9911796707
TMI Blog2012 (8) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... a Jaya, Indonesia. To replace the Company in place of NHAI, a Novatio Agreement dated 7th August, 2002 was entered into among the assessee company, NHAI and M/s. P.T. Sumber Mitra Jaya. By virtue of this agreement, the assessee (AVEXCL) becomes the principal of P.T. Sumber Mitra Jaya for the said contract. During the implementation of the contract, the assessee company had received the certificate from P.T. Sumber Mitra Jaya, for lower deduction of tax from the payments to be made to it under the above mentioned contract. The DCIT (International Taxation), Chennai, being Assessing Officer of the contractor Company, issued certificate dated 07-06-2002 for "Nil " deduction of tax at source u/s 194C(4) of the IT Act. This certificate was valid till 31-03-2003. This was second such certificate issued by the AO. A similar certificate on 24-01-2001 was issued by the AO of the Contractor Company and which was valid for the period ending on 31-03-2002. The above stated certificates were addressed to the Project Implementation Unit, Ahmedabad of NHAI for all the payments to be made under the contract dated 11-07-2000. Further, the concerned AO - the DICT (International Taxation), Chennai co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11). While applying the said ratio, the Ld. CIT(A) has failed to take into account the fact that tax and interest were already paid by the assessee. (iv)The fact that DDIT (Intl. Taxn.), Chennai had issued the certificate proves that the Contractor Company is a Non-Resident and the assessee should not be penalized for the mistake of the revenue. (v) Finally, the assessee has argued that an appeal is pending before the ITAT, Ahmedabad and therefore, the penalty should be kept in abeyance. After considering the aforesaid submission, the JCIT (International Taxation), vide order dated 26-03-2008, levied penalty u/s 271 C of Rs.3,52,96,067/-, being 100% of shortfall of deduction of the following 4 items: Date of Payment Amount paid (Rs.) 18-04-2002 10501825 03-05-2002 30078105 18-05-2002 13407259 31-03-2003 19076613 3. In appeal against the penalty order under section 271C before the learned CIT(A), the assessee contended that it received 'Nil deduction certificate' issued by DDIT (International Taxation), Chennai being the Assessing Officer of the Contractor Company and the certificate was dated 07-06-2002. Further, the assessee company obtained confirmation letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of section 273B of the I.T. Act in deducting the tax under section 194C of the I.T. Act. With regard to confirmation of penalty u/s 271C of the IT Act in respect of two payments made in the month of May, 2002, the learned Counsel for the assessee pointed out that there was reasonable cause within the meaning of Section 273 B of the IT Act for deducting the tax @ 2%. For reasonable cause, the learned Counsel for the assessee pointed out that majority of the payment prior to the date "Nil" certificate was issued i.e. prior to 07-02-2002. On this basis, the assessee was not required to deduct the TDS. As a matter of fact, the assessee company has deducted tax on these payments made, till the date of certificate was received by it, @ 2% and thereafter relying on the Nil deduction certificate, it ceased to deduct tax. The learned Joint Director of Income Tax (International Taxation) has not considered the same major issues regarding the case which are as under: (a)The confirmation letter dated 12th July 2002 issued by Deputy Director of Income Tax (intl. Taxation), Chennai confirming that he himself has issued the said certificate and further the said Contractor Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein including s.271C, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. Therefore, in order to bring in application of s. 271C in the backdrop of s.273B, absence of reasonable cause, existence of which has to be established by the assesses, is the sine qua non. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. The cause shown has to be considered and only if it is found to be frivolous, without substance1, or foundation, the prescribed consequences follow. Above being the position, the Commissioner's non-consideration of the plea raised by the assessee about the existence of reasonable cause vitiated the order. On that score, the order parsed by the cit is not maintainable. "Reasonable cause" as applied to human ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to penalty if he is able to prove that there was a reasonable cause for failing to deduct the tax. The assessee in the present case had given an explanation which found favour with the Tribunal. We think that the view taken by the Tribunal is one that could have possibly been taken in the matter. It is not perverse as to warrant interference or which gives rise to a substantial question of law 7. Having heard both the sides we have carefully gone through the orders of the authorities below. In the month of April 2002 and May, 2002, no certificate u/s 194C(4) of the IT Act for deducting tax at 'Nil' or lower rate was available. In the assessment years 2000-01 and 2001-02, the DDIT (International Taxation), Chennai issued certificate under section 194C(4) of the I.T. Act, 1961 of 'Nil' tax deducted at source from the bill amount payable to the Contractor, namely, M/s. P.T. Sumber Mitra Jaya. The assessee, in these circumstances, keeping in view the certificate earlier issued u/s 194C (4) of the IT Act and clarification thereof issued by DDIT (International Taxation), Chennai, was of the bona fide belief that it was required to deduct TDS u/s 194C of the IT Act and not u/s 195 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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