ACIT (TDS), Chandigarh V. The State Bank of Patiala, Chandigarh

ITA 79/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90208 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-06-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 22-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR AMA RVEER SINGH
• Keywords: Bonafide belief; Period of limitation; Question of law; Non-deduction of tax; Reasonable cause
• Section: 273B; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 79/CHD/2015 ASSESSMENT YEAR: 2012-13 THE ACIT (TDS), VS THE STATE BANK OF PATIALA, 2 ND FLOOR, CR BUILDING, SCO 3A, SECTOR 7-C, SECTOR 17-E, CHANDIGARH. CHANDIGARH. PAN: PTLSI2979B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SI NGH RESPONDENT BY : DR. AMARVEER SINGH DATE OF HEARING : 29.06.2015 DATE OF PRONOUNCEMENT : 30.06.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS), CHANDIGARH DATED 27.11.2014 FOR ASSES SMENT YEAR 2012-13 CHALLENGING THE DELETION OF PENALTY UNDER S ECTION 271C OF THE INCOME TAX ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE PERSO N RESPONSIBLE (PR) HAD NOT DEDUCTED TAX AT SOURCE ON PAYMENTS OF INTEREST TO THE FOLLOWING FOUR SOCIETIES : 1. HARYANA RURAL ROADS AND INFRASTRUCTURE DEVELOPMENT AGENCY (HARRIDA) 2. PUNJAB ICT EDUCATION SOCIETY (DIRECTOR GENERAL SCHOOL EDUCATION PUNJAB) 3. HARYANA STATE COUNCIL FOR SCIENCE & TECHNOLOGY 4. SHRI AUROBINDO SOCIETY 2 3. THE ASSESSING OFFICER VIDE SEPARATE ORDER LEVIED PENALTY UNDER SECTION 271C OF THE ACT. THE LD. CIT(APPEALS ) CONSIDERING THE EXPLANATION OF THE ASSESSEE, CANCELLED THE PENA LTY AND HELD THAT PERSON RESPONSIBLE WAS NOT LIABLE FOR PENALTY UNDER SECTION 271C OF THE ACT. HOWEVER, AS REGARDS THE PENALTY O RDER PASSED AFTER PERIOD OF LIMITATION, WAS NOT DECIDED IN FAVO UR OF THE SOCIETY. 4. THE REVENUE IS IN APPEAL. 5. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET SUBMITT ED THAT THE ISSUE IS COVERED BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEAR 2011-12 IN ITA 1129/CHD/2014 DATED 27.02.2015 IN WHICH ON IDENTICA L ISSUES, DEPARTMENTAL APPEAL WAS DISMISSED. THE ORDER IS RE PRODUCED AS UNDER : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS), CHANDIGARH DATED 30.10.2014 FOR ASSES SMENT YEAR 2011-12 CHALLENGING THE CANCELLATION OF PENALT Y UNDER SECTION 271C OF THE ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE PERSO N RESPONSIBLE (PR) HAD NOT DEDUCTED TAX AT SOURCE ON PAYMENTS OF INTEREST TO THE FOLLOWING FOUR SOCIETIE S : 1. HARYANA RURAL ROADS AND INFRASTRUCTURE DEVELOPMENT AGENCY (HARRIDA) 2. PUNJAB ICT EDUCATION SOCIETY (DIRECTOR GENERAL SCH OOL EDUCATION PUNJAB) 3. HARYANA STATE COUNCIL FOR SCIENCE & TECHNOLOG Y 4. SHRI AUROBINDO SOCIETY 3. THE ASSESSEE EXPLAINED THE REASONS FOR NON DEDUC TION OF TAX AT SOURCE BUT THE ASSESSING OFFICER REJECTED THE CLAIM AND CREATED DEMAND UNDER SECTION 201(1) AND ( 1A) OF THE ACT. PENALTY PROCEEDINGS UNDER SECTION 271C WE RE ALSO INITIATED AND VIDE SEPARATE ORDER, THE ASSESSING OF FICER HELD THAT PERSON RESPONSIBLE WAS LIABLE FOR PENALTY UNDER THE ABOVE PROVISIONS. