VIJAY ENGINEERING ENTERPRISES (NOW KNOWN AS M/S SRICON INFRASTRUCTURE PVT LTD ),NAGPUR vs. THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS) CIRCLE 2, NAGPUR

Before us, at the outset, ld. Counsel for the assessee submitted that both these appeals could not be filed in time and the said appeals are filed with the delay of 979 days. In this regard, ld. Counsel for the assessee filed an affidavit along with condonation of delay petition.

The Ld. AR of the assessee has referred to the decision of the Hon’ble 2017 wherein the Hon’ble High Court rejected the plea of the assessee of condonation of delay stating that reasons stated by the assessee is not bona- fide reason and therefore, delay cannot be condoned. Thereafter, the assessee therein preferred SLP before the Hon’ble Supreme Court in Civil Appeal No.(s) 11750/2018 ( arising out of Special Leave Petition (C) No.(s) 15715/2017 in the case of Anil Kumar Nehru Vs. ACIT, Circle 16(2), Mumbai, wherein the Hon’ble Supreme Court has held that the High Court should not have taken such a technical view of dismissing the appeal in the instant case on the ground of delay, when it has to decide the question of law between the parties in any case in respect of earlier assessment year. For this reason, the Hon’ble Supreme Court set aside the order of the High Court; condoned the delay for filing the appeal and directed to decide the appeal on merits. The Ld. AR further referred to the decision in the case of DCIT Vs. (India) Ltd. in & ITA No.1726/PUN/2014 & CO Nos.34 & 35/PUN/2019 wherein the Tribunal has condoned the delay of 1965/1018 days.

On the other hand, ld. DR strongly opposed the request for condoning the delay.

We have heard the rival submissions and gone through the condonation petition as well as the affidavit. We have also considered the judicial pronouncements placed before us. We find that reasons specified therein are justified and that the delay cannot be attributed to the deliberate conduct of the assessee neither through intention nor through action. No malafide is made out by the Revenue. Further, we find relevant to extract the relevant paras from the judgment in the case of Atlas Copco (India) Ltd. (supra). The same read as under :- “2. The Cross objection for the A.Y. 2008-09 is late by 1965 days. Similar cross objection filed by the assessee for the A.Y. 2009-10 is also late by 1018 days. The assessee has moved an application for condonation of delay. The ld. AR submitted that the assessee was not properly advised by its then counsel for espousing the legal issue now sought to be raised in the Cross objections, which is fundamental in nature. The ld. DR strongly opposed the condonation of delay.

It is seen that through the Cross objections, the assessee has raised a legal ground challenging the validity of assessment order passed u/s.143(3) r.w.s. 144C of the Income-tax Act, 1961 (hereinafter also called `the Act’). The moot point is as to whether such a long delay deserves condonation. At this stage, it is relevant to note the judgment of the Hon’ble Bombay High Court in Vijay Vishin Meghani Vs. DCIT & Anr (2017) 398 ITR 250 (Bom) holding that none should be deprived of an adjudication on merits unless it is found that the litigant deliberately delayed the filing of appeal. Similar to the cases under consideration, in that case too, delay of 2984 days crept in due to improper legal advice. ITR 507 (SC), the Hon’ble juri ictional High Court condoned the delay.

In yet another case in Anil Kumar Nehru and Another vs. ACIT (2017) 98 CCH 0469 Bom HC, there was a delay of 1662 days in filing the appeal. Such a delay was not condoned by the Hon’ble High Court. In further appeal, condoning the delay, the Hon’ble Supreme Court in Anil Kumar Nehru vs. ACIT (2018) 103 CCH 0231 ISCC, held that : `It is a matter of record that on the identical issue raised by the appellant in respect of earlier assessment, the appeal is pending before the High Court. In these circumstances, the High Court should not have taken such a technical view of dismissing the appeal in the instant case on the ground of delay, when it has to decide the question of law between the parties in any case in respect of earlier assessment year. For this reason we set aside the order of the High Court; condone the delay for filing the appeal and direct to decide the appeal on merits.’

Turning to the facts of the instant cases, we find that the assessee has raised a legal ground through these Cross objections, which goes to the root of the matter. It would be seen infra that the said legal issue is squarely covered in the assessee’s favour by several orders passed by the Tribunal including those by the Pune Benches. Under these circumstances, we condone the delay and take up the Cross objections for disposal on merits.”

Further, considering the judicial pronouncements as referred hereinabove, we condone the delay in respect of both these appeals and proceed to hear them on merits. B. On Merits

Before us, at the outset, ld. Counsel for the assessee submitted that this is a case where the assessee made contractual payments to M/s. P.T. Sumitra Mitra Jaya (PTSMJ). The assessee failed to make the TDS from the said contract payments. The payee is Non Resident Indian (NRI) and the assessee is under statutory obligation to make the deduction of TDS at the rate of 40%. However, the Assessing Officer invoking the provisions of section 194C of the Act made a deduction at the lower rates i.e. 1%. Considering the above failure on the part of the assessee to comply with the provisions of the Act, the Assessing Officer invoked the provisions of section 201(1) r.w.s. 201(1A) of the Act and raised the demands. The Assessing Officer passed a penalty order u/s 271C of the Act on 18.07.2006. The CIT(A) confirmed the above order of the Assessing Officer as per the order dated 31.10.2007. The contents of para 2.8 of the said order of the CIT(A) are relevant in this regard and the same are extracted hereunder :- “2.8 Further, I do not find any merit in the argument of the AR that since the full taxes have been paid by the non-resident foreign company (payee) the appellant cannot be treated in default for short payment of TDS and levy of penalty u/s 271C of the Act. I find that such payment of taxes by the non- resident foreign company on the contractual income cannot absolve the appellant from levy of interest u/s 201(1A). The liability to deduct TDS u/s 201(1) is absolute and it is obligatory for the A.O. to levy penalty, when non- compliance of any of the provisions requiring deduction of tax at source is noticed by him. Therefore, the payment of taxes by the payee, cannot provide any immunity from levy of penalty u/s 271C of the Act.”

From the above, it is evident that the CIT(A) held that the payments of taxes made by the payee cannot absolve the defects in complying with the provisions of section 201(1)/201(1A) of the Act.

Before us, on the above facts, ld. Counsel for the assessee brought our attention to the various decisions and submitted that this is a covered issue by virtue of the order of the Bangalore Bench of the Tribunal in the case of ITO vs. Intel Tech India (P.) Ltd., 32 SOT 227 (An USA based company). The ld. Counsel submitted that the levy of interest u/s 201(1)/201(1A) of the Act is not sustainable when the payee made the payment of taxes fully. The ld. Counsel further relied on the other decisions including the recent decision of the Pune Bench of the Tribunal in the case of Volkswagen India (P.) Ltd. vs. Addl. CIT, 81 taxmann.com 8 and submitted that the same is relevant for the proposition that when there is a debate on the applicability of the provisions of section 201(1)/201(1A) of the Act to the facts of the present case, the penalty is not leviable u/s 271C of the Act, here the payee is German Company. The ld. Counsel further relied on another judgment of the Hon’ble 66 and the judgement of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P.) Ltd. vs. CIT, 293 ITR 226 (SC) and submitted that in the case of Hindustan Coca Cola Beverage (P.) Ltd. (supra) the Hon’ble Supreme Court held that where the deductee, recipient of income, already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on same income by treating deductor to be assessee-in-default for shortfall in its amount of TDS. This decision was applied in various judgement including the case of deductee non-resident. The decision of the Jabalpur Bench of the Tribunal in the case of National Highway Authority of India vs. ACIT, 49 taxmann.com 32 (Jabalpur-Trib.) is one of such decisions. It is also mentioned before us that Non-Discrimination Article is provided by way of Article 25 of the India-Indonesia Treaty whereby the non-resident assessee has to be treated as part with domestic entities. In other words, the judgment of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P.) Ltd. (supra) is equal applicable to the case of a non-resident like the present deductee. The held portion of the said judgement of the Hon’ble Supreme Court (supra) reads as follows :- “The Circular No.275/201/95-IT(B), dated 29-1-1997 issued by the Central Board of Direct Taxes would put an end to the controversy. The circular dealers that no demand visualized under section 201(1) should be enforced after the tax deductor has satisfied the officer-in-charge of TDS that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) till the date of payment of taxes by the deductee-assessee or the liability for penalty under section 271C. In the instant case, the assessee had paid the interest under section 201(1A) and there was no dispute that the tax due had been paid by ‘P’. It was not disputed that the circular was applicable to the facts situation at hand. Hence, the judgment of the High Court was, accordingly, set aside. The appeal was to be allowed.”

Considering the same, we are of the opinion that this issue must go back to the file of the CIT(A) for fresh adjudication in the matter of findings of the CIT(A) does not sync with the legal proposition laid down by the various judgements cited above. Therefore, the CIT(A) is directed to examine the issue afresh and applied the correct law after granting reasonable opportunity of being heard to the assessee as per set principles of natural justice.

In the result, both the appeals of the assessee are allowed for statistical purposes. Order pronounced on this 18th day of February, 2020. (PARTHA SARATHI CHAUDHURY) (D. KARUNAKARA RAO) "याियक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER पुणे / Pune; "दनांक / Dated : 18th February, 2020. Sujeet आदेश क" "ितिलिप अ"ेिषत / Copy of the Order forwarded to : अपीलाथ" / The Appellant.

The CIT(TDS), Nagpur. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, 5. नागपुर / DR, ITAT, Nagpur. गाड" फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, //// Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.