STATE BANK OF INDIA, REGIONAL BUSINESS OFFICE-III,SURAT V. .JCIT(TDS), SURAT

ITA 804/SRT/2024

AI Insights

The case involves three appeals by the State Bank of India against the orders of the Joint Commissioner of Income Tax (TDS), Surat, which imposed penalties under Section 271C of the Income Tax Act for non-deduction of TDS on Leave Travel Concession (LTC) payments to employees. The penalties were contested on the grounds of being imposed beyond the statutory time limits. The tribunal consolidated the appeals due to similar facts and legal issues, focusing on the validity of the penalties and the applicability of the statutory time limits for such penalties under Section 275(1)(c) of the Act.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 37228 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 01-08-2024
• Other Referred Cases: State Bank of India Vs ACIT (2022) 144 taxamann.com 131(SC), ITO Vs Turner General Entertainment Networks India Pvt. Ltd. in ITA No.6597/Delhi/2017 dated 29.04.2024, PCIT vs. JKD Capital & Finlease Ltd. reported in 378 ITR 614 (Del.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Question of law; Period of limitation; TDS; Initiation of penalty proceedings; Time period of passing order; Benefit of exemption
• Section: 143(3); 2; 201(1); 271E

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No. 802 & 803/Srt/2024 (AY: 2013-14 & 2014-15) (Physical hearing) State Bank of India, Regional Business Office-II, 1st Floor, State Bank Bhavan, Ghoddod Road, Opp. Pinjrapole, Surat-397007 PAN No. AAACS 8577 K TAN No. SRTS 07982 C Vs. JCIT (TDS), Range, Surat, 416, 4th Floor, Anavil Business Centre, Surat Hazira Road, Surat. Appellant/ assessee Respondent/ revenue ITA No. 804/Srt/2024 (AY: 2013-14) State Bank of India, Regional Business Office-III, 1st Floor, State Bank Bhavan, Ghoddod Road, Opp. Pinjrapole, Surat-397007 PAN No. AAACS 8577 K TAN No. SRTS 08925 A Vs. JCIT (TDS), Range, Surat,416, 4th Floor, Anavil Business Centre, Surat Hazira Road, Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Pankaj Gupta, C.A. Department represented by Shri Mukesh Jain, Sr.DR Date of Institutions of Appeals 01/08/2024 Date of hearing 02/12/2024 Date of pronouncement 11/12/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These three appeals by the assessee(s) i.e. different officials of State Bank of India are directed against the separate orders of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) [in short, the ld. CIT(A)] all dated 06/06/2024 for the Assessment Years (AY) 2013-14 and 2014-15 respectively. Though, the assessee has raised multiple grounds ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 2 of appeal, however, in our considered view, the substantial ground of appeal relates to validity of penalty levied under Section 271C of the Income Tax Act, 1961 (in short, the Act) and rest of the grounds of appeal are “narration of facts.” As there are similar facts and similar grounds of appeals are raised in all these appeals, therefore, with the consent of parties all these appeals were clubbed, heard together and are being decided by this consolidated order to avoid the conflicting decision. For appreciation of facts, the appeal in ITA No. 803/Srt/2024 for the A.Y. 2014-15 is treated as a “lead case”. 2. Brief facts of the case are that a TDS verification was carried out by the department in different regional business office of State Bank of India, State Bank Bhavan, Ghoddod Road, Surat on 20/03/2014. During the course of such verification, it was noted that deductor-assessee is allowing claim of Leave Travel Concession / Leave Fare Concession (LTC/LFC) of its employee as exempt under Section 10(5) of the Act, on overseas travel. On finding such violation, the Assessing Officer/ITO(TDS) passed order under Section 201(1) and 201(1A) of the Act on 16/02/2015, raising aggregating demand of tax of Rs. 17,94,201/- which consists of demand under Section 201(1) and 201(1A) of the Act. Aggrieved by the order dated 16/02/2015, the assessee filed appeal before the ld. CIT(A) wherein part relief was allowed in favour of assessee by holding that as per Section 10(5) LTC/LFC is exempt only, if travel on such concession is not related to foreign country. The ld. CIT(A) directed the Assessing Officer to re-compute TDS on actual income tax rate applicable for relevant assessment year in respect of each employee instead of flat rate of 30% as applied by the AO/ITO(TDS) and also directed to recompute the ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 3 interest from the date of sanction of LTC instead of considering actual date of payment of LTC in each of the employee. Thus, demand was recomputed at Rs. 15,19,615/- (Rs. 11,49,578 + 3,69,974). Further aggrieved, the assessee has filed present appeal before the Tribunal. The appeal of assessee was allowed for statistical purposes in ITA No(s). 