TMI Blog2010 (12) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... ctible or collectible. Regarding penalty u/s 271C - Even though it is not disputed that levy of penalty is not automatic but where a cause is shown which results in making the entire provisions of deduction of tax redundant, and would create a precedence for enabling the payers not to deduct taxes cannot be said to be satisfactory. An explanation for default is highly individualistic should confine to the facts and circumstances of that case and should be seen as satisfactory only in the factual matrix of that case. It is an explanation in personem not an explanation in rem. Any explanation in rem like in the present case and which has very wide repercussion against statutory scheme cannot be accepted as satisfactory. - ITA NOS.1946 & 1947/AHD/2010 - - - Dated:- 10-12-2010 - MAHAVIR SINGH JUDICIAL MEMBER J, D.C. AGRAWAL ACCOUNTANT MEMBER J, Appellant by :- Shri Sakar Sharma, AR Respondent by:- Smt . Shailaja Rai, DR ORDER Per D.C. Agrawal, Accountant Member. These are two appeals filed by the assessee against the orders of ld. CIT(A) dated 2.2.2010 for Asst. Years 2003-04 2004-05 wherein the ld. CIT(A) has confirmed the levy of penalty under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Returns for both the years, under review. The details and supporting documents are attached herewith. In view of this, there is no loss to the Revenue. The company has started deducting tax at source from Director s remuneration from 1.4.2004. The AO did not accept the above explanation on the ground that if above explanation is accepted then there will not be any meaning of TDS provisions under section 192B of the Act. He thereafter levied the penalty under section 271C as above. 3. Before ld. CIT(A) it was submitted that directors had paid advance-tax on the remuneration so received as under :-Asst. Year 2003-04: Date of payment Director/remuneration Tax payable Tax paid Tax paid 30.4.2003 1,00,000 29,951 31.5.2003 1,00,000 29,951 30.6.2003 1,00,000 29,951 31.7.2003 1,00,000 29,951 31.8.2003 1,00,000 29,951 30.9.2003 1,00,000 29,951 31.10.2003 1,00,000 29,951 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not deduct the amount of tax the penalty is imposed unless he shows reasonable cause for non-deduction. A letter from the recipient that the payer may not deduct the tax because the recipient intends to pay the tax on the income in future cannot be considered as a reasonable cause. It must be noted that it is not a case where the recipient has paid the tax and then has approached the payer of the amount. The recipient has merely shown his intention and filed a letter stating that he will pay the tax in future on the amount already received and due for deduction. In the present case, the recipient has paid the tax subsequently but it does not alter the situation that the payer had not fulfilled the responsibility cast upon by the Act at the time of payment, let us consider a hypothetical situation where the recipient might not have paid the tax in future after filing such a letter. Can we say that in that situation provisions of section 271C would apply? The answer would be yes because merely filing a letter from the recipient would not be enough for ignoring the provisions of Chapt. XVII-B. In that case, the whole provisions of Chapt. XVII-B would become redundant. The thrust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the directors that they will pay the advance-tax. (5) Advance taxes have been paid by the directors on due date. They have made the compliance and, therefore, no penalty should be levied. 5. The ld. AR referred to several judgments as under :- Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), Wipro GE Medical Systems Ltd. v. ITO [2005] 3 SOT 627 (Bang.), Wipro Finance Ltd. v. ITO [2003] 81 TTJ (Bang.) 887 6. On the other hand, the ld. DR supported the orders of ld. CIT(A) and submitted that if on the basis of letter received from the payees if TDS is not deducted and there is no controlling mechanism whether the recipients of remuneration are paying taxes then provisions relating to deducting tax would become redundant. If the statute has provided that tax has to be deducted on remuneration paid then the payer has to deduct the tax and it cannot be substituted by payee making payment of advance tax. A reasonable explanation is the one, according to the ld. DR, where assessee has all the intention to comply with the law but because of circumstances beyond his control, he could not do so. Further the directors and the company are closely con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable. The words used in this provision is deductible or collectible, it does not use the word deducted or collected. In other words the tax deductible at source or collectible at source can be reduced by the assessee from the tax liability payable during F.Y. Thus if tax is not deducted or not collected by the payer then still assessee has a right to claim the deduction of the TDS deductible or collectible. Therefore even where tax is not deducted at source the payee can still, since get away from paying the same as advance tax as there is no liability to pay that tax as advance tax, which is deductible or collectible at source. Once the mechanism is provided in the statute then such mechanism cannot be brought to naught by filing a letter by the payee that he will pay advance tax and, therefore, no TDS has to be made on the payment. In our considered view this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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