ADDL. CIT, GHAZIABAD vs. M/S PUNJAB & SINDH BANK, NOIDA

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A)-I, New Delhi dated 29.07.2016 for the Assessment Year 2005-06 wherein the penalty levied by the learned additional Commissioner of income tax (TDS), Ghaziabad u/s 271C of the income tax act for assessment year 2005 – 06 per order dated 27/3/2015 of INR 2 086022/– was held to be time barred. 2. The revenue has raised the following grounds of appeal:- “1. Ld. CIT(A) has erred in law and on facts in deleting the penalty u/s 271C on the assumption that penalty proceeding was initiated on 28.02.2013 when the order u/s 201(1)/201(1A) of Income-Tax Act, 1961 was passed. But, in fact, no penalty proceeding was initiated on that date rather penalty proceeding u/s 271C was initiated vide issue of notice on 16.03.2015 and penalty order was passed on 27.03.2015 which was well within the limitation provided u/s 275 of Income-Tax Act, 1961.

2. Ld. CIT(A) has erred in law and on facts in treating the date of order u/s 201(1)/201(1A) as date of initiation of penalty proceeding u/s 271C.

3. Ld. CIT(A) has erred in law and on facts in treating the penalty order as barred by limitation by not treating penalty order passed on 27.03.2015, in consequence of valid penalty notice issued on 16.03.2015, as a valid penalty order u/s 271C.”

3. Brief facts of the case shows that assessee is a branch of a nationalised bank. It paid the interest payment of approximately 5,00,00,000 on fixed deposit receipts to new Okhla industrial development authority for the financial year 2004 – 05 without deduction of tax at source. Therefore the show cause notice was issued to the assessee for non-deduction of tax at source to the assessee stating that Noida is not an exempt entity under section 194A (3) of the income tax act. The assessee did not file any reply to the proceedings. Therefore in order u/s 201 (1) read with section 201 (1A) read with section 194A of the income tax act 1961 was passed on 28/2/2013 holding assessee to be an assessee in default and determining the TDS default u/s 201 (1) and also working out interest thereon u/s 201 (1A) of the income tax act. The total demand of INR 1 3604250/– was worked out. In the order the additional Commissioner of income tax further mentioned that the penalty proceedings u/s 271C of the income tax act is initiated separately. Consequent to that penalty notice was issued on 16/3/2015 where the deduction was required to show cause as to why the penalty u/s 271C may not be levied. The assessee submitted that for assessment year 2011 – 12 the Commissioner of income tax has crashed the interest charged u/s 201 (1A) as well as the TDS default u/s 201 (1) of the income Page | 2 tax act and therefore penalty cannot be levied. The learned additional Commissioner of Income tax rejected the contention of the assessee and held that since the assessee has failed to deduct tax at source amounting to INR 2 086022/– u/s 194A of the income tax act in respect of the interest paid on fixed deposit receipts to Noida a penalty of INR 2 086022/– was imposed by passing an order dated 27/3/2015.

4. The assessee aggrieved with the order of the learned additional Commissioner of income tax preferred an appeal before the learned Commissioner of income tax (appeals – 1 Noida who deleted the penalty holding that penalty order passed is beyond the time limit prescribed u/s 275 of the income tax act and therefore it is passed without the lawful authority. Thus revenue aggrieved with that order has preferred this appeal before us.

5. Despite notice none appeared before us on behalf of the assessee therefore the issue is decided on the basis of information available on record. 6. The learned departmental representative vehemently supported the order of the learned additional Commissioner of income tax and stated that it is not barred by the limitation. 7. We have carefully considered the rival contention and perused the order of the lower authorities. In the present case the penalty was initiated in the course of completion of assessment proceedings on 28/2/2013 when the order u/s 201 (1) and 201 (1A) read with section 194A of the income tax act 1961 was passed. Therefore the penalty proceedings show initiated were required to be completed by 31/8/2013 in terms of provisions of section 275 (1) © of the income tax act 1961. The penalty orders have been passed On 27/3/2015. Therefore, we do not find any infirmity in the order of the learned CIT – A in holding that the penalty order passed by the adjudicating authority is beyond the time prescribed under section 275 of the income tax act. Even otherwise on the merits of the case the penalty u/s 271 C has been levied for non-deduction of tax at source on the interest paid to Noida which was as such subject to litigation as mentioned in the order of the adjudicating authority’s before the honourable allowable High Court. Thus there cannot be any contumacious conduct for non-deduction of tax attributed to assessee. Honorable Supreme court in CIVIL APPEAL NO. 1704 OF 2008 COMMR.OF INCOME TAX-XVIII, DELHI VERSUS BANK OF NOVA SCOTIA has held as under :- “2. The matter was pursued by the Revenue before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 31.03.2006 entered the following findings: “11..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 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