M/S. CENTRAL BANK OF INDIA,NOIDA vs. ADDL. CIT (TDS), GHAZIABAD

Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 5968 to 5974/Del/2015 (Assessment Year: 2005-06 to 2011-12)

Central Bank of India, Addl. CIT (TDS), Naya Bans, Sector-15, Ghaziabad Vs. Noida PAN:AAACC24 (Appellant) (Respondent)

Assessee by :Sh.AjayWadhwa, Adv Ms. Reema Malik, CA Ms.Aruna Mittal, CA Respondent by: Sh. A.K.Saroha, CIT DR Date of Hearing 05.01.2016 Date of pronouncement 08.01.2016 O R D E R PER BENCH, 1. These appeals are filed by the assessee against the orders of penalty u/s 271C of the Act levied by AO vide order dated 28.02.2013. The penalty was further confirmed by learned Commissioner of Income-tax (Appeals) vide his consolidated order dated 14.10.2015 for Assessment Year 2005-06 to 2011-12. The learned Commissioner of Income-tax (Appeals) confirmed the penalty in respect of orders as under:- ITA No. Amount Assessment Year 5968 /Del/2015 Rs.12,60,934 2005-06 5969/Del/2015 Rs.1,48,58,905/- 2006-07 5970/Del/2015 Rs.98,10,293/- 2007-08 5971/Del/2015 Rs.5,89,17,048/- 2008-09 Page 1 of 17

Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015

5972/Del/2015 Rs,8,13,52,153/- 2009-10 5973/Del/2015 Rs.5,87,77,941/- 2010-11 5974/Del/2015 Rs.2,13,06,703/- 2011-12

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015

orders levied the penalty for all the years. The assessee carried the matter before the learned Commissioner of Income-tax (Appeals) who confirmed the penalty for all the years under the appeal by consolidated order holding as under:- “45. The position of the law with regard to the order dated 07/08/2015 of id. ITAT, Delhi Benches and the judgment dated 28/02/2011 of Hon'ble Allahabad High Court needs to be considered as there is clear conflict between the judgment dated 28/02/2011 of Hon'ble Allahabad High Court and the order dated 07/08/2015 passed by Ld. ITAT Delhi Benches both of which are the superior authorities of the CIT(Appeal) at Noida and whose judgment or orders are binding precedents for CIT(A) at Noida in terms of law declared by the Hon'ble Apex Court in the case of Union of India and Others Vs. Kamlakshi Finance Corporation and others AIR (1992) SC 711. 46. Since the order dated 07/08/2015 of Id. ITAT, Delhi Benches has been obtained by concealing the material facts and thereby by playing fraud on Id. ITAT, Delhi Benches the said order is nullity and non-estabinito and cannot be a binding precedence or even a precedence for the undersigned. In any case an order by Id. ITAT Delhi Benches qua1 jurisdiction exercised to a case coming under the territorial jurisdiction of Hon'ble Allahabad High Court cannot supersede the judgment of Hon'ble Allahabad High Court and will have no existence in the eyes of law. Faced with the precarious situation of an order obtained by fraud in violation of the judgment of Hon'ble Allahabad High Court, I respectfully follow-the judgment of Hon'ble Allahabad High Court being the superior authority of both of us, i.e., the undersigned and the Id. (TAT Delhi Benches and conclude that it is not open to adjudicate the issue of jurisdiction under section 194A of the I.T. Act, 1961 and the same stands settled by Hon'ble Allahabad High Court in favour of revenue and against the appellant bank.The Id. A.O. had the competence and jurisdiction under section 194A of the Income Tax Act and was competent to enforce the compliance of section 194A of the Income Tax Act 1961 by the appellant bank qua credit or payment of interest on time deposits of the Noida Authority by the appellant bank and other similarly p aced banks and other entities. 47. In respectful submission to the ld. ITAT, Delhi Benches it is submitted that each assessment proceeding or any other proceeding under the income Tax Act are independent proceedings and are to be decided independently and separately with reference to the facts of that particular proceedings and the particular assessment year. The doctrine of res-judicata does not apply to the income tax law nor is there any equity in taxation law. In view of the peculiar facts of each proceeding for

