Income Tax Appellate Tribunal - Chandigarh
Addl. Cit (Tds), Panchkula vs M/S Haryana State Counseling Society, ... on 21 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'A' CHANDIGARH
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND
DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA Nos. 1153 to 1155/Chd/2016
Assessment Years: 2008-09 to 2010-11
Addl. CI T(TDS) Vs. M/s Haryana State Counseling
Panchkula Society, Bay No. 7-12, Sector-4
Panchkula
PAN No. RTKH03001F
(Appellant) (Respondent)
Appellant By : Sh. Tej M ohan
Respondent By : Sm t. C. Chandrakanta
Date of hearing : 30/08/2017
Date of Pronouncement : 21/09/2017
ORDER
PER BENCH:
All the above appeals filed by the Revenue are directed against the common orders of Ld. CIT(A), Panchkula, dt. 31/08/2016 for Assessment years 2008-09, 2009-10 and 2010-11. Since the grounds raised and issues involved are identical therefore the appeals are being heard and disposed off by this common order for the sake of convenience.
2. The grounds of appeal and facts are referred from A.Y. 2008-09 and considered for adjudication which are identical for other Assessment Years 2009- 10 and 2010-11:
1. The CIT(A) erred by not discussing the provisions of section 275(l)(c) of the Act, but has only relied upon the case law of Subodh Kumar Bargava 309 ITR 31.
The facts and circumstances of Subodh Kumar Bargava 309 ITR 31 are distinguishable from the facts and circumstances of the instance case, the relied upon case was adjucated on section 271B and whereas, in the present case, the issue involved is levy of penalty u/s 271C of the IT Act. Further, the CIT(A) erred in holding that the case has been decided beyond time limit whereas as per the provision of Section 275(1)(c) of the IT Act, 1961, the case was decided well within the time limit as mentioned therein. The provisions of section 275(1)(c ) are read as below:
2"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."
In this case, penalty proceedings were initiated on 10.07.2014 and the order imposing penalty was passed on 11.03.2015, whereas as per the provision of section, the time limitation expires on 31.03.2015, therefore, the penalty order was passed well within time as provided u/s 275(1)(c ) of the Act..
2. The CIT(A) has erred in deleting the penalty u/s 271C by observing that the said payments were secret payments for conducting entrance tests, making and printing of question papers etc. In the penalty order, the JCIT has clearly established that the payments are not of secretive in nature as the order sanctioning advance payments with respect to the incurred expenditures was endorsed to four different authorities. It is also worthy to note that appellant has not taken the secretive nature of payments as ground for non deduction TDS before CIT(A) in appeal for quantum addition u/s 143(3) in Appeal No. 129/PKL/10-11.
The CIT(A) also relied on the judgment of the Hon'ble Supreme Court of India in Eli Lilly & Company(lndia) Pvt. Ltd.. The fact of the case relied upon are entirely different, where the judgment deals with tax deduction at source on the Home Salary/ special allowance(s) payment made by foreign Company/HO to its employees (expatriates to India ) outside India in foreign currency. The CIT(A) erred both in laws and facts.
3. Brief facts of the case are that during the course of assessment proceedings for the AY 2008-09 which were concluded on 27/12/2010, the ITO, Ward-3, Panchkula noted that no TDS was made by the assessee on the payment of Rs.3,34,92,686/- on various accounts as listed in the order and disallowance u/s 40(a)(ia) of Rs.3,34,92,686/- was made by the AO. The assessee preferred an appeal before the CIT(A). The CIT(A) vide order dated 19.12.2011 in Appeal No. 129/PKL/10-11 held that the appellant is liable to deduct TDS on payments made to National Informatics Centre (NIC) and Diploma Entrance Test expenses and printing brochure expenses as well as advertisement and publicity expenses of Rs.3,34,92,686/-. The CIT(A) deleted the disallowances u/s 40(a)(ia) with the observation that disallowance u/s 40(a)(ia) is not warranted in view of grant of exemption u/s 10(23C)(iv) to the assessee, however, the penalty proceedings may be initiated by CIT(TDS) for default in deduction of TDS.
4. The penalty proceedings u/s 271C was referred by the AO to the JCIT on 19.05.2014 for non deduction of TDS. A show cause notice u/s 271C r.w.s. 274 was issued by the JCIT-TDS on 10/07/2014 and the assessee filed a reply on 24/12/2014 and penalty order under section 271C was passed on 11/03/2015 levying penalty of Rs. 22,67,451/-.
35. During proceedings before the Ld. CIT(A), the appellant submitted that the appellant society was constituted with main objective to act as a single window agency for admissions/counseling in various technical institutions in diploma/UG/PG level programs. The return of the appellant was taken up for scrutiny during the AY 2008-09 and an addition of Rs.3,34,92,686/- was made vide order dated 27.12.2010 applying the provisions of Section 40a(ia) of the Act for non-deduction of taxes on the amounts mentioned in the submission. The appellant further submitted that no proceedings were initiated under section 271C by the Assessing officer in the assessment order. Further, no proceedings have been initiated under section 201/201(A) of the Act treating the assessee to be assessee in default. The Ld. CIT(A) deleted the addition made under section 40(a)(ia) vide order dated 19.12.2011. Later penalty proceeding u/s 271C of the Act was referred by the AO vide his letter dated 19.05.2014 to Addl.CIT(TDS) and thereafter show cause notice dated 10.07.2014 was issued by the Addl.CIT (TDS) Karnal and levied penalty on 11/03/2015.
6. The Ld. CIT(A) deleted the penalty levied invoking the judgments in the case of CIT vs. Satluj Jal Vidyut Nigal Ltd. 345 ITR 552 (H.P.), CIT Vs. U.B. Electronic Instruments Ltd. 371 ITR 314 (AP), M/s Jet Lite (India) Ltd 379 ITR 185 (Del.) and Subodh Kumar Bhargava 309 ITR 31 on the grounds that the penalty imposed on 11/03/2015 is beyond four years.
7. Aggrieved the Revenue preferred appeal before us.
8. The main contention of the Revenue was that the penalty proceedings were initiated on 10/07/2014 and the penalty order was passed on 11/03/2015 whereas the limitation expires on 31/03/2015 as per the provisions under section 275(1)(C) of the Income Tax Act. The Revenue further contended that the case of Subodh Kumar Bhargawa 309 Assessing Officer 31 was distinguishable in relation to Section 271(1)(c) , 271C and 271B as the case dealt with provisions under section 271B. Revenue has taken argument that the case of Eli Lilly and Company India Pvt. Ltd. is also not applicable to the appeal in question.
9. The Assessing Officer. AR relied on the order of the Assessing Officer. CIT(A).
410. We have gone through the material before us.
Particulars Date Remarks Date of Assessment under 27/12/2010 Assessing Officer neither section 143(3) initiated any action under section 271C nor satisfaction recorded Date of Order of CIT(A) 19/12/2011 Held, Assessee is liable for penalty under section 221 Reference to Addl. CIT-TDS by 19/05/2014 Assessing Officer Initiation of penalty 10/07/2014 Notice issued to Assessee proceedings 271C Date of passing of order 11/03/2015
11. The Ld. CIT(A) held that since there is no time period prescribed in the Act for initiating and imposition of penalty u/s 271C, the reasonable time period as has been held by various courts to be 4 years from the end of financial year in which the default occurred. In the instant case, the notice has been issued beyond the period of 4 years and as the same is time barred. The Ld. CIT(A) relied on various decisions in CIT vs. Satluj Jal Vidyut Nigal Ltd. 345 ITR 552 (H.P.), in CIT Vs. U.B. Electronic Instruments Ltd. 371 ITR 314 (AP), M/s Jet Lite (India) Ltd 379 ITR 185 (Del.) and in case of Subodh Kumar Bhargava 309 ITR 31 and CIT vs. Ikea Trading Hong Kong Limited 333 ITR 565 for determination of time limit. Thus the notice issued by the JCIT-TDS and the penalty order passed are barred by limitation.
12. Further, no order has been passed u/s 201(1) or 201(1A) and as such the assessee is not in default. Since the assessee is not in default, there is no question of levy of penalty u/s 271C especially when no such initiation/satisfaction has been recorded during the course of passing of order u/s 143(3). Thus, on all scores, no penalty is leviable. The Coordinate Bench of ITAT, in the case of H.P. State Electricity Board vs. Addl.CIT, 177 TTJ 18 (Chandigarh) held that penalty under section 271C is not leviable on an assessee who is not treated as an"
assessee in default" as per section 201 of the Act more so when there was a reasonable cause for not deducting tax on payment made by the assessee.
13. Pertaining to the Revenue's objection that the case of Eli Lilly and Company (India) Pvt. Ltd. is not applicable to the present case, we have gone through the ratio of that case and found that the Hon'ble Supreme Court has held that no penalty is leviable if the assessee proves that there was reasonable cause for the said failure. In the instant case the assessee has shown reasonable cause for non deduction of tax at source as the payments were made as secret 5 payment under Rule 35 of Appendix -15 of Punjab Financial Rules which can be taken as a default being technical and venial in nature.
14. Thus, owing to the levy of penalty under section 271 in the absence of order under section 201, delay in levying of penalty, and the assessee proving that there was reasonable cause for the failure, we decline to interfere in the order of the Ld. CIT(A)
15. In result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on
Sd/- Sd/-
(DIVA SINGH) (DR. B.R.R. KUMAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 21/09/2017
AG
Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR