M/S M.D.S. UNIVERSITY, Jaipur V. ADD. CIT, UDAIPUR

ITA 807/JPR/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74789 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 13-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Reasonable cause
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.806 & 807/JP/2011 M/S. M.D.S. UNIVERSITY, VS. THE ACIT (TDS), AJMER (RAJASTHAN). UDAIPUR. TAN NO. JDHM 06215 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHENDRA GARGIEYA. DEPARTMENT BY : SHRI D.C. SHARMA- D.R. DATE OF HEARING : 21/01/2014. DATE OF PRONOUNCEMENT : 23/01/2014. O R D E R PER N.K.SAINI, A.M THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE SEPARATE ORDERS EACH DATED 20/06/2011 OF LD. CIT(A) , AJMER. SINCE, THE COMMON ISSUES ARE INVOLVED IN THESE APPE ALS, WHICH WERE HEARD TOGETHER, SO THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IN I.T.A.NO. 806/JP/2011, THE FOLLOWING GROUNDS HAV E BEEN RAISED:- 2 1. THE IMPUGNED PENALTY ORDER U/S 271C OF THE ACT DATED 18/08/2010 IS BAD IN LAW AND ON FACTS OF THE CASE, FOR WANT OF JURISDICTION AND FOR VARIOUS OTHER REASONS AND H ENCE, THE SAME KINDLY BE QUASHED. 2. THE IMPUGNED PENALTY ORDER U/S 271C OF THE ACT D ATED 18/08/2010 IS BAD IN LAW AND ON FACTS OF THE CASE, BEING BARRED BY LIMITATION HENCE, THE SAME KINDLY BE QUAS HED. 3. RS. 1,79,309/-: THE LD. CIT(A) ERRED IN LAW AS W ELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE IMPUGNED PENALT Y U/S 271C OF THE ACT OF RS. 1,79,309/-. THE PENALTY SO IMPOSED & CONFIRMED BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED IN FULL. 4. THE APPELLANT PRAYS YOUR HONOUR INDULGENCES TO A DD, AMEND OR ALTER OF OR ANY OF THE GROUNDS OF THE APPEAL ON OR BEFORE THE DATE OF HEARING. 2 THE FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF TDS SURVEY, IT WAS FOUND THAT THE ASSESSEE HAD NOT MADE TDS OUT OF MOBILIZATION ADVANCE PAID TO M/S RAJASTHAN STATE ROAD DEVELOPMENT CORPORATION LTD. THE ITO (TDS), AJMER , VIDE ORDER UNDER SECTION 201(1) DATED 19/03/2009 OF THE ACT I. T. ACT 1961 (HEREINAFTER REFERRED TO AS ACT, IN SHORT) HELD T HE ASSESSEE DEDUCTOR AS DEFAULTER AND RAISED A DEMAND OF RS. 1, 79,309/-. THIS WAS BROUGHT TO THE NOTICE OF THE ADDITIONAL CI T, UDAIPUR, WHO ISSUED A NOTICE UNDER SECTION 274/271C OF THE A CT TO SHOW- CAUSE AS TO WHY PENALTY UNDER SECTION 271C SHOULD N OT BE IMPOSED IN ITS CASE FOR DEFAULT OF NOT MAKING TDS O F 3 RS.1,79,309/- UNDER SECTION 194C OF THE ACT WHILE MA KING ADVANCES TO M/S. RAJASTHAN STATE ROAD DEVELOPMENT CO RPORATION LTD. (RSRDCL). THE ASSESSEE SUBMITTED IN ITS REPLY T HAT IT DID NOT MAKE ANY TDS ON THE PAYMENTS MADE TO RSRDCL ON THE IMPRESSION THAT THE TDS PROVISIONS WERE NOT APPLICA BLE IN VIEW OF SECTION 196 OF THE ACT. IT WAS FURTHER SUBMITTED T HAT THE ASSESSEE-DEDUCTOR HAD DEPOSITED THE ENTIRE PAYMENT RAISED BY ITO (TDS) WITHIN A STIPULATED TIME. THE RELIANCE W AS PLACED ON THE JUDGMENT OF THE HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. SR. ACCOUNTS OFFICER, MPEB . HOWEVER, THE AO DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND LEVIED PENALTY OF RS. 1,79,309/- UNDER SECTION 271C OF THE ACT VIDE ORDER DATED 18/08/2010. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ), WHO CONFIRMED THE PENALTY BY OBSERVING IN PARA 3.3 & 3.4 OF THE IMPUGNED ORDER WHICH READ AS UNDER:- 3.3A THE APPELLANT ALLOTTED CONSTRUCTION WORK TO R SRDC BY A MEMORANDUM OF UNDERSTANDING. THUS THERE WAS A CONT RACT BETWEEN THE APPELLANT AND RSRDC. B. APPELLANT MADE PAYMENT OF RS. 79,13,000/- TO RSR DC DURING THE F.Y. 2007-08 WITHOUT MAKING TDS. C. AS PER SEC. 194C (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM IN PURSUANCE OF A CONTRACT IS REQUIRED TO DEDUC T TAX. 4 THEREFORE, THE APPELLANT WAS ALSO LIABLE TO DEDUCT TAX ON THE SUM OF RS. 79,13,000/-. D. SEC. 196 SPECIFIES THAT TDS IS NOT REQUIRED TO B E MADE IF THE PAYMENT IS MADE TO : (I) THE GOVERNMENT, OR (II) THE RESERVE BANK OF INDIA, OR (III) A CORPORATION ESTABLISHED BY OR UNDER A CENTR AL ACT WHICH IS, UNDER ANY LAW FOR THE TIME BEING IN FORCE , EXEMPT FROM INCOME-TAX ON THE INCOME, OR (IV) A MUTUAL FUND SPECIFIED UNDER CLAUSE (23D) OF SECTION 10. IN THE CASE OF APPELLANT THE PAYMENT WAS NOT MADE TO A PERSON SPECIFIED AS ABOVE AND THEREFORE PROVISIONS OF SEC. 196 ARE NOT APPLICABLE IN ITS CASE. E. THE ARGUMENT OF THE APPELLANT THAT TAX IS TO BE DEDUCTED ON THE INCOME COMPONENT OF THE PAYMENT IS NOT ACCEPTAB LE. SEC. 194C STIPULATED DEDUCTION OF TAX AT THE TIME O F MAKING ANY PAYMENT TO THE CONTRACTOR. THEREFORE, THE ARGU MENT OF THE APPELLANT THAT NOT TAX WAS REQUIRED TO BE DEDUC TED AT THE TIME OF GIVING DEPOSIT MOBILIZATION ADVANCE IS NOT CORRECT. 3.4 IN VIEW OF ABOVE MENTIONED FACTS, I HOLD THAT T HERE WAS NO REASONABLE CAUSE IN THE CASE OF APPELLANT FOR NOT D EDUCTING TAX AT SOURCE. LEVY OF PENALTY U/S 271C IS THEREFO RE JUSTIFIED. PENALTY OF RS. 1,79,309/- IS CONFIRMED. GROUND NO. 1, 2 AND 3 OF THE APPEAL ARE THUS DISMISSED. NOW THE ASSESSEE IS IN APPEAL. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E PENALTY LEVIED BY THE AO WAS BARRED BY LIMITATION A S PER THE PROVISIONS CONTAINED IN SECTION 275(1)(C) OF THE AC T WHICH 5 PROVIDES THAT NO PENALTY CAN BE IMPOSED AFTER EXPI RY OF FINANCIAL YEAR IN WHICH PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED ARE CO MPLETED. IT WAS CONTENDED THAT IN THIS CASE, THE RELEVANT PROCE EDINGS WERE COMMENCED ON 29/03/2009 AND THE FINANCIAL YEAR ENDS ON 31/03/2009. IT WAS FURTHER STATED THAT THE PENALTY COULD NOT HAVE BEEN IMPOSED FROM THE END OF THE MONTH, IN WHI CH ACTION FOR IMPOSITION OF PENALTY WAS INITIATED, WHICH IN T HE PRESENT CASE