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8. On the other hand, the learned AR drew our attention to the order passed by the Assessing Officer u/s 201(1) and 201(1A) of the Act, 1961 dated 11-11-2009 at the conclusion para specifically held as follows:-

"Thus, the assessee is not treated as assessee in default for the purpose of section 201(1) of the Act"

9. The Assessing Officer placing reliance on the judgement of Hon'ble Supreme Court in the case of Hindustan Coco Cola Beverage Pvt. Ltd. vs. CIT (163 Taxman 365) wherein it was observed that the assessee is liable to deduct tax u/s 201(1A) which is mandatory in nature and treated the assessee as 'assessee in default' in respect of TDS amount liable for deduction. According to the learned AR until and unless the assessee is treated as assessee in default, 271C penalty cannot be levied. Further, he submitted that section 271C penalty for default in deducting tax should be levied, a sum equal to the amount of tax with such person failed to deduct TDS. According to the learned AR the assessee was not treated as a defaulter in respect of deduction of TDS itself. Being so, there is no scope for levying any penalty u/s 271C of the Act for not deducting TDS. Further, he submitted that the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (293 ITR 226) wherein it was held that the assessee cannot be treated as defaulter if the recipient of the income has already paid tax on such income and there was no issue M/s Good Health Plan Limited ======================== for consideration before Hon'ble Supreme Court with regard to levy of penalty u/s 271C of the Act. In the instant case, the Assessing Officer did not treat the assessee as the assessee in default so far as section 201(1) of the Act is concerned. Penalty u/s 271C is only consequential in nature for the default committed u/s 201(1) of the Act. Being so, it is reasonable to interpret the provisions of section 271C of the Act, then no penalty could be levied on the assessee. He submitted that when the assessee is in default for failure to deduct or pay tax at source, naturally, there cannot any question of imposing penalty u/s 271C for the reason that the very basis of such penalty is the amount of tax which such person failed to deduct or pay as per law and when there is no such amount in existence, the possibility of imposing penalty will automatically be ruled out. The Assessing Officer relied upon Circular No. 8 of 24-11-2009 which reads as under:-

6. The matter went for consideration of various Hon'ble High Courts. The Hon'ble High Courts rendered decisions in favour of revenue. All those decisions were rendered in 2010 and subsequently.

7. The Hon'ble High Courts struck down a part of the circular 8/2009 and held that the assessing officer was only the competent person to judge whether the assessee was liable for penalty u/s. 271C of the IT Act.

8. In the assessee's case order u/s. 201(1) & 201(lA) was passed for the asst. year 2008-09 and a specific observation was recorded by the assessing officer regarding initiation of penalty proceedings u/s. 271C of the IT Act. Notices u/s. 271C of the IT Act dated 06.03.2009 and 31.03.2010 calling for explanation of the assessee.

11 In the order the assessing officer did not mention anything with regard to penalty proceedings u/s. 271C of the IT Act. Thus the AO did not record any satisfaction with regard to initiation of penalty proceedings u/s. 271C of the IT Act.

12 However, the Addl. CIT in the penalty order u/s. 271C of the IT Act dated 29.9.2011 observed that the assessing officer had proposed for initiation of penalty proceedings u/s. 271C of the IT Act but the order u/s 201 & 201(lA) does not lend support for such assertion in the absence of any such recording.

15 The Addl. CIT, Range 15, Hyderabad issued show cause notice u/s. 271C of the IT Act on 21.03.2011.

16 The Add!. CIT, Range 15, Hyderabad passed order u/s. 271C of the IT Act on 29.09.2011.

17 In view of section 275(1)(C) of the IT Act the show cause notice issued on 21.03.2011 u/s. 271C is barred by limitation.

18 In view of detailed submissions made the order M/s Good Health Plan Limited ======================== passed u/s. 271C of the IT Act is invalid.