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Before: SHRI H.S. SIDHU
Date of Hearing : 12-07-2016 Date of Order : 02-08-2016
O R D E R PER H.S. SIDHU, JM This appeal is filed by the Revenue is directed against the Order dated 14.11.2014 of the Ld. CIT(A)-XII, New Delhi relevant to assessment year 2009-10 on the following grounds:-
“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in appreciating that penalty u/s. 271(1)(c) can be initiated either on the basis of order passed u/s. 201(1)/201(1A) or u/s. 143(3).
2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in appreciating that penalty u/s. 271C was levied because the deductor company failed to adhere to the provisions of Chapter XVII of Income Tax Act, 1961.
3. The appellant craves leave to add, alter or amend any of the grounds of appeal at the time of hearing.
2. The brief facts of the case are that a reference has been received by the Addl. CIT, Range-49, New Delhi from the ITO, Ward 1(3), stating that in the course of assessment proceedings u/s. 143(3) for AY 2009-10 the assessee had made payment aggregating to Rs. 2,71,21,666/- on account of unascertained provisions added back to the income of the assessee. As per AO, the assessee failed to deduct TDS aggregating to Rs. 24,16,490/- as per the assessment order passed u/s. 143(3) of the Income Tax Act, 1961 on 29.12.2011 for the financial year under consideration. AO further observed that as per the provisions of Section 271C of the Act, if any person fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B of the Act; he is liable to pay by way of penalty a sum equal to amount of tax which such person failed to deduct. Therefore, in accordance with the provisions of Chapter XVII-B of the Act, penalty is leviable u/s. 271C of the Act. Hence, the AO levied the penalty of Rs. 24,16,490/- u/s. 271(1)(C) of the Act vide his order dated 25.10.2013.
3. Aggrieved by the aforesaid addition, assessee appealed before the Ld. CIT(A)-XII, New Delhi vide his impugned order dated 14.11.2014 has allowed the appeal of the assessee.
4. Against the order of the ld. CIT(A), Revenue is in appeal before the Tribunal.
5. During the hearing, Ld. DR relied upon the order passed by the AO and reiterated the contentions raised in the grounds of appeal filed by the Department and requested that the Appeal of the Revenue may be allowed.
6. On the contrary, Ld. Authorised Representative of the Assessee relied upon the order of the Ld. CIT(A) and stated that the issue in dispute is squarely covered by the following cases and requested that by following the same, the Appeal of the Revenue may be dismissed and Ld. CIT(A)’s order may be upheld, who has also relied upon some of the decision in his impugned order.
- CIT vs. Bank of Nova Scotia (SC) - CIT vs. Itochu Corp. (DHC) - CIT vs. Mitsuie & Co. Ltd. (DHC) - Woodword Governors India P. Ltd. vs. CIT (DHC) - Sahara India Finance Corporation Ltd. vs. Addl. CIT (ITAT, Delhi)
7. I have heard both the parties and perused the records available with us, especially the order of the Ld. First Appellate Authority and the case laws as cited by the Ld. Counsel of the Assessee. Ld. CIT(A) has elaborately discussed the issue in dispute vide his impugned order dated 14.11.2014 and adjudicated the same as under:-
“1. I have considered the grounds raised in appeal and the facts of the case. I have also considered the submission filed by the AR of the appellant.
The appellant has raised ground against the penalty u/s 271C of Rs.24,16,490/-.
As per the provisions of section 271C if any person fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII B of the Act, he is liable to pay by way of penalty, a sum equal to the amount of tax which such person fail to deduct.
It is seen from the penalty order that the assessee has not deducted taxes amounting to Rs.24,16,490j-, hence the penalty. However, the assessee has raised ground against the penalty and highlighted that due to liquidity crunch the assessee failed to deduct tax on royalty payments. TDS required to be made and deposited u/s 194C, 195, 194H, 1941 and 194J was deposited later with interest hence the appellant's plea is that there was no loss of revenue. The appellant also contended that the assessment in this case was completed after accepting returned income at Nil and no penalty proceedings were initiated as per the order of assessment. The appellant also submitted photocopy of the said order of assessment dated 29.12.2011 u/s 143(3) for verification.
The appellant further pleaded that the payments on which TDS was to be deducted were added uj s 40(a)(i) by the assessee. Further, no order u/s 201(IA) has been passed against the assessee for default in payment of TDS.
It is matter of record, that the assessee company having failed to deduct the TDS and to deposit the tax deducted has suo-motto on its own offered to tax the said expenditure in their regular assessment proceedings. Coupled with that the assessee company has deposited the TDS due alongwith the penal interest amounting to Rs. 21,87,731.00 on 21.02.2011. The delay in payment of the TDS is attributable to the fact 5 that at the time of finalizing the accounts as on 31.03.2009, the assessee company did not have the wherewithal to pay the tax so deducted. On the transactions on which the TDS had not been deducted upto the period ending 31st March 2009 amounting to Rs. 52.44 Lacs, the TDS was deposited on 46.34 Lacs in the year 2009-10. However the fact remains that the assessee company offered the whole amount on which they defaulted in payment of TDS for addition, in the course of normal assessment.
Since the assessee had offered the aforementioned amounts to tax at the time of filing the Income Tax Return, and subsequently also paid the TDS too, and if the penalty is levied it would be result in double taxation. The matter is supported by the decision of jurisdictional high court in the case of Woodward.
Governor India Ltd. Vs CIT (2002) 253 ITR 745 Del and that of the Apex Court in the case of Hindustan Steel Ltd. Vs State of Orissa (1972) 83 ITR 26(SC). The assessee was under a bonafide belief that since he has been hit under the provisions of section 40(a)(i), he need not deposit the tax so deducted. However as his financial position improved he did deposit the TDS alongwith the interest thereon. Copy of challan evidencing the payment of TDS is enclosed for reference.
8. Further, in the case of Indo Nissin Foods Ltd. v.
CIT (2004)3 SOT (Delhi) it is held that not passing order under section 201(1) before initiation of proceedings under section 271C make imposition of penalty invalid.
In view of these facts and legal position the penalty of Rs.24,16,490/ - warrants deletion. Grounds raised in appeal are allowed.
In the result, appeal is allowed.”
7.1 After going through the aforesaid finding of the Ld. CIT(A), I am of the view that since the assessee had offered the amounts to tax at the time of filing the Income Tax Return, and subsequently also paid the TDS too, and if the penalty is levied it would be result in double taxation. This view is fully supported by the jurisdictional High Court decision in the case of Woodward Governor India Ltd. Vs CIT (2002) 253 ITR 745 Del and that of the Apex Court in the case of Hindustan Steel Ltd. Vs State of Orissa (1972) 83 ITR 26(SC). In my view, the ld. CIT(A) has rightly observed that the assessee was under a bonafide belief that since he has been hit under the provisions of section 40(a)(i), he need not deposit the tax so deducted. However as his financial position improved he did deposit the TDS alongwith the interest thereon and filed the copy of challan evidencing the payment of TDS. It was further noted that in the case of Indo Nissin Foods Ltd. v. CIT (2004)3 SOT (Delhi) it is held that not passing order under section 201(1) before initiation of proceedings under section 271C make imposition of penalty invalid. In the background of the aforesaid discussions and by respectfully follow the precedents, as aforesaid, the order of the Ld. CIT(A) does not require any interference on my part, therefore, I uphold the order of the Ld. CIT(A) and dismiss the Appeal filed by the Revenue.
In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the Open Court on 02-08-2016.