886, 887 and 888/Ahd/2016/Srt dated 20/04/2018. The Tribunal directed the Assessing Officer to decide the issue afresh after allowing adequate opportunity to the assessee. In direction of order of Tribunal, the Assessing Officer passed order under Section 201/201(1A) r.w.s. 254 on 07/02/2019. The AO/ITO(TDS) while passing the assessment order, initiated penalty under Section 271C of the Act. As the penalty is to be levied by the Joint Commissioner of Income Tax (TDS), Range (JCIT), Surat. Thus, AO/ITO(TDS) made a reference for levy of penalty vide order dated 10/04/2019. The JCIT issued show cause notice dated 04/12/2019 which followed another show cause notice dated 02/02/2021. In response to show cause notice, the assessee filed reply on 12/02/2021. The contents of reply filed by the assessee are recorded by JCIT in para-4 of his order. In reply the assessee-bank stated that they have allowed exemption of LTC in a bonafide manner without any melafide intention to deceive the Income tax Department. Reply of assessee was not accepted and the JCIT passed order under Section 271C by imposing penalty of Rs. 11,13844/- vide his order dated 17/03/2021. Aggrieved by the order of JCIT (TDS), the assessee filed appeal before the ld. CIT(A) wherein the action of JCIT(TDS) was confirmed. Further aggrieved, the assessee has filed present appeal before this Tribunal. ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 4 3. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr.DR) for the revenue and have gone through the orders of the lower authorities carefully. The ld. AR of the assessee submits that he has filed detailed written submissions on record which may be considered. In his submissions, the ld AR of the assessee submits that the assessee-bank acted in a bonafide manner and there is a reasonable cause within in scope of section 273B of the Act. Such payment of LTC was paid in accordance with the settlement signed by Indian Bank Association on behalf of members Bank and representative of Officers Organizations. At the time of hearing, we ask the ld AR of the assessee, if the order of penalty is passed within period of limitation as prescribed under section 275. The ld AR of the assessee submits that he has not looked on such issue. 4. On the other hand, the ld Sr DR of the revenue supported the order of lower authorities. The ld Sr DR of the revenue also relied on the decisions of Hon’ble Apex Court in State Bank of India Vs ACIT (2022) 144 taxamann.com 131(SC), wherein it was held that LTS grated to employees by assessee-bank, which involve foreign leg, benefit of exemption under section10(5) could not be granted to the assessee-bank. 5. We have considered the rival submissions of the parties and have gone through the orders of lower authorities carefully. On careful perusal of order of AO/ITO -TDS, passed under section 201(1)/ 201(1A) r.w.s 254 on 07.032019, we find that penalty levied under section 271C on 17.03.2021 is beyond the time limit of section 275(1)(c). Thus, by exercising our inherent jurisdiction under section ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 5 254, firstly we shall examine such aspect of limitation. The AO made reference to JCIT on 10.04.2019. The AO/ ITO-TDS while passing the order under section 201(1)/201(1A) on 07.03.3019, initiated penalty under Section 271C of the Act. As the penalty is to be levied by the Joint Commissioner of Income Tax (TDS), Range (JCIT), Surat, therefore, AO/ITO(TDS) made a reference for levy of penalty vide order dated 10/04/2019. The JCIT kept the proceedings in abeyance for about six months and issued show cause notice for the first time only on 04/12/2019. The JCIT levied penalty under Section 271C of Rs. 11,13,844/- vide his order dated 17/03/2021. Such order is expressly beyond the time period prescribed under section 275 (1) (c) of the Act. Once the penalty was initiated by AO/ITO-TDS, the penalty was to be passed within six months from the date of initiation of penalty or at the worst from date of reference, from