Income Tax Appellate Tribunal - Chandigarh
M/S Chandigarh Overseas Private ... vs Addl. Cit(Tds), Chandigarh on 28 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA Nos.502, 503 & 504/Chd/2017
(Assessment Years : 2005-06, 2007-08 & 2008-09)
Chandigarh Overseas Private Limited, Vs. The Addl.CIT(TDS),
SCO 196-97, Sector 34-A, Chandigarh.
Chandigarh.
P A N : AAACCC3609C
(Appellant) (Respondent)
Appellant by : Shri Ajay Jain
Respondent by : Smt.Chander Kanta, CIT DR
Date of hearing : 11.09.2017
Date of Pronouncement : 28. 09.2017
ORDER
PER ANNAPURNA GUPTA, A.M.:
Th e s e t h r e e a p pe a l s h av e be e n p r e f e r r e d b y t h e s a me a s s e s s e e a g ai n s t t h e c o n s o l i d a t ed o r d e r o f L d . CI T( A p p e a l s ) , C h a n d i g a rh d a t ed 2 7 . 9 . 2 0 1 2 re l a t i n g t o a s s es sm e n t y e a r s 2 0 0 5 - 0 6 , 2 0 0 7 - 08 a n d 2 0 08 - 0 9 .
2. S i n c e th e i ss u e i n v o l ve d i n a l l t h e th r e e a p p ea l s i s i d e n t i c a l , t h e y we r e h e a r d t o g et he r a n d a r e b e i n g d i s p o s e d o f f b y th i s c om mo n o r d e r .
3. Th e o n l y i s s u e i n v o l v e d i n t h e ab o v e a p p e a l s r e la t e s t o l e v y o f p e n a l t y u / s 2 7 1 C o f t h e I n c o m e Ta x A c t , 1 9 6 1 ( i n s h o r t ' t h e Ac t ' ) a n d t h e f a c ts l ea d i n g t o t h e sam e a r e t h a t TD S i n s p e c t i o n /s u r v e y w as c a r r i e d o u t i n t h i s ca s e d u r i ng t h e c o u r s e o f wh i c h i t w a s f o un d t h a t d e d u c t or h a d n o t deposited TD S into G o v e r nm e n t a c c o u nt during the f i n a n c i a l y e a r s 20 0 4 - 0 5 , 20 0 6 - 0 7 a n d 2 0 0 7- 0 8 a s u n d e r : 2
F i n a n c i a l y e a r 20 0 4 - 0 5 R s . 1 5 , 8 6 8/ -
F i n a n c i a l y e a r 20 0 6 - 0 7 R s . 4 2 , 1 9 ,8 0 3 / -
F i n a n c i a l y e a r 20 0 7 - 0 8 R s . 3 2 , 1 2 ,5 6 6 / -
4. Th e A s s e s s i n g O f f i c e r pa s s e d o r d e r u / s 2 0 1 ( 1) a nd 2 0 1 ( 1 A ) o f t h e A c t f o r a l l t h e se y e a r s a n d re fe r r e d t h e m a t t e r t o th e A CI T f o r i m p os i t i o n o f pe n a l t y u / s 27 1 C o f t he Act. Th e t a x d e m a n d r a i s e d u /s 2 0 1 ( 1 ) w a s e nh a n c e d b y t h e L d . CI T( A p p ea l s ) t o R s . 6 8 , 02 , 8 5 1 / - f o r f i na n c i a l y e ar 2 0 0 6 - 0 7 a nd Rs . 4 2 , 4 5 , 06 9 / - f or f i n a n c i al y e a r 2 0 0 7 - 0 8. Th e r e a f t e r s h o w c a u s e n o ti c e w a s i s s u e d t o t h e a ss e s s e e f or l e v y o f p e n a l t y u / s 2 7 1 C o f t h e A c t , i n r e s p o n se t o w h i ch t h e a s s e s s e e s u bm i t t e d t h a t n o pe n a l t y w a s l e v i ab l e s i n c e i t h a s d e p o s i te d a l l TD S a l o n g w i t h i n t e r e s t a nd f u r th e r h a d a r e a s o n a b l e c a u se f o r n ot d e po s i t i n g t h e TD S d ue t o n o n- a v a i l a b i l i t y o f fu n d s s i n c e t he p r o j e c t s u nd e r t ak e n b y i t w e r e s t o pp e d i n b e t w e e n . Th e A s s e s s i n g O f f i cer r e j e c t ed b o t h t he c o nt e n ti o n s o f t h e a s s es s e e h ol d i n g t h at t h e TD S w a s d e p o s i t e d a ft e r s u r v e y an d , th e r e f o r e , l e v y o f p e n a l t y i s n o t p r ec l u d e d an d f u r th e r th a t r e a s o na b l e c a us e o f n o n - a v a i l a b i l i t y o f fu n d s i s n o t a c ce p t a b l e s i n c e t he a s s e ss ee h a s d e d uc t e d t a x e s a t s o u r ce on t h e p a y m e nt s m a d e b u t h a d n o t d e p o s i te d t h e s a m e i n to t h e G o v e r n m en t a c c o u n t. Th e A s s e s s i n g O f f i c e r , t h e re f o r e , l e v i e d p e n a l t y u / s 2 7 1 C for not d e p o s i ti n g the tax d ed u c t e d at s o u rc e in the G o v e r n m e nt a c co u n t f o r t h e i mp u g n e d ye a r s am o u n t i n g a s under:
Financial Year P e n a l t y U/ s 2 7 1( 1 ) ( c ) 2004-05 R s . 2 5 , 2 5 0/ -
2006-07 R s . 6 8 , 0 2 ,8 5 1 / -
3
2007-08 R s . 4 2 , 4 5 ,0 6 7 / -
5. A g g r i e v e d b y t he s a m e , t he a s s ess e e f i l e d a p p e al b e f o r e t h e L d .CI T( A p p ea l s ) w ho u p h el d t h e or d e r o f t he A s s e s si n g Officer.
6. Aggrieved by t he order of the L d . CI T( A p p e a l s) , the a s s e s s e e h a s no w c o m e u p i n a p p e a l b ef o r e u s r a i s i ng f o l l o w i ng g r o u nds f o r A . Y 0 5 - 0 6:
"1. That the Id Commissioner of Income Tax (appeal) has wrongly upheld the penalty amounting to Rs 15868/- under section 271C levied by Assessing officer on the ground that TDS has been deducted by appellant but not deposited in to Government Account & Id CIT(A) failed to appreciate the fact the penalty under section 271C can be levied only in case when the assessee failed to deduct TDS as required by or under the provisions of Chapter XVIIB of Act..
2. That the provisions of Section 271C are not applicable in case of appellant case as appellant had deducted TOS as per provisions of Act but not deposited in to Government Account & therefore the orders passed by Addl. CIT(TDS) & CIT(A) Chandigarh are bad in law & deserves to be quashed .
3. That the appellant craves leave to add, amend, alter or withdrawn any ground of appeal before final hearing."
I d en t i c a l g r o u n ds w e r e r a i se d f or t h e o t h e r t w o y e a r s a l s o i . e. a s s es s me n t y e a r s 2 0 0 7 -08 & 2 0 0 8 -0 9 .
7. B e f o r e u s, L d . co u n s e l f or t h e as s e s s e e co n t e s ted t h e o r d e r o f t h e L d. CI T( A p p e a l s ) o n t he f o l l o wi n g g ro u nd s :
1) A s p e r s e c t i o n 2 7 1 C p e n a l t y i s l e v i a b l e o nl y f or non d e d u c ti o n of tax at s o u rc e and not for non p a y m e n t o f t a x d e d u c t e d a t so u r c e . Since in the present c a se th e default of the a s s e s s ee is non 4 p a y m e n t o f t a x d e d u c t ed a t s ou r c e , n o p e n a l t y u / s 2 7 1 C o f t h e A c t i s l e v i a bl e .
Ld. counsel f or assessee also argued that wi t h o u t prejudice to t he above c o n t ent i o n no penalty was l e v i a b l e f o r t h e fo l l o w i n g r e a s o ns a l s o :
i) Th e e n t i r e TD S a l o n g w i t h i nt e r es t h a d b e e n d e p o s i t e d by t he a s s e s s e e be f o re p a s s i n g o f t h e p e n a l t y or d e r .
ii) Th e r e was reasonable c au s e with the a s s e s s e e f o r n o n d e d u c t i n g t h e TD S a s e x p l a i n ed to the lower authorities si n c e the p r o jec t u n d e r t a k en b y i t w a s s t o p pe d i n b e t w ee n d ue to n o n a v a i l a b i l i t y o f f u n d s a n d , t he r e f o r e , a s s o on as the f un d s ar e a v a i l ab l e t he TD S has been d e p o s i t e d.
iii) Th e r e w a s n o r eve n u e l o s s.
