COMMISSIONER OF INCOME TAX CHD vs. STATE BANK OF PATIALA

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ITA/406/2015HC Punjab & HaryanaPHHC01110058201508 February 2016Bench: MR. JUSTICE RAMESHWAR SINGH MALIK,MR. JUSTICE SURINDER GUPTA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court noted that the issue raised in the appeal was concluded by its own earlier decision in the case of the same assessee in ITA No. 400 of 2015, decided on 4.2.2016, where the Revenue's appeal on a similar issue was dismissed. Therefore, following its own precedent, the High Court held that the ITAT's order upholding the deletion of the penalty was correct. The reasoning for the deletion of the penalty by the lower authorities (CIT(A) and ITAT) was based on the assessee's genuine belief that tax deduction was not required, which led to the deletion of the penalty under Section 271C. The operative direction was the dismissal of the Revenue's appeal.

What were the facts?

The Revenue (Commissioner of Income-tax (TDS)-I, Chandigarh) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had upheld the order of the Commissioner of Income Tax (Appeals) which deleted a penalty imposed on the assessee, State Bank of Patiala, for the assessment year 2012-13. The penalty was levied under Section 271C read with Section 274 for failure to deduct tax at source (TDS) on interest paid to certain parties who claimed exemption under Sections 12A and 10(23C). The assessee admitted the default and deposited the TDS along with interest amounting to ₹46,62,737/-. The Assessing Officer (AO) determined the short deduction of tax at ₹42,90,960/-. The Joint Commissioner imposed a penalty of ₹42,90,960/- under Section 271C, which was deleted by the CIT(A) and subsequently upheld by the ITAT.

What were the issues?

1. Whether the ITAT was right in law in deleting the penalty imposed by the AO under Section 271C read with Section 274 of the Income Tax Act for failure to deduct tax at source out of interest paid/credited to four deductees as required under Section 194A of the Income Tax Act, 1961? 2. Whether, on the facts and circumstances of the present case and in law, the ITAT is right in holding that the assessee was not liable to deduct tax at source, as required under Section 194A of the Income Tax Act, 1961? 3. Whether, in the facts and circumstances of the case and in law, the ITAT is right in holding that the assessee had a genuine belief that it was not required to deduct tax at source, as required under Section 194A of the Income Tax Act, 1961? Revenue's Contentions: The Revenue argued that the assessee failed to deduct tax at source as required under Section 194A and consequently was liable for penalty under Section 271C. The Revenue contended that the ITAT erred in deleting the penalty. Assessee's Contentions: The assessee contended that it had a genuine belief that it was not required to deduct tax at source, implying that the penalty should not have been levied. The judgment does not explicitly detail the assessee's arguments before the High Court, but it refers to the ITAT's decision which upheld the CIT(A)'s deletion of the penalty.

Which sections of the Income-tax Act were involved?

Section 260A,Section 133A,Section 12A,Section 10(23C),Section 201(1),Section 201(1A),Section 194A,Section 272A(2)(k),Section 271C,Section 274

AI-generated summary — verify with the full judgment below

ITA No. 406 of 2015 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 406 of 2015 Date of Decision: 8.2.2016 The Commissioner of Income-tax (TDS)-I, Chandigarh ....Appellant. Versus State Bank of Patiala, SCO 3-A, Sector 7-C, Chandigarh ...Respondent. 1. Whether the Reporters of the local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MRS. JUSTICE RAJ RAHUL GARG. PRESENT: Mr. Denesh Goyal, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 30.6.2015 (Annexure A-4) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 79/CHD/2015, for the assessment year 2012-13, claiming the following substantial questions of law:- (i) Whether the ITAT was right in law in deleting the penalty imposed by the AO u/s 271C read with Section 274 of the Income Tax Act for GURBACHAN SINGH 2016.03.01 11:29 I attest to the accuracy and authenticity of this document High Court Chandigarh

