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Income Tax Appellate Tribunal, ‘B’ BENCH,
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
Shri S.S. Viswanethra Ravi, JM :-
These three appeals by the Assessee are directed against the separate orders of the Commissioner of Income Tax (Appeals), Kolkata all dated 17-05-2013 for the assessment year 2008-09 (1st qtr, 3rd qtr & 4th qtr), wherein he confirmed the penalty order passed by the AO u/s. 221/201(1A) r.w.s. 194A and 194C of the Act.
Since the issues involved in all the appeals are common, therefore, they are heard together and consolidated order is being passed for the sake of convenience.
ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 1
In these appeals, the Assessee has raised the following common grounds of appeal for the assessment year (1st qtr/ 3rd qtr and 4th qtr) under consideration:- 1. For that on the facts of the case, the order passed by the Ld. C.I.T.(A) is completely arbitrary, unjustified and illegal.
For that on the facts of the case, the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the penalty u/s 221/201(1A) amounting to Rs.35,000/-, Rs.40,000/- & Rs.40,000/- which is completely arbitrary, unjustified and illegal.
For that on the facts of the case, the Ld. CIT(A) was wrong and not considering the facts that the T.D.S. amount was deposited by the Company even before receiving of show cause notice, therefore, the appellant Company was not default levied penalty ix] s. 221 of the IT. Act, thus his action is completely arbitrary, unjustified and illegal.
For that on the facts of the case, the Ld. CIT(A) was not considered the facts and failed to appreciate the appellant's explanations in its true perspective, hence the penalty order u/s. 221/201(1A) is liable to be cancelled and/ or quashed.
For that on the facts of the case, whether the Ld. C.LT.(A) is right in law and on facts in confirming the order passed by the A.O. imposing penalty u/s. 221/201(1A) amounting to Rs. 35,000/- in respect of default of T.D.S. which has not been disputed in appeal.
For that the Id. CIT(A) has misinterpreted and or misunderstand the decision of the Courts which has resulted in confirming penalty order u/s. 221/201(1A)
For that the appellant reserves the right to adduce any further ground/grounds, evidence or evidences on hearing of appeal.
Brief facts of this case are that the assessee is a private limited company and engaged in the business of cable operator and broadband services. During the proceedings u/s. 221/201(1A) the AO found that the assessee deducted the TDS amount to the extent of Rs.1,78,368/- u/s. 194A/194C of the Act and deposited the same beyond the due date. The AO ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 2
further found that the assessee deposited the interest thereon, which also paid u/s. 201(1A) of the Act beyond the due date. Thereby the AO initiated penalty proceedings u/s. 221/201(1A). Against which, the assessee submitted its written submissions on 08-03-2010 stating that the delay was occurred due to mistake of account clerk of the assessee company in depositing the TDS was in respect of various amounts on different dates and urged before the AO to drop the penalty proceedings u/s. 221 by not treating the assessee in default in terms of provisions of section 201. However, the AO initiated the penalty proceedings u/s. 221/201(1A) r.w.s 194A/194C and imposed penalty of Rs.35,000, Rs.40,000/- and Rs.40,000/- for the first quarter, third quarter and fourth quarter of AY 2008-09 respectively.
Aggrieved by such order of the AO in imposing the impugned penalty the assessee challenged the same before the CIT-A and contended the same submissions as made before the AO. The CIT-A found that the penalty imposed @ 20% by the AO is reasonable being assessee in default for depositing the TDS. Accordingly, he confirmed the same.
Aggrieved by such order of the CIT-A, now the assessee is in appeal before us by raising the above mentioned common grounds of appeal in all the three appeals.
Before us the Ld.AR submits that the AO did not issue notice as required u/s. 201(1A) of the Act stating that the assessee was in default for non payment of TDS in time. He further submits that the delay was occurred due to clerical ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 3
mistake of account clerk of the assessee. In support of his contentions relied on the order of the Tribunal Kolkata in the case of Royal Calcutta Turf Club Vs. DCIT reported in (2001) 76 ITD 237 (Cal). The ld.AR further submits that the assessee paid interest for non depositing the TDS in time, which is penal in nature and again imposing penalty u/s 221 of the Act is bad in law and liable to be cancelled.