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFORE LD. CIT(APPEALS) AND FILED THE WRITT EN 3 SUBMISSIONS WHICH WERE TAKEN INTO CONSIDERATION AND THE LD. CIT(APPEALS) CANCELLED THE PENALTY. HIS FINDIN GS IN PARA 3.3 TO 4 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 3.3 I HAVE CONSIDERED FACTS OF THE CASE. FOR THE SA KE OF READY REFERENCE, PROVISIONS OF SECTION 194A(3)(II I)(F) ARE REPRODUCED BELOW: '194A. INTEREST OTHER THAN 'INTEREST ON SECURITIES'. (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APPLY- ------------------- (III) TO SUCH INCOME CREDITED OR PAID TO- ------------------- F) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR C LASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENTRAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITING, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE; THE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT U/S 194A MENTIONS VARIOUS SOCIETIES AND ENTRY AT S.N O. 40 (NOTIFICATION NO. SO 3489 DATED 22.10.1970) IS AS UNDER: 'ANY UNDERTAKING OR BODY INCLUDING A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (XXI OF 1890) FINANCED WHOLLY BY THE GOVERNMENT' IT HAS BEEN POINTED OUT IN THE APPELLATE PROCEEDING S THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON INTEREST PAID TO THE FOLLOWING THREE SOCIETI ES, DETAILS OF WHICH ARE AS UNDER: I) HARYANA RURAL ROADS AND INFRASTRUCTURE DEVELOPMENT AGENCY (HARRIDA), FORMED AS A SOCIETY REGISTERED UNDER SOCIETIES REGISTRATION ACT 1860, FOR T HE PURPOSE OF IMPLEMENTING INFRASTRUCTURE PROJECTS ESPECIALLY ROADS UNDER PRADHAN MANTRI GRAM SARAK YOJNA. JAB ICT EDUCATION SOCIETY (DIRECTOR GENERAL II) PUN SCHOOL EDUCATION PUNJAB), A NON PROFIT ORGANIZATION REGISTERED UNDER SOCIETIES REGISTRATIO N ACT 1860 WITH AN AIM TO PROVIDE COMPUTER EDUCATION IN .ALL DISTRICTS OF PUNJAB COVERING GOUT. SCHOOLS. III) HARYANA STATE COUNCIL FOR SCIENCE &, TECHNOLOGY INCORPORATED IN 1986 UNDER SOCIETIES REGISTRATION ACT 1860 TO PROMOTE SCIENCE & TECHNOLOGY AND ITS UTILIZATION FOR ACHIEVEMENT OF SOCIO-ECONOMIC OBJECTIVES IN THE STATE OF HARYANA.' 3.3.1 THE LD. COUNSEL HAS SUBMITTED THAT ALL THE ABOVE SOCIETIES HAD DECLARED THESE FUNDS RECEIVED A S GRANTS AND SO TAX WAS NOT REQUIRED TO BE DEDUCTED A T SOURCE ON INTEREST ON THESE FUNDS IN VIEW OF THE PROVISIONS OF SECTION 194A(3)(III)(F) READ WITH THE AFORESAID NOTIFICATION NO. SO 3489 DATED 22.10.1970 , 4 SINCE THESE SOCIETIES WERE REGISTERED UNDER THE SOCI ETIES REGISTRATION ACT 1860 AND FINANCED WHOLLY BY THE GOVERNMENT; AS HELD BY HONBLE ITAT, CHANDIGARH IN THE CASE OF STATE BANK OF PATIALA, KUSUMPTI, SHIMLA, VIDE ORDER DATED 20.05.2014 IN ITA NO. 269- 271/CHD/2014. IT WAS ALSO HELD BY HONBLE TRIBUNAL IN THIS CASE THAT IF THE ASSESSEE HAD GENU INE BELIEF THAT IT WAS NOT REQUIRED TO DEDUCT TAX, PENA LTY U/S 271C WAS NOT LEVIABLE. 