ITA No. 406 of 2015 -2- failure to deduct tax at source out of interest paid/credited to four deductees as required u/s 194A of the Income Tax Act, 1961? (ii) Whether on the facts and circumstances of the present case and in law, the Hon'ble ITAT is right in holding that the assessee was not liable to deduct tax at source, as required u/s 194A of the Income Tax Act, 1961? (iii) Whether in the facts and circumstances of the case and in law the Hon'ble ITAT is right in holding that assessee has a genuine belief that it was not required to deduct tax at source, as required u/s 194A of the Income Tax Act, 1961? 2. Briefly stated, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. A TDS Inspection/ Survey under Section 133A of the Act was carried out at the business premises of the assessee on 27.2.2013. During the course of said survey, it was noticed that the assessee had not deducted tax on interest paid to different parties who claimed to be exempt from the income tax under Sections 12A and 10(23C) of the Act. The Person Responsible (PR) of the Bank admitted the default on his part and deposited the Tax Deducted at Source (TDS) along with interest on 1.3.2013. On asking to furnish the details and proof of deposit of TDS into Government account, the PR furnished the same vide letter dated 1.3.2013 and as per the details, the total TDS along with interest under Section 201(1A) of the Act amounting to ` 46,62,737/- was deposited. The assessee had filed its e-TDS statements late for the financial year 2012-13. The matter GURBACHAN SINGH 2016.03.01 11:29 I attest to the accuracy and authenticity of this document High Court Chandigarh

ITA No. 406 of 2015 -3- regarding initiation of penalty proceedings under Section 272A(2)(k) of the Act was referred to the Joint Commissioner of Income Tax (TDS), Range, Chandigarh and separately to initiate penalty proceedings under Section 271C of the Act. Since the PR had failed to deduct tax at source under Section 194A of the Act @ 10% on the payments made on account of interest paid to different parties and deposit the same in the Central Government account, the Deputy Commissioner of Income Tax (TDS), Chandigarh vide order dated 26.12.2013 (Annexure A-1) under Section 201(1)/201(1A) of the Act informed the office of Joint Commissioner of Income Tax (TDS), Range, Chandigarh that the deductor had not deducted the tax at source amounting to ` 42,90,960/- during the financial year 2012-13 and also failed to deposit the same in the Central Government account as required under Chapter XVII-B of the Act. Accordingly, a notice dated 15.1.2014 was issued to the PR to show cause as to why penalty under Section 271C read with Section 274 of the Act be not levied for failing to pay the amount of TDS. The Joint Commissioner of Income Tax (TDS), Range, Chandigarh vide order dated 15.5.2014 (Annexure A-2) imposed a penalty of ` 42,90,960/- under Section 271C of the Act. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. The CIT(A) vide order dated 27.11.2014 (Annexure A-3) allowed the appeal of the assessee and deleted the penalty. Against the order, Annexure A-3, the revenue filed an appeal before the Tribunal who vide order dated 30.6.2015 (Annexure A-4) upheld the order of the CIT (A) and dismissed the appeal. Hence, the present appeal. 3. We have heard learned counsel for the revenue. 4. It is not disputed by the learned counsel for the revenue that GURBACHAN SINGH 2016.03.01 11:29 I attest to the accuracy and authenticity of this document High Court Chandigarh

ITA No. 406 of 2015 -4- the issue raised herein stands concluded by the decision of this Court in the case of assessee in ITA No. 400 of 2015 (The Commissioner of Income-tax (TDS)-I, Chandigarh v. State Bank of Patiala, SCO 3-A, Sector 7-C, Chandigarh) decided on 4.2.2016 wherein the appeal filed by the revenue has been dismissed. 5. In view of the above, the instant appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE February 8, 2016 (RAJ RAHUL GARG) gbs JUDGE GURBACHAN SINGH 2016.03.01 11:29 I attest to the accuracy and authenticity of this document High Court Chandigarh

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