M/S. SAHARA CREDIT COOPERATIVE SOCIETY,LUCKNOW vs. JOINT COMMISSIONER OF INCOME TAX (TDS), LUCKNOW

PER A. D. JAIN, V.P.: This is an appeal filed by the assessee against the order of the ld. CIT(A), Lucknow, dated 12/10/2017 for assessment year 2015-16, taking the following grounds: 1. That the Learned CIT(A) is not justified in confirming the penalty under section 271C of the Income Tax Act, 1961 to the extent of tax deducted at source amounting to Rs.13,220/-, though penalty late with Government Treasury. 2. That the Learned CIT(A) has failed to appreciate that initiation of proceedings under section 271C were based on frivolous complaint in which the complainant had stated that TDS of Rs.50,000/- has been deducted on commission payment of Rs.5,00,000/- which was demonstrated to be factually incorrect.

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of the deductee. On the basis of this information, a letter was issued to the assessee, requiring it to file the corrected form 24Q/26Q. Further, the Assessing Officer issued show cause notice to the assessee, requiring it to explain as to why penalty under section 271C may not be levied, to which there was no compliance. Hence the Assessing Officer imposed a penalty of Rs.50,000/- under section 271C of the Act. 4. Before the ld. CIT(A), the submission of the assessee was that the total commission paid by it to Shri Ravi Kumar, during the year, was only Rs.1,32,198/- and due tax was deducted and the same was reflecting in the Form 26AS of the deductee. The assessee also filed copy of Form 16A downloaded from the TRACES website before the ld. CIT(A), along with complete details regarding the date of payment and deduction. The assessee had contended that the penalty under section 271C is not applicable due to the fact that the tax was duly deducted at source but there was delay in deposit of the TDS in the Government account, due to the fact that the parent group of the assessee society was passing through a very bad phase and the Chairman of the group, alongwith two senior Directors, were confined to jail pursuant to the direction of the Hon'ble Apex Court, since March, 2014, which had disrupted the regular business activities of the group and hence caused the delay in the deposit of the tax. 5. The ld. CIT(A) rejected the contention of the assessee, observing that the TDS was deducted by the assessee during the financial year 2014-15 and it was deposited on 28.10.2016, i.e, after a delay of almost two years. He, accordingly, held the imposition of penalty under section 271C of the Act, to be justified. However, the ld. CIT(A) directed the Assessing Officer to

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suitably modify the amount of penalty imposed, as per the default made by the assessee. 6. Before us, the ld. Counsel for the assessee has submitted, as before the ld. CIT(A), that the commission paid to Shri Ravi Kumar was Rs.1,32,198/- on which, TDS of Rs.13,220/- had been deducted at source during the financial year 2014-15 and the delay in deposit of the TDS in the Government account, was due to the fact that the parent group of the assessee society was passing through a very bad phase and the Chairman of the group, alongwith two senior Directors, were confined to jail pursuant to the direction of the Hon'ble Apex Court, since March, 2014, which had disrupted the regular business activities of the group and hence caused the delay in the deposit of the tax. The ld. Counsel for the assessee has also placed reliance on various case laws, which we shall presently discuss. 7. The ld. D.R., on the other hand, placing strong reliance on the impugned order, has submitted that the TDS was deducted during financial year 2014-15 and it was deposited on 28/10/2016, i.e., after a delay of approximately two years; and that therefore, the Assessing Officer was justified in levying the penalty under section 271C of the Act, as rightly held by the ld. CIT(A). 8. Heard. We find that the assessee had paid commission to Shri Ravi Kumar was Rs.1,32,198/-, on which TDS of Rs.13,220/- had been deducted at source during the financial year 2014-15. There was delay in deposit of the TDS in the Government account which, according to the assessee, was due to the fact that the parent group of the assessee society was passing through a very bad phase and the Chairman of the

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group, alongwith two senior Directors, were confined to jail pursuant to the direction of the Hon'ble Apex Court, since March, 2014, which had disrupted the regular business activities of the group and hence caused the delay in the deposit of the tax. 9. We have carefully perused the relevant provisions of section 271C of the Act and we find that penalty under section 271C of the Act can only be levied where the assessee fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B, or pay the whole or any part of the tax as required by or under (i) sub-section (2) of section 115- O, or (ii) the second proviso to section 194B. 10. In ‘Coca Cola Beverage P. Ltd. vs. CIT’, 293 ITR 226 (SC) and in ‘Jagran Prakashan Ltd. v. Deputy Commissioner of Income-tax (TDS)’, 345 ITR 228 (Alld) and also various orders of the Tribunal, it has been held that where TDS was paid by the assessee or the required tax was paid by the deductee, the assessee should not be held to be in default. Only interest on delayed payment under section 201(1A) of the Act can be charged. In the light of these decisions, where the assessee has made payment of TDS though late, he cannot be held to be in default and so, there is no question of levy of penalty under section 271C of the Act. 11. In ‘CIT vs. Bank of Nova Sotia’, 380 ITR 550 (SC), the Hon'ble Supreme Court upheld the order of the Tribunal cancelling the penalty levied under section 271C, wherein, the Tribunal had held as under: “We have carefully considered the rival submissions. In the instant case we are not dealing with collection of tax u/s 201(1) or compensatory interest u/s 201(1A). The case of the assessee is that these amounts have already

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been paid so as to end dispute with Revenue. In the present appeals we are concerned with levy of penalty u/s 271-C for which it is necessary to establish that there was contumacious conduct on the part of the assessee. We find that on similar facts Hon'ble Delhi High Court have deleted levy of penalty u/s 271-C in the case of M/s. Itochu Corporation, reported in 268 ITR 172 (Del) and in the case of CIT Vs. Mitsui & Company Ltd. reported in 272 ITR 545. Respectfully following the aforesaid judgments of Hon'ble Delhi High Court and the decision of the ITAT, Delhi in the case of Television Eighteen India Ltd., we allow the assessee's appeal and cancel the penalty as levied u/s 271-C.” 12. No decision contrary to the above case laws cited on behalf of the assessee has cited before us. Therefore, respectfully following the above decisions, we allow the appeal of the assessee and cancel the penalty levied under section 271C of the Act. 13. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 07/01/2020.

Sd/- Sd/- [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT DATED:07/01/2020 JJ:1712 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order

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