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015

each assessment year, the order of an authority under the Income Tax Act, 1961 cannot be the binding precedent for other proceedings for other assessment years and respectfully the order dated 07/08/2014 of ld. ITAT Delhi Benches cannot be the binding precedent for other proceedings in other assessment years. 48. In view of these facts and the position of law, I find no infirmity in impugned penalty orders passed by Id. Addl.ClT(TDS), Ghaziabad imposing penalty u/s. 271C of Income Tax Act, 1961 on the appellant bank for the A.Ys, 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12. The same are therefore confirmed. All the appeals of the appellant bank for A.Ys. 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010- 11 and 2011-12 fails. 49. The appeals of the appellant bank for the A.Ys, 2005-06, 2006-07, 2007- 08, 2008-09, 2009-10, 2010-11 and 2011-12 are disposed off accordingly.” 4. Against this order the assessee is in appeal before us . 5. The ld AR of the assessee submitted that ITAT has already cancelled the demand raised by AO u/s 201(1) and 201(1A) rws section 194A of the Act and therefore no default persists and hence penalty cannot be levied on the assessee u/s 271C of the Act. He further submitted that observation of the learned Commissioner of Income-tax (Appeals) at Page 46 of the impugned order are not correct, where it is stated that the order passed by ITAT cancelling the demands u/s 201(1) and 201(1A) are nullity and non-est abinito and was not followed by learned Commissioner of Income-tax (Appeals) is against the settled judicial precedent. He further submitted that learned Commissioner of Income-tax (Appeals) further erred in holding that the applicability of section 194A of the act with respect to payment of interest made to Noida has been settled by Hon‟ble Allahabad High Court in favour of revenue. For this he submitted that decision of the Hon‟ble Allahabad High Court in Writ Petition Tax No.1338 of 2005, where the appellant is one of the respondents, The Hon‟ble High Court did not given any decision on the issue of tax deduction at source on interest paid to Noida by various banks. He further

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 submitted that Hon‟ble High Allahabad High Court has held that after 01.03.2003 Noida is not local authority within the meaning of section 10(20) of the Income Tax Act, 1961. Hence learned Commissioner of Income-tax (Appeals) had erred in holding that Allahabad High Court has decided the issue in favour of revenue u/s 194A of the Act. He further submitted that various tribunals have held that provisions of section 194A do not apply to area development authority. For this he relied on the decision of the Amritsar Bench of this Tribunal in the case of ITO (TDS) Vs. Jammu & Kashmir Bank, Delhi bench in the case of Oriental Bank of Commerce Vs. ITO as well as order of ITAT Delhi bench dated 07.08.2015 where in the case of several Banks, it has been held that the assessee cannot be held to be an „assessee in default‟ for deduction tax at source u/s 194A read with section 201(1) and 201(1A) of the Act. 6. In response to this the ld DR vehemently argued that the Hon‟ble Allahabad High Court‟s decision has held that Noida is not entity exempted under the provision of section 10(20) of the Act and therefore tax is required to be deduct thereon. He further submitted that Allahabad High Court was also seized of the issue that whether the tax was required to be deducted on the interest payment made to Noida and therefore the issue is covered against the assessee on that count. He further submitted that merely because the assessee has not been held to be an „assessee in default‟ and order u/s 201(1) and 201(1A) of the Act has been set aside , the assessee cannot escape the penalty u/s 271C. He also submitted that Revenue has preferred Miscellaneous application before ITAT against the said order which is pending for disposal. He further submitted that there is no embargo laid down u/s 271C of the Act that if there is no order against the assessee u/s 201(1) and 201(1A) of the act

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 holding „ assessee in default‟ penalty independently thereof cannot be levied on the assessee u/s 271C of the Act. His contention was that mere failure to deduct the tax at source according to provision of the act can independently lead the assessee to penalty proceedings u/s 271C without passing any order u/s 201(1) of the Income tax Act. He further argued that there is no parallel between the two independent penalty provision one u/s 271(1)(c) and other u/s 271C of the act. In the end, he submitted that learned Commissioner of Income tax (Appeals)‟s order has considered all aspect of facts and law of the case while confirming the penalty. He vehemently supported the order of lower authorities and argued that penalty levied u/s 271C of the act for all those years be confirmed. 7. In the rejoinder ld AR submitted that ITAT in the case of the assessee has passed a reasoned order cancelling the demand u/s 201(1) and 201(1A) of the act and further Honorable Allahabad High Court has not at all decided the issue about deductibility of tax at source on interest payment to Noida u/s 194A of the act. He further submitted that the provision of section 271C cannot be invoked when the assessee is not in default and as in the case of the assessee orders u/s 201(1) and 201(1A) has been set aside , penalty u/s 271C of all those years cannot survive. 8. We have carefully considered the rival submission it is necessary to appreciate the issue to consider the provision of section 271C which are as under:- “271C. (1) If any person fails to— (a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or (b) pay the whole or any part of the tax as required by or under— (i) sub-section (2) of section 115-O; or (ii) the second proviso to section 194B,