3.3.2 REGARDING SHRI AUROBINDO SOCIETY, THE APPELLANT HAS FILED A COPY OF CERTIFICATE NO. 547-49 DATED 26.04.2006 ISSUED BY DIRECTOR OF INCOME TAX (EXEMPTI ON) KOLKATA FROM F.NO. DIT(E)/86/8E/7/61-62 REGARDING EXEMPTION U/S 80G(5)(VI) OF THE ACT VALID F OR A.Y. 2011-12. THE APPELLANT HAS ALSO FILED A COPY OF RETURN OF INCOME OF SHRI AUROBINDO SOCIETY FOR A.Y. 2012- 13 AS PER WHICH THE TOTAL INCOME WAS 'NIL'. IN AN Y CASE, THE APPELLANT WAS UNDER BONAFIDE BELIEF THAT I T WAS NOT REQUIRED TO DEDUCT TAX ON PAYMENT MADE TO TH IS SOCIETY AND SO PENALTY U/S 271C WAS NOT LEVIABLE IN VIEW OF THE DECISION OF HON'BLE ITAT, CHANDIGARH IN THE CASE OF STATE BANK OF PATIALA, KUSUMPTI, SHIMLA (SUPRA). 3.3.3 THE LD. COUNSEL HAS POINTED OUT THAT APPEAL WAS NOT FILED BY THE APPELLANT AGAINST ORDER U/S 201(1) /(1A) OF THE ACT BECAUSE THE RECIPIENTS OF INTEREST HAD C LAIMED REFUND OF THE AMOUNTS DEDUCTED BY THE APPELLANT. 3.3.4 IN VIEW OF ABOVE DISCUSSION, IT IS HELD THAT THE PR WAS NOT LIABLE FOR PENALTY UNDER SECTION 271C OF THE ACT. THE PENALTY LE VIED IS ACCORDINGLY CANCELLED. GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE ALLOWED. 4. IN THE RESULT, THE APPEAL IS ALLOWED. 4. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS RELIED UPON ORDER OF ITAT CHANDIGARH BENCH IN ITA NO. 267 TO 271/CHD/2014 IN THE CASE OF ITO VS STATE BANK OF PA TIALA, KUSUMPTI, SHIMLA (SUPRA) AND RELIED UPON JUDGEMENT OF HON'BLE HIMACHAL PRADESH IN THE CASE OF CIT (TDS) CHANDIGARH VS STATE BANK OF PATIALA, SHIMLA IN ITA NO. 17/2014 DATED 31.12.2014. 5. ON CONSIDERATION OF THE FACTS OF THE CASE, IN TH E LIGHT OF THE FINDINGS OF LD. CIT(APPEALS) AND THE ABOVE DECI SIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF REVENUE. TH E LD. CIT(APPEALS) FOUND THAT IN CASE OF THREE OF THE SOC IETIES, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. I N THE CASE OF SHRI AUROBINDO SOCIETY, THE EXEMPTION CERTIFICAT E UNDER SECTION 80G(5)(VI) WAS ALSO FILED. IT WOULD, THERE FORE, PROVE 5 THAT ASSESSEE HAD A REASONABLE CAUSE FOR FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 201(1) OF THE ACT. IN T HE CASE OF STATE BANK OF PATIALA, KUSUMPATI, SHIMLA (SUPRA), I TAT CHANDIGARH BENCH DISMISSED THE DEPARTMENTAL APPEAL CONFIRMING THE ORDER OF THE LD. CIT(APPEALS) IN CAN CELING THE PENALTY UNDER SECTION 271C OF THE ACT. THE FACTS A RE IDENTICAL IN THE CASE OF STATE BANK OF PATIALA, SHI MLA (SUPRA). HON'BLE HIMACHAL PRADESH HIGH COURT DISMIS SED DEPARTMENTAL APPEAL FINDING NO SUBSTANTIAL QUESTION OF LAW. THESE FACTS WOULD CLEARLY SUPPORT THE FINDINGS OF L D. CIT(APPEALS) THAT ASSESSEE HAD A GENUINE BELIEF THA T IT WOULD NOT REQUIRE TO DEDUCT TAX AT SOURCE. THE CAS E OF THE ASSESSEE, THEREFORE, SQUARELY FALLS UNDER THE PROVI SIONS OF SECTION 273B OF THE ACT AND PENALTY IS NOT LEVIABLE BECAUSE ASSESSEE IS ABLE TO PROVE THAT THERE WAS A REASONAB LE CAUSE FOR THE SAID FAILURE. 6. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUM STANCES, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL . THE SAME IS ACCORDINGLY, DISMISSED. 7. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. 6. CONSIDERING THE ABOVE, IT IS CLEAR THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. THE DEPARTMENTAL APPEAL IS, THUS, LIABLE TO BE DISMISSED. WE, ACCORDINGLY, DISMISS THE DEPA RTMENTAL APPEAL. 7. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JUNE,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH