SH. SWAPNIL AGARWAL,1, AGARWAL DHARAM KANTA, ADARSH NAGAR, AJMER vs. ITO(TDS), AJMER, AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 160/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2014-15 cuke Sh. Swapnil Agarwal ITO (TDS), Vs. 1, Agarwal Dharam Kanta, Ajmer Adarsh Nagar, Ajmer LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFNPA 9330 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Smt Monisha Chaudhary (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 27/04/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 10/05/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 01/03/2023 [here in after (NFAC)/ ld. CIT(A) ] for assessment year 2014-15 which in turn arise from the order dated 16.12.2020 passed under section 271C of the Income Tax Act, by Addl. CIT, Range TDS, Udaipur.

2. In this appeal, the assessee has raised following grounds: -

2 Sh. Swapnil Agarwal vs. ITO “1. The ld. CIT(A), NFAC has erred on facts and in law in upholding the penalty order passed by Add. CIT, Range-TDS, Udaipur ignoring the penalty proceedings initiated after 7 years of the transaction is illegal & bad in law. 2. The Ld. CIT(A), NFAC has erred on facts and in confirming the levy of penalty of Rs. 57,940/- u/s 271C of the IT. Act, 1961. 3. The appellant craves to alter, amend & modify any ground of appeal

4. Necessary cost be awarded to the assessee.”

3. Succinctly, the fact as culled out from the records is that in this case, the return of income was e-filed on 30.09.2014 declaring total income at Rs. 10,47,410/-. The return of income was processed u/s 143(1) of the Act, 1961 on 11.04.2015. This case was selected for scrutiny through CASS for ‘Complete Scrutiny’. Accordingly, a notice u/s 143(2) of the Income Tax Act, 1961 was issued on 28.08.2015 and case fixed for hearing on 08.09.2015.

This notice was duly served upon the assessee. The notice was duly complied with by the assessee. Thereafter, a notice u/s 142(1) along with a detailed questionnaire was issued on 17.06.2016. Simultaneously, due to change of incumbent a fresh opportunity vide notice u/s 143(2) of the I.T.

Act dated 17.06.2016 was provided to the assessee. Assessment order was passed on 31.10.2016 under section 143(3) of the Act.

3.1 After culmination of the assessment in this case the ACIT, Circle-2, Ajmer referred letter no. 197 dated 30.07.2019 that the revenue audit party has raised minor audit objection in this case that the assessee has failed to deduct TDS @ 1% i.e. 57,940/- as per provision of section 194IA the assessee was liable to deduct TDS @ 1% but failed to do so. Therefore, the case was transferred to the office of the Additional Commissioner of Income Tax, TDS Range, Udaipur. Based on these set of facts a show cause notice under section 274 read with section 271C of the I.T. Act, 1961 was issued on 21.01.2020 to the deductor by the office of the Addl. CIT requesting to show cause why penalty should not be levied for the default fix the hearing of case on 28.01.2020. In response to above, the A/R of the assessee requested for adjournment by filing a letter on 11.02.2020. Again, Second notice under section 274 read with section 271C of the I.T. Act, 1961 was issued on 17.02.2020, fixing the date of hearing on 24.02.2020.

In response to this, the assessee filed a letter by e-mail on 24.02.2020 in which he asked to intimate him about the default for which penalty u/s 271C is leviable. Therefore notice under section 274 read with section 271C of the I.T. Act, 1961 was issued on 02.03.2020, fixing the date of hearing on 06.03.2020 and intimated the assessee about objection raised by revenue audit party on TDS default on purchase consideration of property purchase of Rs. 57,94,000/- by the assessee during F.Y 2013-14, but neither submitted any written reply nor presented himself in the office of the Addl. the I.T. Act, 1961, the case was forwarded to the ITO (TDS), Ajmer vide letter No. 1337 dated 12.03.2020. Later, the ITO(TDS), Ajmer referred vide letter no. 229 dated 02.11.2020 that order u/s 201(1)/201(1A) of the I.T. Act, 1961 was passed on 28.10.2020. The copy of same was endorsed to the office of undersigned for initiating penalty proceedings u/s 271C of the I.T.

