Income Tax Appellate Tribunal - Delhi
M/S Modi Industries Ltd.,, Meerut vs Jcit, New Delhi on 29 November, 2018
1 ITA No. 5233/Del/2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'E' NEW DELHI
BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A. No. 5233/DEL/2016 (A.Y 2008-09)
Modi Industries Ltd. Vs JCIT
C/o. Kashyap & Co. C.A Range-75
214, Citi Center, Begum Bridge R New Delhi.
Road,
Meerut (RESPONDENT)
AAACM2063Q
(APPELLANT)
Appellant by Sh. P. S. Kashyap, CA
Respondent by Sh. S. M. Pandey Sr (DR)
Date of Hearing 22.11.2018
Date of Pronouncement 29.11.2018
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 20/7/2016 passed by CIT(A)-41, New Delhi for Assessment Year 2008-09.
2. The grounds of appeal are as under:-
"1. That on facts and in law imposition of penalty under section 271C for Rs. 10,58,313/- is totally wrong, unjustified and illegal. The appellant company is not liable to penalty u/s 271C on the following grounds:
i) That the Ld CIT (A) has not considered the various facts before passing the order.
ii) That assessee had Bona fide reasons for not deducting TDS.
iii) That the assessee had deposited TDS with interest where ever applicable and in another case the deductee has duly deposited due tax 2 ITA No. 5233/Del/2016 by offering full income in its income tax return and the assessment of deductee was completed u/s 143(3) of The Act.
iv) That no order u/s 201(1) is passed in assessee's case which shows that assessee is not in default for not deducting TDS. The same has not been adjudicated by the Ld CIT (A).
Therefore the basis taken and method adopted by the assessing officer for imposing penalty u/s 271C for Rs. 10,58,313/- and confirmed by CIT (A) is totally wrong, unjustified and unwarranted and the same deserves to be deleted in full."
3. The assessment was completed u/s 143(3) and the Assessing Officer issued notice u/s 271C on 15/12/2014 for imposition of penalty u/s 271C of the Act. In response to the said notice, the assessee filed written submissions stating therein that the assessee Company is a sick Company as per BIFR provisions. Thereafter, the Assessing Officer imposed penalty u/s 271C for Rs. 11,52,144/-.
4. Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) partly granted relief to the assessee by reducing the penalty amount of Rs.93,08,31/- and confirmed the balance penalty of Rs.10,58,313/-.
5. The Ld. AR submitted that the assessee is Public Limited Company in which public are substantially interested. The assessee Company is a Sick Industrial Unit duly registered with BIFR. The Ld. AR further submitted that non deduction of TDS on cane commission was on account of the issue being litigated by the assessee and the Indian Sugar Manufacturers Association by way of SLP in the Hon'ble Supreme Court. The amount was of contingent nature. The amount was reversed in subsequent years which are on record. The Ld. AR further submitted that non deduction of TDS on account of interest payable to Moderate Leasing and Capital Services Ltd. was on account of bonafide belief that no TDS is to be deducted in view of certificate u/s 197(1) of 3 ITA No. 5233/Del/2016 the Income Tax Act for NIL deduction. The Ld. AR submitted that the assessee Company complied with the provisions of the Act by depositing the TDS where it was due and had added back to its income. The gross amount of expenditure and the receiving entities offered the amount in short income and paid due taxes on it. The Ld. AR further submitted that there is no order u/s 201 (1) was passed by the Assessing Officer which was duly reflected in the order wherein the Assessing Officer held that not passing order u/s 201(1) before initiation of proceedings u/s 271C would make imposition of penalty invalid. The Ld. AR relied upon the decision of Indo Nissin Foods Ltd. Vs. CIT (2004) 3 SOT 495 (Bang), Sahara India Financial Corporation Ltd. Vs. CIT (2009) 30 SOT 149 (Delhi). Thus, the Ld. AR submitted that the penalty proceedings u/s 271C is illegal and liable to be quashed. The Ld. AR further submitted that in both the cases there was bonafide belief for not deducting/depositing TDS. There was no mala fide intention for not depositing the TDS. The Ld. AR relied upon the decision of CIT(A) Vs. Muthoot Financials 286 ITR 71 (Coch. Tri.) wherein it is held that interest paid to sister concern without deduction of tax and when it is found that payee concern was assessed to tax and it had shown full interest in its income, there was no loss of Revenue. Thus, it was held that levy of penalty u/s 271C was not justified. The Ld. AR further submitted that in case of Sukhdeo Singh vs. JCIT ITA No. 116/CHD/2014 order dated 29/9/2014 wherein it is held that the assessee was under bonafide belief that no TDS is to be deducted on interest paid to NDFC's as paid to banks. The Tribunal held that the assessee was not bonafide belief that no TDS is to be deducted on interest payment to NBFC as in case of banks, hence penalty order u/s 271C is not to be levied. Thus, the Ld. AR submitted that the assessee's case is identical as the assessee was under bonafide belief that due to the certificate obtained u/s 197 (1) of the Act, which was for NIL deduction for opening balance, no TDS is to be deducted during the year. The Ld. AR further relied upon the decision in case of Wipro GE Medical Systems Ltd. Vs. ITO (2005) 3 SOT 627 (Bang) wherein it is held that where tax has already been paid by the payee no penalty can be levied on the assessee payer for the 4 ITA No. 5233/Del/2016 failure to tax at source.