Th e L d . c o u n s e l f o r t h e a s s e s s ee f u r t h e r s t a t e d a that c o ns e q u e n ce s for non d epo s i t i n g the ta x deducted at s ou r c e provided by Statute was p r o s e c u t i o n a s p e r p r o v i s i o ns o f s e c t i o n 2 7 6 B of t h e A c t w h i c h t he L d . c o u n s e l f or a s s e s s e e s t a te d a t B a r h a d b e e n c o m m e n ce d o n t h e d i r ec t o r s o f t h e a s s e ss e e c omp a n y .5
Th e L d . c o u n s e l f o r a s s e s s e e s t at e d t h a t i n v i e w o f t h e a b o v e, p en a l t y l e v i e d i n th e p r e se n t ca s e o u g h t t o b e d e l e te d .
8. Th e L d . D R , on th e o t h e r h a n d , su p p o r t e d t h e or de r s o f t h e L d . CI T( A p p eal s ) a n d t h e A s se ss i n g O f fi c e r .
9. W e h a v e h e a r d t h e c o n t e n ti o n s o f b o t h t h e p ar t i e s. U n d i s p u t ed l y , i n t h e p r es e n t ca se , p e n a l t y u / s 27 1 C o f th e A c t h a s b e e n l e vi e d for the failure to deposit tax deducted a t s o u r c e i n t he i m p u g n e d y e a r s .
10. W e a r e i n a g r e em e n t w i t h th e co n t e n t i o n o f t h e L d. c o u n s e l fo r t h e a s s e s s e e t h a t pe n a l t y u /s 2 7 1 C o f t h e A c t i s l e v i a b l e o n l y f o r t h e d e f a u l t of n o n d e d u c t i o n o f t a x at source. A b a r e r e a d i n g of s e c ti on 2 7 1 C o f t h e Ac t b r i n g s t h i s o ut c l e a r l y. F o r t h e s a k e of c l a r i t y S e c t i on 2 7 1 C i s r e p r o d u c ed h e r eu n d e r :
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.6
11. I t i s c l ea r f r o m t h e s e c t i o n i t se l f t h a t t h e r e ar e t w o s e p a r a t e t y p e o f d e f a u l t s f o r w h i ch p e n a l t y i s l e v ia b l e u n der t h e s a i d s e c t i on ;
i ) f o r f a i l ur e t o de d u c t w h o l l y o r p a r t l y t a x a t so ur c e a s p r o v i d e d u n d e r Ch a p t e r - X VI I - B of t h e A c t ; i i ) f o r n o n p a y m en t o f t a x a s r e q ui r e d u / s 1 1 5 - O or t h e 2 n d pr o v i s o t o s ec t i o n 1 9 4B o f the A c t .
12. V i s a vi s p a y m en t s l i a bl e t o t a x d e d u c t i o n a t so u r c e u n d e r c h a p t er X V I I - B , e x c ep t i n g t h e p a y m e n t c o ve r e d b y t he second proviso to section 1 94 B , the default attracting p e n a l t y u/ s 2 7 1C i s o n l y n o n - ded u c t i o n of t a x a t s o u r c e .
13. Th e d e f a u l t o f n o n p a y m e n t o f ta x d e d u c t e d a t so u r ce to the credit of c e n t ra l go v e rn m e n t ta n t a m ou n t s to an o f f e n c e l i a bl e t o p r o s e c u t i o n u /s 2 7 6 B o f t h e A c t . S e c t i on 2 7 6 B , f a l l i n g u nd e r c h a p t e r X XII o f t he A c t , d ea l i n g w i t h O f f e n c e s a n d P ros e c u t i o n s, c l e ar l y s t a t e s s o a s un d e r :
276B. If a person fails to pay to the credit of the Central Government,--
(a) the tax deducted at source by him as required by or under the provisions of Chapter XVII-B; or
(b) the tax payable by him, as required by or under--
(i) sub-section (2) of section 115-O; or
(ii) the second proviso to section 194B, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.
14. Even the CB D T Circular N o .5 5 1 dated 2 3 .1 . 1 9 9 0 c o n t a i n i ng t h e e x p l a n a t o r y n o t e s o n t h e p r o v i s i on o f D i r e c t Ta x L a w s ( A m e nd m e n t A c t) 1 9 8 7, b y v i r tu e o f whi c h s e c t i o n 7 271C, was a m en d e d , states at para 16.5 that s e p a r a te c o n s e q u e nc e s ha v e b e en e n vi s ag e d b y t h e L e g i s l a t u r e f or t w o d e f a u l ts v i s- à - v i s TD S i . e . n o n d e d u c t i on o f t a x a t s o u r c e a nd n o n p a y m e n t of t h e ta x a t s o ur c e a nd w h i l e fi r s t d e f a u l t a t t ra c t s p e n a l t y u / s 2 7 1C o f t h e A c t , t h e s e c o n d d e f a u l t at t r a c ts p r o s e c u ti o n u /s 2 7 6 B o f th e A c t . Th e r e l e v a n t p o r t i on o f t h e Ci r c u l ar i s a s u n d e r:
"16.5 Insertion of a new section 271C to provide for levy of penalty for failure to deduct tax at source--Under the old provisions of Chapter XXI of the Income-tax Act no penalty was provided for failure to deduct tax at source. This default, however, attracted prosecution under the provisions of section 276B, which prescribed punishment for failure to deduct tax at source or after deducting, failure to pay the same to the Govt. It was decided that the first part of the default, i.e., failure to deduct tax at source should be made liable to levy of penalty, while the second part of the default, i.e., failure to pay the tax deducted at source to the Govt., which is a more serious offence, should continue to attract prosecution. The Amending Act, 1987 has accordingly inserted a new section 271C to provide for imposition of penalty on any person who fails to deduct tax at source as required under the provisions of Chapter XVIIB of the Act. The penalty is of a sum equal to the amount of tax which should have been deducted at source."
15. I t i s a mp l y c l e a r f r o m t he a b o v e t h a t t h e p e n a lt y u / s 2 7 1 C o f t h e A ct i s l e v i a b l e o nl y f o r t h e d e fau l t o f n o n d e d u c t i o n o f t a x a t s ou r c e , p r o v i d e d t h e t a x d o e s n o t re l a te t o t h a t u/ s 1 1 5 -O o r t h e p a y m e nt i s n o t c o v e r e d u n d e r t h e s e c o n d p ro v i s o to s e c t i o n 1 9 4 B o f t h e A ct . S i nc e i n t h e p r e s e n t ca s e t he d e f a u l t o f t he a s s e s s e e i s n o n d e p o s i t of t h e t a x d e d u c te d a t s o u r c e w h i c h i s n e i t h e r v i s -à -v i s t a x a s l e v i e d u /s 1 1 5 -O o f t h e A c t on d i s t r i b u te d p r of i t s n o r ha s b e e n d e d u ct e d un d e r s e c o nd p r ov i s o t o s e ct i o n 19 4 B w h i ch deals w i th TD S on w i n n i ng s fr o m l o t t er y or crossword 8 p u z z l e s ,t h e p r ov i s i o n s of s e c t i on 2 7 1 C o f t h e Ac t , w e h o l d a r e n o t at t r a c te d i n t h e pr e s e n t ca s e a t a l l .
F o r t h e a b o v e r e a s o n al o n e , we d e l e t e t h e p en a l t y l e v i e d u /s 2 7 1 C o f t h e A ct f o r t h e t h r e e y ea r s .
M o r e o v e r si n c e w e h a v e d e l et e d t h e p e n a l t y l e v i ed u / s 2 7 1 C f o r t he a b ov e r e a s o n , w e d o n o t c o n s i de r i t n e c e s s a r y t o d e a l wi t h t h e o t h e r c o nt e n t i o n r a i s e d b y t h e Ld . c o u n s el f o r a s s e ss e e s i n ce t h e y w ou l d m ere l y b e a ca d e m i c i n n a t u r e .
16. I n v i e w o f t h e a b o v e , a l l t h e th r e e a p p e a l s o f t h e a s s e s s e e , t h e r ef or e , s t a n d a l l o w e d.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 28 t h September, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh