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ITA no. 4045/Del/2009 [U/s 271C]:

That the learned Commissioner (Appeals) erred on facts and in law in confirming the penalty amounting to Rs. 39,92,201/- imposed on the appellant by the Addl. Commissioner of Income Tax under section 271C of the I.T. Act, 1961.

2. ITA no. 4044/Del/09 is against the demand raised by treating the assessee in default u/s 201(1)/201(1A) of the I.T. Act and ITA no. 4045/Del/09 is consequent penalty u/s 271C of the I.T. Act. It shall be pertinent to note that appeal no. 4044/Del/09 is barred by limitation by 1562 days. The assessee has filed an application for condonation of delay in filing this appeal. ITA no. 4045/Del/09 has been filed in time.

5. From the facts discussed above, it is evidently clear that the person responsible has deducted tax short by Rs. 39,92,201/- which was required to be deducted by him under the provisions of Sec. 194A and thus has rendered himself liable for imposition of penalty u/s 271C of the I.T. Act, 1961. Penalty imposable under Sec. 271C is the sum equal to the amount of tax which the person responsible has failed to deduct. Since in this case, amount of tax deducted short is Rs. 39,92,201/-, penalty of Rs. 39,92,201/- (Rupees Thirty Nine lacs ninety two thousand two hundred and one only) is hereby imposed under Sec. 271C of the I.T. Act, 1961."

05. In consequence of the order of the ld. CIT(A)-I, Dehradun, the default for short deduction of tax at source u/s 194A of the Act becomes clearly established and the penalty is exigible u/s 271C of the IT Act, in absence of any plausible explanation for the same. Therefore, I uphold the action of the Assessing Officer in levying penalty u/s 271C of the IT Act to the tune of Rs. 39,92,2101/- and no interference is called for in this respect."

3. Aggrieved, assessee is before us. As mentioned above, ITA no. 4044/Del/2009 i.e. in respect of proceedings u/s 201(1)/201(1A) is filed late by 1562 days. Learned counsel for the assessee drew our attention to the detailed condonation application and affidavit filed in this respect. It is argued that the contract given to M/s Harish Chandra & Co. was awarded under the regime of undivided state of U.P. i.e. when the districts of Uttrakhand state were part of U.P. The irrigation project was known as Khara project of U.P. State Irrigation Department. The dispute arose with said M/s Harish Chandra & Co. and erstwhile Executive Engineer, Yamuna Link Channel Construction Division, Saharanpur. The dispute ensued about the implementation of terms of contract, which went right up to the Supreme Court. In the meanwhile the state of U.P. was bifurcated and the part of Khara project record pertaining to Uttrakhand was transferred to Dehradun.

3.1. It shall be pertinent to observe that the original default is not committed by the incumbent in question but by the erstwhile Executive Engineer, Saharanpur of undivided U.P. The partition of U.P. took place under tumultuouscircumstances and the concerned record was belatedly transferred from Saharanpur to Dehraun, which took its own time. The assessee could become aware of the CIT(A)'s order u/s 201(1)/ 201(1A) only when the penalty order u/s 271C was passed. This is a unique situation when the part of record was transferred from one state agency to reorganized other state agency i.e. irrigation department. It was not only TDS record but copious work of project also were transferred. It was humanly not possible to track each issue and look unforeseen time to streamline the affairs. Only when the penalty order u/s 271C was passed, the assessee became aware that three was an ex parte order of CIT(A) in respect of TDS liability u/s 201(1)/201(1A).