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.” 9. Provisions of section 271C of the act are also qualified by the provision of section 273Bof the act which provides that penalty u/s 271C of the act cannot be levied if the failure referred to in the said provision is proved to be because of „reasonable cause.‟ 10. Vide para Nos. 6 to 12 of the order of ITAT, issue about applicability of provisions of withholding tax u/s 194A of the Act on interest paid by assessee bank to Noida is discussed as under :- “6. Now, we espouse the main issue on merits as to whether the assessee was liable to deduct tax at source u/s 194A on interest paid to NOIDA? Before answering this question, it is relevant to consider the provisions of section 194A, the relevant part of which reads as under:- "194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : ................. (3) The provisions of sub-section (1) shall not apply-- (i) ... (iii) to such income credited or paid to-- (a) to (e) ..... (f) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette; (iv) ...." ITA No.1359/Del/2014

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 7. Sub-section (1) of section 194A casts an obligation on the person responsible for paying interest to a resident, to deduct tax at source at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier. Sub-section (3) is relevant for our purpose. This sub-section provides that the provisions of sub-section (1), which cast obligation on the person responsible for paying interest for deduction of tax at source from such interest, shall not apply in the circumstances given in clauses (i) to (xi). Clause (iii) mandates that the requirement of deduction of tax at source contemplated by sub-section (1) shall be waived where such interest is credited or paid to any banking company/financial corporation/LIC/UTI, etc. One of the items of beneficiaries given in such list, as per sub- clause (f) is, 'such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the official gazette.' Notification under section 194A(3)(iii)(f) has been issued which is dated 22.10.1970, as has been reproduced on page 1 of the assessment order. There are several institutions, specifically or ITA No.1359/Del/2014 generally, covered under this notification issued u/s 194A(3)(iii)(f). One of such items notified generally is: "Any Corporation established by a Central, State or Provincial Act." The crux of the controversy before us is whether or not the assessee falls under this item? Whereas the case of the assessee is that it is a corporation established by the State Act, the Revenue has canvassed a view that the assessee is not a corporation established by a State Act. 8. It is observed that the assessee is a creation of the UP Industrial Area Development Act, 1976, a copy of which has been placed on page 102 of the assessee's paper book. Preamble of this Act reads as : "An Act to provide for the constitution of an Authority for the development of certain areas in the State into industrial and urban township and for matters connected therewith." The term 'Authority' has been defined u/s 2(b) to mean: 'Authority constituted u/s 3 of the Act.' Section 3(i), in turn, provides that: 'The State Government may, by notification, constitute for the purpose of this Act, an Authority to be called (Name of the area), industrial development authority, for any industrial ITA No.1359/Del/2014 development area.' It is under the UP Industrial Area Development Act, 1976 that the UP Government constituted various industrial Page 8 of 17

Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 development authorities with the name of the area, such as, NOIDA Authority and Ghaziabad Authority, etc. The case of the Revenue is that only a corporation established 'by', inter alia, a State Act can be brought within the purview of exemption. The ld. DR argued that if the corporation is established 'under' the State Act, then, the exemption to the payer bank from deduction of tax at source on the interest income, is not available. The ld. DR vehemently argued that since NOIDA has been constituted as a corporation established `under' the State Act and not 'by' the State Act, the exemption to the assessee bank from tax withholding stood waived. In order to buttress this contention, the ld. DR relied on the judgment of the Hon'ble Supreme Court in the case of Dalco Engineering Pvt. Ltd. vs. Satish PrabhakarPadhye and Ors., dated 31.3.2010, a copy of which has been placed in the paper book. The ld. AR also drew strength to fortify his point of view by relying on the same judgment for contending that the assessee is a Corporation ITA No.1359/Del/2014 established 'by' the State Act. Since both the sides have heavily relied on the same judgment, it becomes significant to note its facts and ratio. 9. In that case, the appellant, a private limited company, employed respondent for more than two decades. The Respondent's service was terminated by the appellant due to some physical disability. The Respondent complained to the Disability Commissioner against such termination. The Disability Commissioner `suggested' the employer to re-employ the Respondent, which suggestion was turned down by the appellant. The Respondent argued that the Commissioner, instead of making a mere suggestion, ought to have issued a direction to the employer. He filed a writ petition on this aspect. The Hon'ble High Court allowed the said writ petition and directed the employer company to reinstate the Respondent. The Hon'ble High Court held that the appellant, though a private limited company, was an 'establishment' under the Act. The appellant took the matter to the Hon'ble Supreme Court urging that it was not covered within the meaning of 'establishment' and, hence, the provisions of section 47 were not ITA No.1359/Del/2014 applicable. The Hon'ble Supreme Court held that the assessee company was not an 'establishment' under the Act. In reaching this conclusion, the Hon'ble Supreme Court considered the definition of the term 'establishment' under the relevant Act as : 'a Corporation Page 9 of 17

Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 established by or under a Central, Provincial or State Act,.........' The Hon'ble Supreme Court highlighted the use of the words "by or under" in the definition of the term 'establishment' and explained the difference between a corporation established `by' an Act and a corporation established `under' an Act. The Hon'ble Apex Court held that a Corporation is established `by' an Act, where the Act itself establishes the Corporation, such as, State Bank of India Act and Life Insurance Corporation of India Act. On the other hand, a Corporation is established `under' an Act, when it is notified by the delegated authority, though under the Act. In the light of the above distinction, it was held that a company is incorporated and registered under the Companies Act and not established under the Companies Act. 10. It is significant to note that the line of distinction drawn by the Hon'ble Supreme Court between the Corporations established `under' the Act and Corporations established `by' the Act is to be seen in the background of the facts prevailing in that case in which the Respondent urged that the appellant, a company, be declared as 'established by or under the Act.' The Hon'ble Supreme Court further observed that: `Thus, a State Financial Corporation is established under a central Act. Therefore, when the words "by and under an Act" are preceded by the words "established", it is clear that the reference is to a corporation established, that it is brought into existence, by an Act or under an Act. In short, the term refers to a statutory corporation as contrasted from a non-statutory corporation incorporated or registered under the Companies Act.' From the italicized portion of the above prescription of the judgment, it is manifest that in the context of a statutory corporation, the words `by and under an Act' can be read as `by an Act or under an Act'. The above observations make it explicit that in contrast to a non-statutory corporation, a statutory corporation is ITA No.1359/Del/2014 considered as established by or under an Act and the use of the words `by' and `under' in such a situation, is interchangeable. 11. Adverting to the facts of the instant case, we find that the assessee is a statutory corporation established by means of the UP Industrial Area Development Act, 1976. It has been noticed above from the preamble of this Act that it has been made for development of certain areas in the State into industrial and urban township. Instead of enacting area-wise Industrial Area Page 10 of 17

Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 Development Acts, the UP Government enacted a common UP Industrial Area Development Act, 1976 to cover Authorities under different areas with its distinct name. But, for the creation of various area-wise authorities such as NOIDA and Ghaziabad Authorities, there is no other purpose of the UP Industrial Area Development Act, 1976. In other words, we can also say that this Act is nothing but a culmination of several area-wise Industrial Area Development Acts. Since NOIDA has been notified under the UP Industrial Area Development Act, we are of the considered opinion that the expression 'any corporation established by a State Act' shall include ITANo.1359/Del/2014 NOIDA (New Okhla Industrial Development Authority) in the given circumstances. 12. We find that identical issue involving payment of interest by some banks to Ghaziabad Development Authority without tax withholding came up for consideration before the Delhi Bench of the Tribunal in the case of Chief/Senior Manager, Oriental Bank of Commerce vs. ITO. Vide its order dated 15.7.2011 in ITA No.2228/Del/2011, the Tribunal has held that the payment of interest by Oriental Bank of Commerce to Ghaziabad Development Authority is covered within the provisions of section 194A(3)(iii)(f) and, hence, there is no obligation for deduction of tax at source. Consequently, the order passed u/s 201(1) was set aside. Similar view has been taken by the Amritsar Bench of the Tribunal in the case of ITO (TDS) vs. Branch Manager Jammu & Kashmir Bank Ltd. Vide its order dated 24.4.2012 in ITANo.206 to 210/Asr/2011, the Tribunal has held that payment of interest by the bank to Jammu Development Authority (Jammu) is exempt u/s 194A(3)(iii)(f) and, hence, there can be no liability u/s 201(1) and 201(1A) on the bank and ITA No.1359/Del/2014 resultantly, the bank cannot be treated as an assessee in default u/s 201(1) and 201(1A). Likewise view has been taken by the Amritsar Bench of the Tribunal in ITO vs. the Branch Manager, Jammu, Jammu & Kashmir Bank Ltd., by its order dated 2.7.2012, a copy of which has also been placed on record. All these precedents support the proposition that the payment of interest by banks to the State Industrial Development Authorities does not require any deduction of tax at source in terms of section 194A(3)(iii)(f) and, hence, the failure to deduct tax at source on such interest cannot lead to the banks being treated as assessee in default. No material has been placed on record to demonstrate that all/any of the above orders Page 11 of 17

Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 have either been reversed or modified in any manner by the Hon'ble High Courts. Further, the ld. DR failed to point out any contrary decision. In view of the legal position discussed supra and these precedents, we are of the considered opinion that the ld. CIT(A) was justified in reversing the order passed by the Addl. CIT (TDS), Ghaziabad declaring the assessee liable u/s 201(1) and 201(1A) of the Act. We, therefore, uphold the impugned order.” 11. On reading of above decision it is clear that ITAT has held that assessee is not required to deduct tax at source u/s 194A of the act on interest payments made to NOIDA. However, LD DR has stated that revenue has filed a miscellaneous application before ITAT in that appeal which is pending. Be that it may. At this point of time it has been held by various benches of ITAT that no tax is required to be deducted u/s 194A of the Act by the banks including the assessee bank with respect to interest paid to NOIDA. Therefore, at present it cannot be said that assessee has failed to deduct tax at sources on such payment of interest. Hence, on this score only penalty orders are deserved to be set aside. 12. Regarding the contention of revenue, that ITAT has not considered the decision of Honourable Allahabad high court dated 28.02.2011 is also devoid of any merit. Firstly because ITAT in para no. 2 of the order has made a mention of that decision. According to the above facts recited by ITAT therein we are of the view that ITAT has decided the issue after considering the decision of Hon‟ble Allahabad High Court dated 28.02.2011. Therefore, in our opinion it is incorrect to infer that ITAT has not considered the decision of Hon‟ble Allahabad High Court. Further on perusal of decision of Honourable Allahabad high court at para no 15 of that decision it is crystal clear that honourable high court has decided the only issue that whether NOIDA is a Local authority or not as per section 10 (20) of the income tax Act.

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 13. Alternatively, it is necessary to examine that whether the case of the assessee falls under the exception of “reasonable cause” as provided u/s 273B of the Act. We do not have any hesitation to hold that there was a „reasonable cause‟ for non deduction of tax at source on payment of interest made to Noida for following reasons:- a. ITAT has held that according to notification issued dated 22.10.1990 where it has been held that any corporation which is established by Central State or provisional act will fall under the exception to provision of section 194A in sub-section 3(iii)(f) the Act. The assessee has pleaded before all the authorities that it is covered by this notification and no tax is required to be deducted on interest paid to NOIDA. The plea of the assessee also could not be said to be false because of the reason that Noida is a creation of The Uttar Pradesh Industrial Area Development Act, 1976 and therefore the assessee was having a bonafide belief that it is not required to deduct any tax at source on payment made to Noida. Ld DR as well as lower authority did not whisper a word about this aspect of the issue for non deduction of tax source. b. Prior to the decision of ITAT in the case of the assessee under similar circumstances Delhi Bench of ITAT in the case of Oriental Bank of Commerce Vs. ITO vide its order dated 15.07.2011 in ITA No. 2228/Del/2011 has held that the payment of interest by OBC to Ghaziabad Development Authority and Ganga Jal Pariyojna, Ghaziabad is covered within the exceptions of section 194A(3)(iii)(f) of The Income- Tax Act and there is no requirement for deduction of tax at source on interest payment to these parties. It was further held by Amritsar Bench of ITAT in the case of ITO Vs. Jammu &