WAS ON 24/12/2009. THEREFORE, THE PENALTY COULD HA VE BEEN LEVIED BEFORE 30/06/2010, HOWEVER, IN THIS CASE IT WAS LEVIED ON 18/08/2010, SO, IT WAS BARRED BY LIMITATION. RELIAN CE WAS PLACED ON THE FOLLOWING CASE-LAWS:- 1) MITSUI & COMPANY LTD. VS. DCIT (1999) 65 TTJ 1 ( DEL) 2) L.G. ELECTRONICS INC. VS. ACIT (2004) 84 TTJ 10 29 (DEL) 3) CIT VS. JITENDRA SINGH RATHORE (2013) 257 CTR 1 8 (RAJ) IT WAS FURTHER STATED THAT ON MERIT ALSO, THE ASSES SEE WAS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194C(1) OF THE ACT BECAUSE AN ADVANCE FOR M OBILIZING RESOURCES WAS MADE FOR CARRYING OUT THE WORK OF THE CUSTOMER/CLIENT TO RSRDCL AND THIS AMOUNT WAS REQUIRE D TO BE ADJUSTED PROPORTIONATELY BEING RUNNING BILLS FOR TH E WORKS 6 CERTIFIED. IT WAS CONTENDED THAT IN THE EARLIER YE AR ALSO, THE ASSESSEE DID NOT DEDUCT ANY TDS ON THE PAYMENT OF M OBILIZATION ADVANCE NOR THE DEPARTMENT EVER ASKED THE ASSESSEE TO MAKE TDS, THE WAY THEY ASKED THIS YEAR. THEREFORE, NO P ENALTY UNDER SECTION 271C OF THE ACT WAS LEVIABLE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1. HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC) 2. ITO (TDS) VS. BOARD OF SECONDARY EDUCATION, AJME R 50 TAXWORLD 30 (JP) 3. KAMAL INDUSTRIES VS. JCIT (2006) 100 TTJ 451 (JD ) 4. CIT VS. ELI LILLY & COMPANY (INDIA) (P) LTD. (20 09) 223 CTR 20 (SC) 5. CIT VS. DY. HOUSING COMMISSIONER, RAJ. HOUSING B OARD, JODHPUR (2002) 177 CTR 591 (RAJ) 6. ITO VS. DISHERGARH POWER SUPPLY CO. LTD (2001) 7 1 TTJ 725 (CAL). 5. IN HIS RIVAL SUBMISSIONS, LD. D.R. SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT ITO ( TDS) PASSED THE ORDER UNDER SECTION 201(1) AND (1A) OF THE ACT ON 1 9/03/2009 AND 7 INITIATED PENALTY PROCEEDINGS UNDER SECTION 271C OF THE ACT. THE TIME LIMIT FOR LEVYING PENALTY HAS BEEN PRESCRI BED IN SECTION 275 (1)(C) OF THE ACT AND THE RELEVANT PROVISION RE ADS AS UNDER:- 275 (1) NO ORDER IMPOSING A PENALTY UNDER THIS CH APTER SHALL BE PASSED- (A) X X X X X X (B) X X X X X X (C) IN ANY OTHER CASE, AFTER THE EXPIRY OF THE FINANCIA L YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FO R IMPOSITION OF PENALTY IS INITIATED WHICHEVER PERIOD EXPIRES LATER. 7 . IN THE INSTANT CASE, THE PROCEEDINGS FOR LEVYING THE PENALTY UNDER SECTION 271C WAS INITIATED VIDE ORDER DATED 1 9/03/2009 WHICH FALLS IN THE FINANCIAL YEAR 2008-09 AND ENDS ON 31/03/2009 AND THE ACTION FOR IMPOSITION OF THE PENALTY WAS IN ITIATED ON 24/12/2009 WHEN A REFERENCE WAS MADE BY THE AO TO T HE ADDL. CIT (TDS), UDAIPUR, ACCORDINGLY 6 MONTHS EXPIRED ON 30/06/2010. THEREFORE, THE ORDER FOR IMPOSING OF PENALTY UNDER SECTION 271C COULD HAVE BEEN PASSED ON OR BEFORE 30/06/2010, BUT THE ORDER FOR LEVYING THE PENALTY U/S 271C OF THE ACT HAS BEE N PASSED BY 8 THE ADDITIONAL CIT ON 18/08/2010, WHICH IS BARRED B Y LIMITATION. THEREFORE, THE PENALTY LEVIED UNDER SECTION 271C OF THE ACT VIDE ORDER DATED 18/08/2010 WAS CLEARLY HIT BY THE BARRE D BY LIMITATION WHICH DESERVES TO BE SET ASIDE. WE ORDE R ACCORDINGLY. 8 . ON A SIMILAR ISSUE, THE ITAT, JAIPUR BENCH A, JAIPUR IN THE CASE OF ITO (TDS), AJMER VS. BOARD OF SECONDARY EDUCATION, AJMER 50 TW 30 (JP) OBSERVED AS UNDER:- 2.1 WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. DU RING THE COURSE OF HEARING, THE LD. DR RELIED UPON THE ORDER OF THE AO WHEREAS THE LD. AR SUPPORTED THE ORDER OF THE LD. C IT(A). WE OBSERVE THAT THE ASSESSEE IS AN EDUCATIONAL INSTITU TION. DURING TDS SURVEY, IT WAS OBSERVED THAT THE ASSESSEE DID N OT MAKE TDS ON PAYMENT MADE TO M/S. RAJASTHAN STATE ROAD DEVELO PMENT CORPORATION LTD. ON BEHALF OF THE ASSESSEE, IT WAS CONTENDED THAT THE ASSESSEE IS NOT COVERED U/S 194C OF THE AC T. HOWEVER, THE SAID PLEA OF ASSESSEE WAS NOT ACCEPTED. LATER O N, THE ASSESSEE DEDUCTED THE TDS AND THE SAME WAS DEPOSITE D ON 06- 03-2009. WE OBSERVE THAT ON THE DATE OF LEVY OF PEN ALTY NOT ONLY THE ENTIRE AMOUNT OF TDS WAS DEDUCTED AND DEPO SITED BUT ALSO THE INTEREST ON ACCOUNT OF DELAY IN DEDUCTION OF TAX, U/S 201(A) WAS LEVIED AND PAID. IN VIEW OF THE ABOVE FA CTS, THE LD. CIT(A) HAS HELD THAT THERE WAS A REASONABLE CAUSE F OR FAILURE TO DEDUCT TDS AS THE ASSESSEE WAS UNDER THE IMPRESSION THAT IT WAS NOT LIABLE TO DEDUCT THE TDS AND ACCORDINGLY TH E LIABILITY TO DEDUCT TDS WAS A DEBATABLE ONE, ON WHICH THERE COUL D BE TWO OPINIONS. IN VIEW OF THE ABOVE, THE LD. CIT(A) HELD THAT THIS IS NOT A SUITABLE CASE FOR LEVY OF PENALTY U/S 271C OF THE ACT . 2.2 ON CONSIDERATION OF FACTS AND IN THE ABSENCE OF ANY CONTRARY FACTS/ OBSERVATIONS BROUGHT ON RECORD BY T HE DEPARTMENT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE 9 ORDER OF THE LD. CIT(A). HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND REJECT THE GROUND OF APPEAL TAKEN BY THE DEPARTMENT. 9 . IN VIEW OF THE FINDINGS GIVEN IN THE AFORESAID RE FERRED TO CASE ALSO, THE PENALTY UNDER SECTION 271C LEVIED IN THE PRESENT CASE WAS NOT JUSTIFIED. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREIN ABOVE, ARE OF THE VIE W THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY ORDER PASSED BY THE AO UNDER SECTION 271C OF THE ACT. ACCORDINGLY, THE SAME IS DELETED. 10 . THE FACTS FOR THE A.Y. 2009-10 IN I.T.A. NO. 807/ JP/2011 ARE SIMILAR, THEREFORE, OUR FINDINGS GIVEN IN RESPE CT OF A.Y. 2008- 09 IN I.T.A.NO. 806/JP/2011 IN FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS . 11. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED . (ORDER PRONOUNCED IN THE COURT ON 23 RD JANUARY, 2014) SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD JANUARY, 2014. VR/- COPY TO: 10 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R BY ORDER ASSISTANT REGISTRAR, ITAT, JAIPUR.