In reply, the Ld.DR submits that the assessee having deducted the TDS and deposited the same beyond due date. The AO considered the same by treating the assessee is in default for TDS payment in time. He further argued that it is a gross violation of the provisions of the I.T Act. The assessee defeated the purpose of legislature to which the provisions are incorporated to deter and penalise the default.
We have heard the rival submissions and perused the material available on record. It is observed that the assessee has deposited interest u/s. 201(1A) and urged before the AO not to initiate any proceedings u/s. 221 of the Act. It is clear that the assessee has deposited the TDS amounts after due date and paid interest thereon. Section 221 of the Act empowers the AO to impose penalty for any continuing default. The assessee should be in continuing default in making the payment of tax, in addition to the amount of the arrears and amount of interest payable under sub-section (2) of section 220. In the instant case, the assessee had deposited the TDS amount and interest thereon for such default before initiation of penalty proceedings. When the assessee had deposited the TDS and interest thereon, then assessee was not in default for such TDS payment and no penalty can be imposed u/s. 221 of the Act. We find that support from the order of the Co-ordinate ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 4
Bench of the Tribunal in the case of supra held that penalty can be imposed u/s. 221 when the assessee remains to be in default after passing an order u/s. 201(1) of the Act. The relevant portion of which is reproduced hereunder for the sake clarity:-
We find that the assessee has been treated to be in default in respect of the same items over and again and penalty under section 221 has also been levied in respect of the same default in addition to penalty under section 271C. Firstly, the basis for levy of penalty in respect of the first two items already stands quashed away by our decision as above. Secondly, we fail to understand how the assessee can be considered to be in default in respect of making payment of tax deducted at source like this, so far as the provisions of section 221 are concerned. The ITO as well as the CIT(A) has stated in this connection that there is nothing in the Income-tax Act to show that the provisions of sections 271C and 221 are mutually exclusive. It is required to be stated in this connection that section 221 will apply to such cases only where the default is in respect of making a payment of tax. In the instant case, the default is in respect of deduction of tax at source and deposit of the same. In our view, the provisions of section 221 would apply only when a tax is levied on the assessee and thereafter he remains in default in paying the tax. So far as the instant case is concerned, once the order under section 201 (1) was passed by the ITO and if thereafter also the assessee continued to remain in default, in such cases alone, the question of levying penalty under section 221 could have arisen. Hence, we feel that the levy of penalty under section 221, in the instant case, has been totally illegal. From this angle also, we cancel the penalty order passed under section 221.
In view of our above discussion, we are of the view that the order u/s. 221 of the Act passed by the AO is misconceived and liable to be held as invalid and the penalty imposed for 1st Qtr for 2008-09, 3rd Qtr 2008-09 and 4th Qtr 2008-09 of Rs.35,000/-, Rs.40,000/- and Rs.40,000/- respectively are hereby cancelled. Therefore, the grounds raised by the assessee in all the appeals for the 1st qtr, 3rd qtr and 4th qtr of AY 2008-09 are allowed.
ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 5
In the result, all the appeals filed by the assessee are allowed.
Order Pronounced in the Open Court on 19th October,2016.
Sd/- Sd/- WASEEM AHMEED S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 19 /10/2016
Copy of the order forwarded to:- 1. The Appellant/Assessee : M/s. Advance Multisystem Broadband Communications Pvt. Ltd, Bankim Kanan, Chinsurah Station Road, Chinsurah, Hooghly. 2. The Respondent/Department: The Income Tax Officer (TDS), G.T Road, Chinsurah-712101. 3. CIT 4. CIT(A) 5. The Departmental Representative 6. Guard File True Copy By order Assistant Registrar ** PRADIP SPS Income Tax Appellate Tribunal Kolkata benches, Kolkata
ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 6