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 Kashmir Bank vide its order dated 24.04.2012 in ITA No. 206 to 210/Asr/2011 that payment of interest made to Delhi Development Authority is not subject to TDS because of the provisions of section 194A(3)(iii)(f)of The Act. All these judicial precedents also support the proposition that various banks like assessee were carrying a view that payment of interest by bank to the development authorities is falling under the exceptions as provided u/s 194A(3)(iii)(f)of the act. Before us, no contrary decision was placed on record to demonstrate that that tax is required to be deducted on payment made to development authorities which are established by the statute. Therefore the interpretation adopted by the assessee was also supported by various decisions of ITAT .Hence, it cannot be said the plea of the assessee that no tax is required to be deducted on payment of interest made to Noida is incorrect. 14. Hon. Delhi High court in CIT Vs. Mitsui& Co. Ltd. 272 ITR 545 of Hon‟ble Delhi High Court which is held that the assessee is require to prove the existence of reasonable cause of preponderance of probability only and not by way of adducing any proof beyond reasonable doubt. We are also aware about the decision of Hon. Delhi High Court in CIT Vs Fourways International, 166 Taxman 461 (Del)wherein it is held that section 273B of the Act does not make a levy of penalty u/s 271C of the Act mandatory. The assessee would not be liable to be penalized if he is able to prove that there was a reasonable cause for failing to deduct the tax. Further the Hon‟ble Andhra Pradesh High Court had a occasion to interpret the term “reasonable cause” in the context of than existing provision of section 271 in the case of ACIT Vs. Dargapandarinath Tuljayya & Co., 107 ITR 850 at Page 819 “It may also be emphasized that, having regard to the

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 penal consequences, the expression "reasonable cause" has to be liberally construed in favour of the assessee.” 15. Hon‟ble Delhi High Court also explained the term reasonable cause in the case of Woodward Governors India (P.) Ltd Vs., CIT, 253 ITR 745 as under:- “„Reasonable cause‟ as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences will follow.” 16. In the present case it is apparent that belief of the assessee was reasonable to not to deduct tax at source which is also based upon the notification issued by CBDT u/s 194A(3(iii)(f) of the Act as well as several judicial precedents. In our view, it cannot be said that Hon‟ble Allahabad High Court has laid down any law with respect to deduction of tax at source on interest payment made by the assessee to Noida. 17. In view of the above facts and circumstances we are of the view that the assessee cannot be subjected to penalty u/s 271C of the Act because a) There is no failure on part of the assessee to deduct tax at sources u/s 194A of the act in view of the decision of ITAT on this issue for the same years holding that there is no requirement of deduction

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015 of tax at source at all u/s 194A of the Act in view of notification dated 22.10.1990. b) There was a reasonable cause for holding a belief regarding non deduction of tax at source on payment of interest made to Noida which is supported by a notification issued as well as several orders of the coordinate benches holding that interest payment made to Development authorities are exempt for deduction of tax u/s 194A(3)(iii)(f) of the Act. 18. In the end we have not addressed the argument of the LD DR on the issue whether the penalty provision of section 271C can be invoked independently without passing an order u/s 201(1) of the Income tax Act holding ”assesse in default‟. We are of the view that as assessee has not committed any default regarding non deduction of tax at sources and further even otherwise there is „reasonable cause‟ in non deduction of tax at source, the issue raised becomes only academic and therefore we do not express any opinion on the same. 19. While parting we would like to state that learned Commissioner of Income-tax (Appeals) who is a subordinate judicial authority to the ITAT has held that order of ITAT Delhi Bench dated 07.08.2015 is nullity and non-est abinito and cannot be a binding precedence or even a precedent. We are of the view that The learned Commissioner of Income- tax (Appeals) gravely erred in holding so because Hon‟ble Allahabad High Court has not adjudicated on issue of deduction of tax at source u/s 194A of Act on interest payments made to NOIDA by assessee. The learned Commissioner of Income-tax (Appeals) did not carefully perused para 15 of the order of Hon‟ble Allahabad High Court which has only decided that whether Noida is considered as local authority for the

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Central bank of India V Addl. CIT (TDS), Ghaziabad A Y 2005-06 to 2011-12 ITA No 5968 to 5974/ Del/2015

provisions of section 10(20) of the Act or not. We are deeply pained by the observations of the learned Commissioner of Income tax (Appeals) at para 46 of his order which are unwarranted and shows non-application of mind. It is advised that lower authorities must respect the orders of higher authorities without any doubt. We rest ourselves at that only. 20. Resultantly we reverse the order of the learned Commissioner of Income tax (Appeals) and cancel the penalty levied u/s 271C of the act for respective years under the appeal. 19. In the result all the appeals of the assessee are allowed. Order pronounced in the open court on 08. 01. 2016. -Sd/- -Sd/- (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 08/01/2016 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi

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