Income Tax Appellate Tribunal - Mumbai
Mature Trading And Investment Ltd, ... vs Jt Cit (Tds) 1(3), Mumbai on 19 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "D", MUMBAI
BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND
SHRI RAM LAL NEGI, JUDICIAL MEMBER
ITA No.3776/M/2017
Assessment Year: 2009-10
M/s. Mature Trading And Jt. Commissioner of
Investment Ltd., Income Tax Officer (TDS)-
Fortune -2000, Plot No.C- 1(3),
3, G Block, Vs. 701, 7th Floor,
Bandra Kurla Complex, K.G. Mittal Ayurvedic
Bandra (East), Hospital Building,
Mumbai - 400 051 Charni Road,
PAN: AAACM9730G Mumbai - 400 004
(Appellant) (Respondent)
Present for:
Assessee by : Shri Vijay Mehta, A.R.
Revenue by : Shri D.G. Pansari, D.R.
Date of Hearing : 12.02.2019
Date of Pronouncement : 19.02.2019
ORDER
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 04.03.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
2. The grounds taken by the assessee are as under:
"1. The order passed by the CIT (A) is illegal, bad in law, ultra vires and contrary to the provisions of law and facts of the case and without appreciating the facts of the case in their proper perspective.
2. The learned CIT (A), Mumbai erred in confirming the action of the Assessing Officer (AO) in Levying penalty amounting to Rs. 67,69,046/-u/s 271C of Incomc Act, 1961 for AY 2009-10.2 ITA No.3776/M/2017
M/s. Mature Trading And Investment Ltd.
3. It is prayed that the order of CIT (A) be cancelled and direction be issued to allow the appeal on the grounds raised before him.
4. Each one of the above grounds of appeal is without prejudice to the other.
5. The appellant reserves the rights to amend alter or add to any of the above grounds of appeal."
3. Besides, the assessee has raised a additional ground vide letter dated 24.9.2018 which is reproduced below:-
"1. Kindly refer to the above matter which is fixed for hearing on 26.09.2018. It is submitted that while passing order dated 30.03.2011 u/s. 201 (I)/201(1 A) of the Act, the Income-tax Officer (TDS)-1(3), Mumbai had initiated proceedings u/s. 271C of the Act. However, penalty u/s. 271C of the Act was levied by the Jt. CIT (TDS), Range-1(3), Mumbai by her order dated 04.03.2015. Though a ground assailing the legality and validity of such an order was taken before the CIT(A) so also before this Hon'ble Tribunal, as a matter of abundant precaution and as advised, we deem it necessary to take up the enclosed additional ground for adjudication and decision.
2. It is submitted that the additional ground of appeal raises only a question of law and for its consideration no new facts are required to be brought on record. It is, therefore, humbly prayed that the additional ground of appeal enclosed herewith may kindly be admitted and adjudicated by Your Honours. In this regard, we rely upon the following decisions rendered by various Courts.
i. National Thermal Power Corporation v. CIT [229ITR 383 (SC)] ii. Jute Corporation of India Ltd. v, CIT [187 ITR 688 (SC)] iii. Ahmedabad Electricity Co. Ltd. v. CIT [199 ITR 351 (Bom) (FB)]"
4. The ld A.R. submitted before the bench that the issue sought to be raised in the additional ground is of legal nature that order passed by the Jt. Commissioner of Income Tax imposing penalty u/s 271C of the Act is barred by limitation. The ld AR argued that though a ground assailing the legality and validity of the order taken before the CIT(A) and also before the tribunal, as a matter of abundant precaution and as advised, it is deemed necessary to take a specific additional ground for adjudication by this Hon'ble tribunal. The ld AR contended that the additional ground raises a pure question law and is arising out the records before the authorities below and 3 ITA No.3776/M/2017 M/s. Mature Trading And Investment Ltd.
requires no new facts to be verified or brought on records and therefore the same may be admitted and adjudicated. The ld. Counsel rely on a series of decisions in support of arguments namely (i) National Thermal Power Corporation Ltd. Vs CIT 229 ITR 383(SC), (ii)Jute Corporation of India Ltd. Vs CIT 187 ITR 688(SC) and (iii)Ahmedabad Electricity Co. Ltd Vs CIT 199 ITR 351(Bom). The ld DR on the other hand argued that the ground was neither taken before the AO nor before the CIT(A) and therefore it should not be admitted at this stage and may be dismissed.
5. After hearing both the sides and perusing the materials before us, we observe that the issue raised by the ld counsel is purely a legal issue emanating out of the records and no new facts are required to be brought on records or required to be verified, therefore following the ratio laid in the above decisions, we are inclined to admit the same. We would like to adjudicate the additional ground first.
6. The facts in brief are that the assessee paid a sum of Rs.3,40,50,048/- to MMRDA on account of ground rent which was subject to the deduction of tax at source u/s 194I of the I.T. Act. The assessee however did not deduct the said TDS. Thereafter, the AO after issuing show cause notice, passed order u/s 201(1)/201(1A) of the Act raising a demand of Rs.83,93,617/- comprising Rs. 67,69,046/- towards TDS and Rs. 16,24,571/- towards interest u/s 201(1A) vide order dated 30.3.2011 passed u/s 201(1)/201(1A) of the Act. The AO also stated in the order para 6 that penalty proceedings u/s 271C of the Act are separately initiated for non deduction of Tax 4 ITA No.3776/M/2017 M/s. Mature Trading And Investment Ltd.
Deducted at Source. The appellate order of the CIT(A) against the order of AO was passed on 27.02.2014. The AO referred the matter of imposition of penalty on 07.01.204 and show notice was issued by the JCIT on 09.01.2015.Thereafter the order imposing penalty u/s 271C was passed on 4.3.2015, almost 4 years after the initiation of penalty proceedings vide order dated 30.3.2011 passed u/s 201(1)/201(1A).
7. The ld AR argued that the order passed by the ld Jt. Commissioner of Income Tax is barred by limitation as envisaged in the provisions of section 275(1)© of the Act. The ld AR submitted that the action for initiation of penalty was taken on 30.3.2011 in the order passed u/s 201(1)/201(1A) and therefore the period of limitation has to be calculated from that date whereas order imposing penalty u/s 271C was passed on 4.3.2015, almost 4 years after the initiation of penalty proceedings vide order dated 30.3.2011 passed u/s 201(1)/201(1A).The ld AR took us through the provisions of the Act on limitation and submitted that order passed by the JCIT dated 4.3.2015 is barred by limitation and therefore is null and void. The ld AR relied on a series of decisions to support his arguments namely:
1. CIT v. Jitendra Singh Rathore(352 ITR 327) (HC-Rajasthan)
2. CIT v. Hissaria Brothers (291 ITR 244) (HC-Rajasthan)
3. CIT v. Hissaria Brothers (386 ITR 719) (SC)
4. Pr. CIT v. JKD Capital and Finlease Ltd. (378 ITR 614) (HC-Del)
5. ITO v. Shri Dinesh Jain for A.Y. 2009-10 in ITA No. 3'/94/Del/2013 dated 16.05.2014. (Trib.-Del)
6. Lodha Builders (P) Ltd v. ACIT and others (163 TTJ 778) (Trib.-Mum.) 5 ITA No.3776/M/2017 M/s. Mature Trading And Investment Ltd.
8. Finally the ld AR prayed before the bench that order so passed u/s 271C may be quashed as being time barred in view of the ratio laid down in the decisions referred to above.
9. The ld DR on the other hand opposed the arguments advanced by the ld AR by submitting that the order imposing penalty is not barred by limitation as the period of limitation has to be reckoned not from the date of order passed u/s 201(1)/201(1A) dated 30.3.02011 but from the date the order passed by the ld CIT(A) dismissing the appeal of the assessee.
In the instant case the order of CIT(A) was passed on 27.2.2014 and therefore the order imposing penalty u/s 271C of the Act was well within limitation as provided in section 275 of the Act. The DR argued that as the JCIT was referred the matter of initiation of penalty proceedings on 7.1.2014 thereafter the notice u/s 271 r.w.s. 274 was issued on 9.1.2015. After considering the reply of the assessee the JCIT passed the order u/s271C on 4.3.2015.Thus the ld DR prayed that there is no merits in the legal issue of order being time barred u/s 275 of the Act ad may be dismissed.
10. We have heard the rival contentions and perused the records before us carefully in the decisions cited by the ld AR. The only issue before us is whether the order of the JCIT dated 4.3.2015 is barred by limitation as per the provisions of section 275(1)(c) of the Act. For better understanding of the provisions the same are extracted below:
"Section 275(1)(c) in The Income- Tax Act, 1995
(c) in any other case, 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.] 6 ITA No.3776/M/2017 M/s. Mature Trading And Investment Ltd.
1. Substituted by the Taxation Laws (Amendment) Act, 1970, w. e. f. 1- 4- 2 Inserted by the Direct Tax Laws (Second Amendment) Act, 1989 , w. e. f. 1- 4- 1989 . 3 Clauses (a), (b) and (c) substituted for clauses (a) and (b) by the Direct Tax Laws (Amendment) Act, 1987 , w. e. f. 1- 4- 1989 . Prior to their substitution, clause
(a), as amended by the Finance (No. 2) Act, 1977 , w. e. f. 10- 7- 1978 , and clause
(b) read as under:' (a) in a case where the relevant assessment or other order is the subject- matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under section 246 or an appeal to the Appellate Tribunal under sub- section (2) of section 253, after the expiration of a period of-
(i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or
(ii) six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later;
It is clear from the above that in any other case not covered by the provisions of section 275(1)(a)&(b) , no order imposing penalty shall be passed after expiry of the financial year during which the action for imposition of penalty has been initiated or six months from the end of the month in which action for imposition of penalty is initiated which ever expires later. There are two limbs in the clause(c). As per the first limb, the penalty can be imposed in the case of the assessee. In the first limb the penalty can be imposed upto 31.3.2011 or up to 30.9.2011 whichever is later. Thus in this case the penalty gets time barred on 30.9.2011 as that is the later of the two. In the background of these facts the ratio laid down in the various decisions shall be seen.
11. In the case CIT Vs Hissaria Bros(Supra) the Hon'ble Court has held that the penalty proceedings u/s 271D of the Act for violation of provisions of section 269SS and 269T of the Act are not related to the, assessment proceedings but are independent of it, therefore, the completion of appellate proceedings arising out of assessment proceedings or other proceedings during 7 ITA No.3776/M/2017 M/s. Mature Trading And Investment Ltd.
which the penalty proceedings u/s 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and therefore clause(a)of subsection (1) of /section 275 can not be attracted to such proceedings. If that were not so clause(c)of section275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default i.e. the penalty for deducting tax at source while making payment to employees or contractor or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if clause (a) is to be invoked , no necessity of clause (c) would arise. Finally court held that limitation u/s 275(1)(c) applies. The above decision of the high court was affirmed by the Hon'ble Supreme Court as reported in (2016) 386 ITR 719(S.C.)
12. In the case of CIT Vs Jitendra Singh Rathore(supra) the Hon'ble Rajasthan High Court held that period of limitation as prescribed in clause © of section 275(1) is to be calculated from the first show cause notice issued by the AO and not the JCIT. In this case the show cause notice for initiation of penalty proceedings was issued by the AO on 25.3.2003 and served on 27.3.2003 and the period of limitation expired on 30 September,2003 when six moths expired from the end of the month in which the action for imposing penalty was initiated. The court held that the order passed by JCIT for penalty u/s 8 ITA No.3776/M/2017 M/s. Mature Trading And Investment Ltd.
271D on 28th May 2004 was clearly hit by the bar of limitation prescribed in clause © of section 275(1) of the Act. The Hon'ble court has followed the earlier order in the case of Hissaria Bros (2007) 291ITR244 (Raj).
In the instant case before us also the action for initiation of penalty proceedings u/s 271C was initiated while passing the order u/s 201(1)/201(1A) on 30.3.2011 by the income tax officer(TDS).The penalty The show cause notice was issued by the JCIT on 9.1.2015 and the order imposing penalty was passed on 4.3.2015.We find force in the arguments of the ld AR that the provisions of section 275(1)(a) are not applicable to the present case but is covered by section 275(1)(c) of the Act. Therefore the limitation for passing the order u/s 271C expired on 30.9.2011 as the limitation period has to be taken from the date on which the action for initiation of penalty proceedings taken by the assessing officer (TDS) and not from the date of show cause notice issued by the JCIT. We, therefore, respectfully following the ratio laid by the Hon'ble Rajasthan High Court as affirmed by the Hon'ble Supreme Court , hold that the order passed u/s 271C id barred by limitation.
13. Even on merit the assessee has very strong case in so far as in all the preceding from AY 2004-05 to AY 2008-09 and succeeding years 2010-11 & 2011-12 ,the the revenue has not made any disallowance u/s 40(a)(ia) despite the fact that assessee had not deducted any TDS on the payment of ground rent to MMRDA. We find merit in the arguments of the ld AR that the assessee was under bonafide belief that it is not liable to deduct any tax at source from the ground rent paid to 9 ITA No.3776/M/2017 M/s. Mature Trading And Investment Ltd.
MMRDA as in the preceding and succeeding no TDS was deducted and the revenue accepted the claim of the assessee without making any disallowance u/s 40(a)(ia) of the Ac. Even the Tax Auditor in tax audit report in form 3CD reported in para 17(f) that amounts inadmissible u/s 40(a)(ia) as N/A. Thus the assessee was under genuine and bonafide belief that no TDS is required to be deducted. The Ld. A.R. relied on a couple of decisions namely;
1. Hindustan Steel Ltd Vs. State of Orissa 83 ITR 26
2. CIT Vs Kotak Securities Ltd (2012) 340 ITR 333 (Bom) The Hon'ble Supreme Court in the case of Hindustan Steel Ltd (supra) observed that even when there is a technical or venial breach of the provisions of the Act or where the breach flows from the bonafide belief that offender is not liable to act in a manner prescribed by the Statute, the authority competent to impose penalty is justified in refusing to impose penalty. Similarly, in the case of CIT Vs Kotak Securities Ltd (supra), the Hon'ble court has held that where the revenue has accepted the business expenditure in the past 10 years, the n failure to deduct tax at source in the 11th year is not a ground for disallowing the said payment. In the case of the assessee the payment of ground rent to MMRDS has been accepted by the revenue in the earlier and succeeding years, so in the present case the assessing officer can not made disallowance u/s 40(a)(ia) of the Act and consequently no penalty u/s 271C can be imposed.
10 ITA No.3776/M/2017M/s. Mature Trading And Investment Ltd.
14. In result the appeal of the assessee is allowed.
Order pronounced in the open court on 19.02.2019.
Sd/- Sd/-
(Ram Lal Negi) (Rajesh Kumar)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 19.02.2019.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.