Act, 1961. It was reported that deductor has not deducted tax at source u/s 194IA of the I.T. Act, 1961 on immovable property worth Rs. 57,94,000/- at the time of purchase of property from Sh. Indrajeet S/o Sh. Girdhari Lal resident of Dholabhata, Ajmer on 05.08.2013. The deductor assessee was treated as assessee in default as per provisions of section 201(1) of the Act, 1961 for not deducting of TDS amount of Rs. 57,940/- on the payment made of Rs. 57,94,000/- at the time of purchase of immovable property.

Therefore order u/s 201(1)/201(1A) of the I.T. Act, 1961 was passed on 28.10.2020 by creating demand of Rs. 57940/- of TDS default u/s 201(1) and Rs. 49828/- u/s 201(1A) as interest @ 1.00% per month of the I.T. Act, 1961. Therefore, penalty notice u/s 271C of the I.T. Act, 1961 issued on 24.11.2020 to the deductor by the office of the undersigned fixing date of hearing on 01.12.2020. Despite giving due opportunities the assessee failed to represent its case. No compliance made by the assessee till date, of the assessee is established. From the above, it is clear that the deductor has to deduct TDS of Rs. 57,940/- @ 1% u/s 194IA of the IT Act, 1961 at the time of payment of sale consideration to the seller and deposit the same in Central Govt. Account, but deductor failed to do so. Relying on the case of Classic Concepts Home India (P) Ltd. vs. CIT of the Kerala High Court, IT Appeal No. 89, 90, 91 & 92 of 2015 dated 21 May, 2015, wherein it is held that the tax was deducted at source and the same was remitted belatedly, though with interest, authorities were fully justified in levying penalty u/s 271C of the I.T. Act, 1961 and thereby imposed penalty of Rs. 57,940/- which is equivalent to the amount of TDS which the deductor failed to deduct and deposit into Central Govt. A/c within the stipulated time as prescribed under the Chaper XVII-B of the I.T. Act, 1961.

4. Aggrieved from the order of the levy of demand of TDS and order levying penalty, the assessee preferred an appeal before the ld. CIT(A)/NFAC. The ld. CIT(A) has dismissed both the appeal of the assessee. Apropos to the grounds of the appeal related to the levy of penalty the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below :

6 Sh. Swapnil Agarwal vs. ITO “6. I now take up the appeal against levy of penalty u/s 271C. Both grounds in this appeal are related to the action of the Addl.CIT, TDS, Udaipur in levying penalty u/s 271C. During appeal proceedings, the assessee has filed written submissions which are identical to those filed before me in his appeal decided above and are therefore not reproduced for the sake of brevity. The assessee has made identical arguments as to why he did not deduct tax at source. However, on examination of section 271C, I find that words used therein are * If any person fails to...

(a).....

(b)... then, such person shall be liable to pay, by way of penalty....". The words in section 271C are shall be liable to pay, which means there is no discretion given to any authority under the Act for not levying penalty. The only exception is by way proving reasonable cause u/s 273B. As discussed in the appeal earlier decided, the assessee has attempted to prove reasonable cause by stating that the government authorities were not aware and that the provisions and that section 1941A has been introduced only two months before date of transaction. I am not inclined to agree with the assessee on this count as ignorance of law is no excuse and the ignorance by any authority or any other person does not dilute the obligation cast on the assessee to deduct TDS. Based on the discussion above, I am of the view that the assessee has not able to demonstrate reasonable cause u/s 273B and I therefore uphold the levy of penalty of Rs.57,940.

7 Sh. Swapnil Agarwal vs. ITO 1. The assessee is engaged in real estate business. Assessment u/s 143(3) of IT Act was completed on 31.10.2016 at income of Rs.10,77,780/- against returned income of Rs.10,47,410/-.

2. Thereafter on the basis of audit objection, the ACIT, Circle-2 vide letter dt. 30.07.2019 made reference to Additional Commissioner of Income Tax, Range- TDS, Udaipur (Addl. CIT-TDS) to initiate penalty proceedings u/s 271C of the IT Act for failure to deduct tax at source u/s 194-IA of Rs.57,940/- on land purchased on 05.08.2013 at Mangliyawas for Rs.57.94 lacs.

5. The Ld. CIT(A) held that the words in section 271C are ‘shall be liable to pay’ which means there is no discretion given to any authority under the Act for not levying penalty. The only exception is by way of proving reasonable cause u/s 273B. The assessee has attempted to prove reasonable cause by stating that the government authorities were not aware of the provisions and that section 194IA has been introduced only two months before date of transaction. However, ignorance of law is no excuse and the ignorance by any authority or any other person does not dilute the obligation cast on the assessee to deduct TDS. The assessee has not able to demonstrate reasonable cause u/s 273B and thus levy of penalty of Rs.57,940/- is hereby upheld.

Submission:-

Hon’ble Delhi High Court in case of CIT Vs. NHK Japan Broadcasting Corporation (2008) 305 ITR 137 after considering the said decision of Hon’ble Supreme Court with reference to the proceedings initiated u/s 201 where no time limit for initiation of proceedings is prescribed at para 19 to 22 of its order held as under:-

9 Sh. Swapnil Agarwal vs. ITO 22. Learned counsel for the Revenue submitted that the Department came to know that the assessee was an assessee in default only in November, 1998 when a survey was conducted and it came to be known only then that the assessee had not deducted tax at source on the global salary. We are of the opinion that the date of knowledge is not relevant for the purposes of exercising jurisdiction insofar as the provisions of the IT Act are concerned. If it were so, the limitation period, as for example prescribed under s. 147/148 of the Act would become meaningless if the concept of knowledge is imported into the scheme of the Act.

Further Hon’ble ITAT, Chennai Bench in case of RMG Benefit Fund Ltd. Vs. ACIT (2018) 53 CCH 0269 has held that penalty proceeding should have been initiated within reasonable time even though no limitation was provided in Income-tax Act. Threat of initiating penalty proceeding could not be allowed to hang over head of assessee for an unreasonable period of time. There should be an end to proceeding, that also within a reasonable period. Penalty proceeding initiated by AO after expiry of almost six years was barred by limitation.

Hence, penalty order passed ignoring that penalty proceeding is initiated after 6 years of the transaction is illegal & bad in law.

“An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation— Penalty will not also be imposed merely because it is lawful to do so—Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances—Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.”

Motilal Padampat Sugar Mills Co. Ltd. Vs. State of UP & Ors. (1979) 118 ITR 326 (SC) where at Para 7 it was held as under:-

Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement : there is no such maxim known to the law. Over a hundred and thirty years ago, Maula, J. pointed out in Martindale vs. Falkner (1846) 2 CB 706 : "There is no presumption in this country that every person knows the law : it would be contrary to common sense and reason if it were so. "Scrutton, L.J. also once said : "It is impossible to know all the statutory law, and not very possible to know all the common law. "But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans vs. Bartlam (1937) AC 473 :"....... the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application." It is, therefore, not possible to presume, in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dt. 25th June, 1970. We. accordingly, reject the plea of waiver raised on behalf of the State Government.

3. The Addl. CIT-TDS initiated penalty proceedings u/s 271C vide notice dt. 21.01.2020. Penalty u/s 271C is independent of assessment proceedings and thus the limitation for levy of penalty u/s 271C would be governed by clause (c) of section 275(1). This clause provides that no order imposing the penalty shall be 11 Sh. Swapnil Agarwal vs. ITO passed after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. In the present case, since penalty u/s 271C has not been initiated during the course of any proceedings, first part of sec. 275(1)(c) would have no application and it is only the second part which would apply. Thus the penalty order ought to have been passed within a period of six months beginning from the end of the month in which the action for imposition of penalty was initiated. Since the show cause notice u/s 271C was issued on 21.01.2020, the period of six months would have to be reckoned from 01.02.2020 that would end to 31.07.2020. Therefore, penalty order passed on 16.12.2020 is barred by limitation.

In view of above, penalty levied u/s 271C be directed to be deleted.”

7. The ld. DR is heard who has relied on the findings of the lower authorities and also submitted that ignorance of law is not an excuse. Ld. party the demand and penalty has rightly been levied as the assessee failed to demonstrate the voluntary compliance of law which is mandate to the assessee.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 10/05/2023. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 10/05/2023 *Ganesh Kumar आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Sh. Swapnil Agarwal, Ajmer izR;FkhZ@ The Respondent- ITO, TDS, Ajmer 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 160/JP/2023) 6. vkns'kkuqlkj@ By order,

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