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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
Both appeals by Revenue are arising out of common orders of Commissioner of Income Tax (Appeals)-XIV, Kolkata dated 26.04.2013. Penalty imposed by ACIT, Range-28, Kolkata u/s 271C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 29.08.2008 for assessment years 2004-05 & 2005-06 respectively.
Shri Miraj D Shah, Ld. Authorized Representative appearing on behalf of assessee and Shri P.B.Pramanik, Ld. Departmental Representative appearing on behalf of Revenue.
ITA No.2038-39/Kol/2013 A.Ys 04-05 & 05-06 ITO Wd-28(3), Kol. v. Sh Ran Vijay Singh Page 2 2. Since the common grounds are involved except figure in both the appeals, therefore we heard them together and deem it appropriate to dispose them by way of common order. We therefore are taking the facts of the case for AY 2004-05 as a lead case for the sake of convenience. Ground reproduced below:- ITA No.2038/Kol/2013 (A.Y.04-05) “1, That the Ld. C.I.T.(A)has erred both in the question of Law as well as in fact by deleting the Penalty amount of Rs.18,18,348/-, levied u/s.271C on the basis of his observation that the assessee had reasonable cause for not deducting tax at source from the rental payments, as it is not clear from his order whether he is exonerating the assessee from the liability to deduct tax on the ground of the assessee’s lack of awareness as regards his liability of tax deduction as per law or on the ground taken by the assessee in his Revised Grounds of appeal that he did not deduct tax from the rental payments on the perceptions that the Kolkata Port Trust was “exempt from tax” and Prestige Trading Co. is a “Loss making Public sector Undertaking”. Here, the two propositions are not only different but contradict each other as well.”
The only issue raised by the assessee in this appeal is that ld. CIT(A) erred in confirming the penalty order passed by the AO under section 271C of the Act on account of non-deduction of TDS.
3.1 Facts in brief are that assessee is an individual and is running two proprietorship firms in the name of M/s Singh Trading Company and Prestige Trading Company. For the year under consideration, both the concerned of the assessee have paid rent to Kolkata Port Trust (KPT for short) without deducting Tax Deducted at Source (TDS for short) as specified u/s. 194I of the Act. The AO also, during the course of assessment proceeding, observed from the tax audit report that no TDS was deducted and credited to the Central Govt. in accordance with the provision under Chapter XVII-B on the payment of rent. It was also observed that the turnover of assessee for the year under consideration is of Rs.1,35,39,362/- which exceeds limit of gross receipt as mentioned in the provision of Sec.194I of the Act. Subsequently, AO issued notices on 29.02.2008 and 21.08.2008 respectively which was duly
ITA No.2038-39/Kol/2013 A.Ys 04-05 & 05-06 ITO Wd-28(3), Kol. v. Sh Ran Vijay Singh Page 3 served upon assessee for seeking clarification before imposing penalty but no compliance was made thereon. As such, there was no option available to AO except to levy the penalty u/s 271C of the Act. Accordingly, AO levied penalty by passing order u/s 271C of the Act on 29.08.2008.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) where it was submitted that the assessee could not understand the provision of TDS. The assessee was under the wrong impression that being individual he was not required to deduct TDS. The assessee also had no TAN No. and never deducted tax in earlier years of business. Besides above, the Ld. counsel of the assessee never guided to the assessee for the applicability of TDS provision. Considering the same, Ld. CIT(A) deleted the penalty imposed u/s. 271C of the Act by observing as under:- “I am of the opinion that since the assessee misconstrued the provisions of law and also was wrongly advised by his Chartered Accountant no penalty U/s 271C is imposable in this case. In light of these facts, I am of the considered view that there was reasonable cause for not deducting tax at source. Hence, respectfully following the decisions cited above I hold that no penalty was levible u/s. 271C on the appellant. Hence, I hereby delete the penalty of Rs.18,18,318/- imposed by the AO. Accordingly, Revised Ground No-4 is allowed in full.”
Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us.
Before us Ld. DR submitted that the plea taken by assessee before the first appellate stage that he was not aware about the provision of TDS as specified under the IT Act is not tenable. There is no ambiguity in the provision of Sec. 194I of the Act and the language used in the Section is plain and simple which can be understood by assessee. The assessee does not require any guidance from Chartered Accountant. Further, Ld. DR submitted that it is not a new business activity of the assessee. Therefore, TDS provision must be well in his knowledge. The ld. DR further submitted that Ld. CIT(A) deleted the penalty on the basis of additional evidence submitted at the time of
ITA No.2038-39/Kol/2013 A.Ys 04-05 & 05-06 ITO Wd-28(3), Kol. v. Sh Ran Vijay Singh Page 4 appellate proceeding. The Ld. CIT(A) failed to refer the additional evidence to AO before accepting the same and he vehemently relied on the order of AO.
On the other hand, Ld AR submitted paper book which is running from pages 1 to 54 and stated that the payee of rent in the instant case is KPT and its income is not chargeable to tax. He further submitted that for the AY 2005-06 the payee has submitted a certificate issued by IT Department u/s 197 of the Act for nil deduction of TDS. He further submitted that assessee was of the view that the provision of TDS is not applicable and no Ld. counsel guided him about the applicability of provision of TDS. The Ld. AR also submitted that rent was paid to Govt. organization and same must have been included in the total income of the payee and as such there is no loss to the Govt. for non deduction of TDS and he relied on the order of Ld. CIT(A).
We have heard the rival contentions and perused the materials available on record. From the aforesaid discussion, we find that assessee in the instant case failed to deduct TDS from the payment of rent to M/s KPT. Accordingly, AO imposed penalty u/s. 271C of the Act but subsequently the same was deleted by Ld. CIT(A). Now the question before us arise so as to whether the assessee is defaulter of TDS in terms of Sec. 271C of the Act. From the facts of the case, we find that income of KPT is exempted from tax and in this connection, we are putting our reliance in the order of this Tribunal in the case of M/s Gourishankar Bihani v. DCIT in ITA No.1127/Kol/2011 for AY 2007-08 dated 18.12.2014, wherein this Tribunal has held as under:- “7. In view of the above facts, we are of the view that in the instant case no tax was deductible at source under section 194I read with section 204 comprised in Chapter XVII-B from the rent paid by the assessee to KPT. This is because such rent was not to be included in the total income of the KPT and was, therefore, not chargeable under the provisions of the Act. In the case law referred by Ld. Sr.DR the fact relating to the claim of exemption of the income of KPT was not before Tribunal or that issue was not raised but in the instant case, KPT was not required to pay any tax and in turn cannot be treated to be in default within the meaning of section 201(1). Accordingly, we are of the view
ITA No.2038-39/Kol/2013 A.Ys 04-05 & 05-06 ITO Wd-28(3), Kol. v. Sh Ran Vijay Singh Page 5 that no disallowance ought to have been made under section 40(a)(ia) of the Act.”
Taking a consistent view in the case of Gourishankra Bihani (supra) we find that as such there was no need on the part of assessee to deduct TDS from the payment made to KPT. In the similar facts of the case in Civil Appeal No. 1704 of 2008 dated 07.01.2016 of Hon'ble Supreme Court in the case of CIT v. Bank of Nova Scotia wherein the Hon'ble Supreme Court has upheld the order of ITAT Delhi Bench in favour of assessee and relevant extract of the decision is reproduced below:- “11. We have carefully considered the rival submissions. In the instant case we are not dealing with collection of tax u/s. 201(1) or compensatory interest us. 201(1A). The case of the assessee is that these amounts have already been paid so as to end dispute with Revenue. In the present appeals we are concerned with levy of penalty u/s. 271-C for which it is necessary to establish that there was contumacious conduct on the part of the assessee. We find that on similar facts Hon'ble Delhi High Court have deleted levy of penalty us. 271-C in the case of M/s Itochu Corporation, reported in 268 ITR 172 (Del) and in the case of CIT vs. Mitsui & Company Ltd., reported in 272 ITR 545. Respectfully following the aforesaid judgments of Hon'ble Delhi High Court and the decision of the ITAT, Delhi in the case of Television Eighteen India Ltd., we allow the assessee’s appeal and cancel the penalty as levied u/s. 271-C.”
Accordingly in our considered view the additions under the assessment were not required to be made and consequently penalty imposed by AO u/s 271C of the Act will not stand. But Revenue took up the aforesaid matter before Hon'ble Delhi High Court which was dismissed on the ground that no substantial question of law arises in the matter and subsequently same was affirmed by Hon'ble Supreme Court. Accordingly, we find that in the instant case, the payee was not liable to tax on the rental income received by assessee and as such there was no requirement on the part of assessee to deduct TDS u/s. 194-I of the Act. Respectfully following such precedents, penalty imposed on account of non-deduction of TDS on the payment of rent will not stand in terms of provision of Sec. 271-C of the Act. In this view of the
ITA No.2038-39/Kol/2013 A.Ys 04-05 & 05-06 ITO Wd-28(3), Kol. v. Sh Ran Vijay Singh Page 6 matter, we have no hesitation in upholding the order of Ld. CIT(A). This ground of Revenue’s appeal is dismissed. 7. In the result, Revenue’s appeal is dismissed. Coming to ITA No 2039/Kol/2013 (A.Y.05-06) 8. At the time of hearing both the parties conceded that whatever view taken in the appeal in ITA No.2038/Kol/2013 may be taken in this appeal also, we hold accordingly.
In combined result, both the appeals of Revenue stand dismissed. Order pronounced in the open court 27/05/2016 Sd/- Sd/- (S.S.Vishwanethra Ravi) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 27/05/2016 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-Ran Vijay Singh, 2, Hide Road, Kolkata-700 043 2. राज�व/Revenue-ITO, Ward-28(3), Aayakar Bhavan, Dakshin, 3rd Fl, 2, Gariahat Road South, Kolkata-700 068 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता ।