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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice- & Shri Satbeer Singh Godara
Per Shri P.M. Jagtap, Vice-President: This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-24, Kolkata dated 16.07.2019, whereby he confirmed the penalty of Rs.80,406/- imposed by the Assessing Officer under section 271C of the Income Tax Act, 1961.
The assessee in the present case is a Company. During the year under consideration, it had paid a rent of Rs.49,24,850/- to M/s. K.T. Enterprise without deducting tax at source on the basis of certificate produced by M/s. K.T. Enterprise. On perusal of the said certificate, it was observed by the Assessing Officer that the assessee was allowed to pay rent upto Rs.41,20,785/- after deducting tax at source @ NIL. Since the assessee had paid a total rent of Rs.49,24,850/- to M/s. K.T.
ITA No. 2222/KOL/2019 Assessment Year: 2011-2012 M/s. Speciality Restaurants Limited
Enterprise, the Assessing Officer held that there was a failure on the part of the assessee to deduct tax at source from the balance payment of rent amounting to Rs.8,04,065/-. He accordingly disallowed the rent to that extent by invoking the provision of section 40(a)(ia) of the Act and also initiated penalty proceedings under section 271C of the Act. In reply to the show-cause notice issued by the Assessing Officer during the course of penalty proceedings, it was submitted on behalf of the assessee that the default in deducting tax at source from the rent of Rs.8,04,065/- was unintentional and it was a result of inadvertent on the part of its staff. This explanation of the assessee was not found acceptable by the Assessing Officer and he proceeded to impose a penalty of Rs.80,406/- under section 271C of the Act. On appeal, the ld. CIT(Appeals) confirmed the said penalty imposed by the Assessing Officer vide his appellate order dated 16.07.2019 passed ex-parte. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. Counsel for the assessee, a disallowance made by the Assessing Officer under section 40(a)(ia) on account of rent to the extent of Rs.8,04,065/- for non- deduction of tax at source was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and vide an appellate order dated 27.02.2017 passed in the quantum proceedings, the ld. CIT(Appeals) deleted the said disallowance made by the Assessing Officer holding that the certificate issued for lower or no deduction of tax at source was person specific and could not be restricted to an amount. He also held that the payee M/s. K.T. Enterprise, in any case, had already included the rental income in its total income offered to tax and had paid tax due thereon. To arrive at this conclusion, the ld. CIT(Appeals) relied on the decision of this Tribunal in the case of Twenty First Century Securities Limited (ITA Nos. 464 & 465/KOL/2014), wherein it was held that a certificate issued for deduction of tax at source at lower rate is person
ITA No. 2222/KOL/2019 Assessment Year: 2011-2012 M/s. Speciality Restaurants Limited
specific and not amount specific. Keeping in view the said decision of this Tribunal, we are of the view that the assessee cannot be said to be guilty of failure to deduct tax at source from the payment of rent of Rs.8,04,065/-. In any case, there being a certificate provided by the concerned party namely M/s. K.T. Enterprise for deduction of tax at source at ‘NIL’ rate from the payment of rent and the said certificate as held by the Tribunal in the case of M/s. Twenty First Century Securities Limited (supra) being person specific and not amount specific, we are of the view that there was a sufficient cause for the failure of the assessee to deduct tax at source from the payment of rent of Rs.8,04,065/- and it was not a fit case to impose penalty under section 271C of the Act. We accordingly cancel the penalty imposed by the Assessing Officer under section 271C and confirmed by the ld. CIT(Appeals) and allow this appeal of the assessee.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on May 29, 2020.
Sd/- Sd/- (Satbeer Singh Godara) (P.M. Jagtap) Judicial Member Vice-President) Kolkata, the 29th day of May, 2020 Copies to : (1) M/s. Speciality Restaurants Limited, ‘Uniworth House’, 3A, Gurusaday Road, Kolkata-700019 (2) Joint Commissioner of Income Tax, Range-59 (TDS), Kolkata, 10B, Middleton Row,Kolkata-700071 (3) Commissioner of Income Tax (Appeals)-24, Kolkata; (4) Commissioner of Income Tax- , Kolkata (5) The Departmental Representative (6) Guard File By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 3