both the dates the penalty order is beyond six months. We find that coordinate bench of Delhi Tribunal in ITO Vs Turner General Entertainment Networks India Pvt. Ltd. in ITA No.6597/Delhi/2017 dated 29.04.2024, while dismissing the appeal of revenue on the issue of time period in passing similar penalty order under section 271C of the Act, passed the following order; “2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in holding that the penalty levied u/s 271C of the Act is barred by limitation in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of broadcasting television channel “Imagine TV” and had filed its return of income for the Asst. Year 2011-12 on 11.2011 declaring total loss of Rs.262,04, 18,432/-. As per clause 27(b) of Tax Audit Report, the Tax Auditor had reported that tax of Rs.5,00,40, 103/- was deductible and not deducted at source by the assessee. The ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 6 ld. AO held this to be an admission of fact that there had been a default on the part of the assessee as it had not deducted TDS. Therefore, a reference was made by the ld. AO i.e. DCIT, Circle 16(1), Delhi to the ld. JCIT, Range 76, Delhi on 25.09.2014 that the assessee has not deducted TDS of Rs.5,00,40, 103/- though it was deductible and consequentially provisions of section 271C of the Act gets attracted. Accordingly, a show cause notice stood issued by the ld. JCIT on 4.8.20 15 to the assessee as to why penalty u/s 271C of the Act should not be levied on the aforesaid default of not deducting tax at source. These proceedings ultimately got culminated in the form of passing of penalty order u/s 271C of the Act by the ld. JCIT levying penalty of Rs.5,00,40,103/- vide order dated 25.02.2016. Now the short point that arises for our consideration is that whether the penalty order passed u/s 271C of the Act by the ld. JCIT on 25.02.2016 would be barred by limitation as per section 275(1)(c) of the Act. For the sake of convenience, the relevant dates are reproduced herein below:- Completion of assessment u/s 143(3) 26.03.2014 Date of receipt of reference by JCIT-TDS 25.09.2014 Show cause notice by JCIT-TDS 04.08.2015 Date of passing order of penalty u/s 271C by JCIT 25.02.2016 4. As per provisions of section 275(1)(c) of the Act, we find that there are two distinct periods of limitation for passing of penalty order is provided and one that expires later will apply. One is the end of the financial year in which the quantum proceedings are completed. In the instant case, the quantum proceedings were completed on 26.03.20 14 and hence one deadline would be 31.03.2014. The second date would be expiry of 6 months from the month in which penalty proceedings were initiated. The dispute in the instant appeal is to give proper meaning for the expression ‘expiry of 6 months from the month in which penalty proceedings were initiated’, i.e. to say whether 6 months expiry should be reckoned from the date of which reference was made by ld. AO who passed the quantum assessment order to ld. JCIT (TDS) or the date on which JCIT (TDS) issued notice to the assessee for the first time. In other words, the limitation period of 6 months should be reckoned from 25.09.2014, being the date of reference made by AO (who framed the quantum assessment order) or the date of issuance of first show cause notice by JCIT(TDS) on 04.08.2015. The stand of the revenue before us is that limitation should be reckoned from the expiry of 6 months from the end of the month in which first show cause notice stood issued by JCIT(TDS). If this is construed, the ld. JCIT(TDS) framing the penalty order u/s 271C of the Act on 25.02.2016 would be well within time as he has time to pass the order till 28.02.2016. On the contrary, the stand of the assessee is that penalty proceedings stood initiated on 25.09.2014 itself as that was the date on which reference was made by the AO to JCIT (TDS). If 6 months period is construed from this date, then the ld. JCIT(TDS) ought to have passed the order on or ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 7 before 31.03.2015 and since the penalty order was passed on 25.02.2016, it would be barred by limitation. We find that this dispute has been directly addressed by the Hon’ble Jurisdictional High Court in the case of PCIT vs. JKD Capital & Finlease Ltd. reported in 378 ITR 614 (Del.) wherein the limitation period mentioned in provisions of section 275(1)(c) of the Act was subject matter of interpretation in the context of levy of penalty u/s 271E of the Act. The relevant operative portion of the said order is reproduced below:- 7. Kamal Sawhney, learned Senior standing counsel appearing for the Revenue submitted that the AO has no power to initiate the penalty proceedings under Section 271-E of the Act and it was only the Joint CIT who could have done so. Therefore, for the purpose of limitation under Section 275 (1) (c), the relevant date should be the date on which notice in relation to the penalty proceedings were issued. In the present case, as the Additional CIT issued notice to the Assessee on 12th March 2012, the order of the Additional CIT passed on 20th March, 2012 was within limitation. 8. ……. 9. ……. 10.Considering that the subject matter of the quantum proceedings was the non- compliance with Section 269 T of the Act, there was no need for the appeal against the said order in the quantum proceedings to be disposed of before the penalty proceedings could be initiated. In other words, the initiation of penalty proceedings did not hinge on the completion of the appellate quantum proceedings. This position has been made explicit in the decision in Worldwide Township Projects (supra) in which the Court concurred with the view expressed in CIT v. Hissaria Bros. [2007] 291 ITR 244/[2008] 169 Taxman 262 (Raj.) in the following terms: “The expression other relevant thing used in s. 275(1)(a) and cl. (b) of Sub-s. (1) of S. 275 is significantly missing from cl. (c) of s. 2 75(1) to make out this distinction very clear. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under ss. 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under ss. 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, cl. (a) of sub-s. (1) of s. 275 cannot be attracted to such proceedings. If that were not so cl. (c) of s. 2 75(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if cl. (a) was to be invoked, no necessity of cl. (c) would arise.” (emphasis supplied) 11. In fact, when the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under Section 271 -E was concerned. He, therefore, ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 8 referred the matter concerning penalty proceedings under Section 271-E to the Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the Assessee under Section 271-E (1) till 20th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275 (1) (c), i.e., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271- E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275 (1) (c). 12. In that view of the matter, the order of the CIT (A) which has been affirmed by the impugned order of the ITAT does not suffer from any legal infirmity. 13. No substantial question of law arises for determination. 5. Respectfully following the aforesaid judicial precedent, it could be safely concluded that the penalty order framed by the ld. JCIT(TDS) on 25.02.2016 is squarely barred by limitation and hence penalty is required to be deleted. 6. Since the penalty order is held to be barred by limitation, the other grounds raised by the assessee challenging the validity of levy of penalty on merits need not be adjudicated into at this stage as the same would be academic in nature. “ 6. Considering the aforesaid factual and the legal position, and respectfully following the same, we find that penalty order is passed beyond the prescribed period of limitation. So far as reliance made by ld SR DR for the revenue, in case of SBI Vs ACIT (supra), is concern, the ratio of the said decision is not applicable on the issue before us. The issue before us is about the validity of penalty levied under section 271C. In the said case Hon’ble Apex Court was considering the question of law whether the assessee-bank was in default for not deducting tax at source while releasing payments to its employees as LTC. 7. In the result, the appeals of assessee in ITA No. 803/Srt/2024 is allowed. 8. Considering the facts that there is no variation in the order of ITO-TDS and his reference to JCIT-TDS for levying penalty, in remaining two appeals in ITA ITA 802 to 804 /Srt/2024 SBI Vs JCIT(TDS) 9 No. 802& 804/Srt/2024, thus, both these appeals are also allowed with similar direction. 9. In the result, all three appeals by the assessees are allowed. Order pronounced in the open court on 11th December, 2024. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 11/12/2024 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat "