURN, AFFECTING THE PATIENT INFLOW ETC . IT WAS ALSO CONTENDED THAT PENALTY CANNOT BE LEVIED FOR NON-PAY MENT OF INTEREST, SINCE TAX AND INTEREST ARE DIFFERENT IN CHARAC TER, WHEREAS THE DEFINITION OF TAX UNDER S.2(43) DOES NOT COVER I NTEREST AND PENALTY, UNDER S.221 OF THE ACT, AND THEREFORE, MERE NON-PA YMENT OF INTEREST, PENALTY IS NOT LEVIABLE, AND IN THIS REGARD, RELIAN CE WAS PLACED UPON THE ITA NO.658-659/HYD/2015 M/S. IMAGE HEALTH CARE LTD., HYDERABAD 4 DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF SHREENIWAS & SONS V/S. ITO (96 ITR 562)-CAL. 5. THE LEARNED CIT(A) OBSERVED THAT SECOND PROVIS O TO S.221 PROVIDES FOR NON-LEVY OF PENALTY; IF THE ASSESSEE I S ABLE TO GIVE GOOD AND SUFFICIENT REASON FOR NON-REMITTANCE OF TAX AND IN THE GIVEN CIRCUMSTANCES, THE ASSESSEE IS PREVENTED BY GOOD AN D SUFFICIENT CAUSE IN WHICH EVENT PENALTY SHOULD NOT BE LEVIED. IN TH IS REGARD, THE LEARNED CIT(A) RELIED UPON THE FOLLOWING DECISIONS- (1) CIT V/S. BHIKAJI RAMCHANDRA (183 ITR 478)-BOM (2) CIT V/S. CHEMBARA PEAK ESTATES LTD. (183 ITR 471)-K ER (3) CIT V/S. RAUNAQ & CO. (P) LTD. (140 ITR 407)-DEL (4) HINDUSTAN STEEL LTD. V/S. STATE OF ORISSA (83 ITRT 26)-SC (5) CIT V/S. MUNNILAL & COMPANY (204 CTR (RAJ) 529 (SC) WHILE SUMMING UP, THE LEARNED CIT(A) OBSERVED THAT THERE IS GOOD AND SUFFICIENT CAUSE FOR NOT PAYING THE TAX BECAUSE THE RE IS A GENUINE FINANCIAL CRUNCH, WHICH IS EVIDENT FROM THE TOTAL B ALANCE AVAILABLE IN THE THREE BANK ACCOUNTS. IT AS FURTHER OBSERVED TH AT WHERE THE ASSESSEE HAD ACTED IN A BONA FIDE MANNER, PENALTY S HOULD NOT BE LEVIED, MORE PARTICULARLY, WHEN THE AMOUNT REMAININ G TO BE PAID WAS ONLY INTEREST COMPONENT. THUS, SHE DELETED THE PEN ALTY LEVIED BY THE ASSESSING OFFICER FOR BOTH THE YEARS. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 7. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT MERE CASH CRUNCH CANNOT BE CONSIDERED AS A REASONABLE CAUSE AND THE ASSESSING OFFICER IS JUSTIFIED IN LEVYING PENALTY UNDER S.221 OF THE ACT, ITA NO.658-659/HYD/2015 M/S. IMAGE HEALTH CARE LTD., HYDERABAD 5 WHICH IS ONLY IN ADDITION TO THE ARREARS OF PAYMENT OF TAX DEDUCTED. RELIANCE WAS PLACED UPON THE DECISION OF THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF RELIANCE INDUSTRIES LTD. (377 ITR 774), WHEREIN COURT OBSERVED THAT PENALTY UNDER S.221 IS IMPOSABL E EVEN IF TAX HAS BEEN PAID BEFORE THE INITIATION OF PENALTY PROCEEDI NGS. HOWEVER, WHEN POINTED OUT THAT WHEN THERE IS GOOD AND SUFFICIENT REASON, THE SAME REQUIRES TO BE CONSIDERED, LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED HAT MERE NON-AVAILABILITY OF CASH CANNOT BE TREATED AS A VALID CAUSE BECAUSE ASSESSEE HAS DEDUCTED TAX AT SO URCE. 8. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED HAT IT WAS ONLY A NOTIONAL DEDUCTION AN D THE ASSESSEE HAS NOT RECEIVED THE AMOUNT, WHICH IS VERY MUCH EVIDEN T FROM THE FACT THAT IT WAS DEALING WITH VARIOUS PATIENTS COVERED UNDER SCHEMES SUCH AS ESI, AROGYA SREE, ETC. AND THERE WAS A GENUINE CASH CRUNCH, BECAUSE OF WHICH ASSESSEE COULD NOT MAKE THE REMIT TANCE ON TIME, AND THE SAME HAVING BEEN CONSIDERED BY THE LEARNED CIT(A), IN THE ABSENCE OF PLACING ANY EVIDENCE TO THE CONTRARY, TH E LEARNED DEPARTMENTAL REPRESENTATIVE WAS NOT JUSTIFIED IN S TATING THAT THE EXPLANATION OF THE ASSESSEE IS NOT VALID. HE ALSO SUBMITTED THAT HE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F RELIANCE INDUSTRIES LTD. (SUPRA) DOES NOT COME IN THE WAY OF ASSESSEES PLEA, SINCE THERE WAS A VALID EXPLANATION GIVEN BY THE A SSESSEE. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. IN THE INSTANT CASE, IN THESE APPEALS, THE PLEA OF THE ASSESSEE ALL ALONG WAS THERE WAS A GENUINE CASH CRUNCH BECAUSE OF THE FACT THAT MOST OF THE PAYMENTS WERE RECEIVED UN DER SEVERAL SCHEMES AFTER A GAP OF TWO TO SIX MONTHS, WHEREAS T HE ASSESSEE HAS TO MAKE SOME URGENT PAYMENTS FOR THE PURPOSE OF RUN NING ITS DAY-TO- ITA NO.658-659/HYD/2015 M/S. IMAGE HEALTH CARE LTD., HYDERABAD 6 DAY BUSINESS ON ACCOUNT OF WHICH THE ASSESSEE COULD NOT HAVE SUFFICIENT LIQUID CASH TO MAKE THE PAYMENT, WHICH I S EVIDENT FROM THE FACT THAT ALL THE THREE BANK ACCOUNTS OF THE ASSESS EE TOGETHER HAD A TOTAL CASH BALANCE OF RS.6 LAKHS ONLY. THESE FACTS WERE NOT DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. IN OTH ER WORDS, THE EXPLANATION OF THE ASSESSEE THAT ON ACCOUNT OF CASH CRUNCH, REMITTANCE OF TDS INTO GOVERNMENT ACCOUNT COULD NOT BE MADE HA S NOT BEEN REBUTTED. UNDER THESE CIRCUMSTANCES, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A). WE THEREFOR E, UPHOLD THE SAME AND DISMISS THESE APPEALS OF THE REVENUE. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE COURT AT THE CONCLUSION OF THE HEARING ON 1.12.2015. SD/- SD/- (B.RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT DT/- 1 ST DECEMBER, 2015 COPY FORWARDED TO: 1. M/S. IMAGE HEALTH CARE LTD., 8 - 3 - 603/F/12 & 13, IMAGE HOUSE, BEHIND IMAGE TRADE CENTRE, HYDERABAD 2. ASST . COMMISSIONER OF INCOME - TAX (TDS) CIRCLE 1(1) HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) 8 , HYDERABAD PR. COMMISSIONER OF INCOME-TAX (TDS), HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.