D.CI.T.(TDS), CIRCLE-58, KOLKATA, KOLKATA vs. M/S J.J.EXPORTERS LTD., KOLKATA

The only issue is to be decided in this appeal is as to whether the penalty u/s. 271 C is sustainable in view of deletion of disallowance by the CIT(A) in the first appeal.

Brief facts are that the AO by an order dtd. 28-12-2011 u/s. 143(3) of the Act had disallowed an amount of Rs.3,84,07,558/- u/s. 40(a)(ia) of the Act for non deduction of TDS on commission paid to foreign agents for services rendered and utilized outside India. Against which the assessee preferred an appeal before the CIT(A), wherein the said disallowance was deleted by his order dtd. 25-11- 2011.

As aggrieved by the order of CIT(A), the Revenue preferred an appeal before the Tribunal inter alia challenging the amongst other grounds, but, however, not the deletion of disallowance made by the AO u/s. 40(a)(ia) of the Act and the appeal as it is still pending for adjudication before the Tribunal.

As matter stood thus, the AO issued a notice dt. 09-02-2012 u/s. 271C of the Act for default in making TDS, and during such proceedings the assessee has brought to the notice of the AO by his letter dt. 02-03-2012 that the assessee has got relief on disallowance made in respect of commission paid to foreign agents in first appeal vide order dt. 25-11-2011 passed by the CIT(A) and the Revenue did not contest the said deletion before the Tribunal in the appeal preferred by the Revenue. Inspite of which, the AO levied penalty of Rs.43,51,576/- by his order dt. 27-04-12. The relevant portion of which is reproduced herein below:-

The CIT-A having considered the submission of the assessee and having examined the grounds of appeal filed by the Revenue before the Tribunal has opined as under:- Therefore, from the above, it is clear that the Appellant was not liable for deduction of TDS in respect of the commission payments of Rs.3,84,07,558/-. It is further seen that although the department has filed an Appeal in the ITAT against the above mentioned order of CIT(A)-XII, Kolkata, However, in the Grounds of Appeal taken before the Hon’ble ITAT the issue of disallowance s/s. 40(a)(ia) for alleged non deduction of tax has not been taken up. The relevant grounds of Appeal enclosed with Form No.46 filed before the Hon’ble ITAT by the A.O are reproduced as under:- 1. That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition U/s. 36(1)(iii) made on the basis of Auditor’s certificate in the form No.3CD. 2. That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting upward adjustment amounting to Rs.10,83,00,000/- without

That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting upward adjustment amounting to Rs.10,83,00,000/- though the assessee failed to provide the comparable profit at transactional level. “ The JCIT(TDS) in his penalty order has taken the only ground for imposition of penalty that the matter “was still alive” in view of the department’s Appeal before the ITAT. But considering the above, it is clear that the observation made in the Penalty Order that the issue is still alive and the department has not accepted the decision is of CIT(A) is not correct and no Ground of Appeal on this issue has been taken up before the ITAT. It is, therefore, held that the JCIT(TDS) was not justified in imposition of penalty U/s. 271C, since it has been held in the Appellant’s own case for A.Y 2007-08 in appeal that there was no default in payment of TDS, as the amount paid was not taxable in India. It is, therefore, clear that the provisions of TDS were not applicable on the payment of above amount and hence there was no ground of imposition of penalty U/s. 271C for alleged non deduction of TDS. The A.O is accordingly directed to delete the penalty imposed u/s. 271C.”

As aggrieved by the order of the CIT(A) the Revenue preferred this appeal before the Tribunal and contended that it is open to the Department of Revenue to file the supplementary grounds of appeal in the main appeal filed by the Revenue against other additions made by the AO by his order dated 28-12-2011.

In reply, the ld.AR submits that though the appeal was preferred by the revenue before the Tribunal, it did not choose to file any supplementary grounds of appeal, which are still pending before the Tribunal for adjudication.

Heard the rival submissions and perused the material available on record. It is observed from the order of the CIT(A) that he examined the grounds of appeal in Form No.35. He found that the Revenue did not contest the said

The assessee submits the C.O filed is in support of the order of CIT(A). Since we uphold the impugned order of the CIT(A) in cancelling the peanlty, Cross Objection filed by the assessee is dismissed being infructuous.

In the result, the appeal of the revenue and Cross Objection of the assessee, both are dismissed. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 15 / 06 /2016 Sd/- Sd/- S.S.Viswanethra Ravi P.M. Jagtap J Judicial Member Accountant Member