6. The Ld. DR relied upon the Penalty order u/s 271C and the order of the CIT(A).
7. We have heard both the parties and perused the material available on record. The CIT(A) held as under:
"5.8 TPS on interest payable to M/s Moderate Leasing and Capital Services Ltd.:
5.8.1 The appellant had not deducted tax on the interest of Rs.
41,00,515/- payable to this company. The tax deductible on the same was Rs. 9,29,177/-. The appellant has claimed that a 'NIL' deduction of tax certificate had been issued by the department to the deductee on the opening balance. The appellant was under bonafide belief that no TDS was to be deducted in view of the certificate. Hence, no tax was deducted by the appellant. It was further contended that the payee/deductee is regularly assessed to tax and the interest received from the appellant has been offered to taxation by the deductees. Hence, there is no loss of revenue.
5.8.2 Admittedly, the Lower TDS Certificate had been issued only in respect of the opening balance. However, the appellant has not deducted tax on the interest payment on subsequent loans, despite the fact that no Lower TDS certificate was available on the subsequent amounts. As the facts were fully in the knowledge of the appellant, penalty u/s 271C is upheld in respect of the interest on balance amount, over and above the opening balance. The AO is directed to re-calculate the amount of penalty imposable u/s 271C accordingly.
5.8.3 The explanation that the deductee has paid tax on the receipt and that there is no loss of revenue is not acceptable.
5.8 Claim of the appellant that it is sick company, and that it had suo moto added back the amounts on which tax had not been deducted cannot come to the defense of the appellant company. The appellant is a loss making 5 ITA No. 5233/Del/2016 company declaring net loss. Even after adding back the amount u/s 40a(ia) it had shown net loss and there was no tax payable by the appellant. Hence, this action cannot absolve the appellant form the responsibility of deduction of tax.
The appellant has claimed that no order u/s 201(1) has been passed in its case, holding it assessee-in-default, and in the absence of this penalty u/s 271C is not leviable. The appellant has relied on several decisions in support of this claim. "
(1) Sahara India Financial Corporation Ltd. Vs. CIT (2009) 30 SOT 149 (Delhi) (2) Indo Nissin Foods Ltd. Vs. CIT (2204) 3 SOT 495 (Bang) 5.8 In all the above mentioned decisions quoted by the appellant, the judicial authorities have held that for non applicability of penal provisions u/s 271C, there has to be a reasonable cause for non deduction of taxes and the reasonable cause will depend on the facts and circumstances in each case.
Hence from this analysis it can be reasonably affirmed that the case laws quoted by the appellant in its defence cannot and does not apply strictly to the facts and circumstances of the given case.
5.9 Thus, in view of the above facts it is concluded that the submission of the appellant does not constitute reasonable cause for non deduction of TDS. While it is true that penalty u/s 271C is not automatic consequence of non deduction or short deduction of tax at source but the same is leviable if there is no reasonable cause for such taxes not deducted or short deducted. The appellant is clearly an assessee in default. Hence penalty order u/s 271C dated 06.02.2015 passed by the JCIT is partly confirmed as discussed in the above paragraphs.
6. In the result, appeal is partly allowed. The AO is directed to take consequential action at the time of giving effect to this order accordingly."
6 ITA No. 5233/Del/2016The provisions of Section 271C is 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,
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."
From the perusal of the Section 271C, if there is a failure to deduct tax at source then such person is liable to pay the penalty under this section. Merely being under bonafide belief that the tax was not deducted at source will not be a ground for exonerating the assessee from the provisions of this section. The case laws referred by the Ld. AR will also not be applicable in case of assessee as the same are on different footing and facts. Therefore, we are not inclined to interfere with the findings of the CIT(A). Hence, appeal of the assessee is dismissed.
8. In the result, the appeal of the assessee is dismissed. Order pronounced in the Open Court on 29th November, 2018.
Sd/- Sd/-
(N. K. BILLAIYA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 29/11/2018
R. Naheed *
7 ITA No. 5233/Del/2016
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date of dictation 22 .11.2018
Date on which the typed draft is placed before the 26 .11.2018
dictating Member
Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr. 29 .11.2018 PS/PS Date on which the final order is uploaded on the 29 .11.2018 website of ITAT Date on which the file goes to the Bench Clerk 29 .11.2018 Date on which the file goes to the Head Clerk