TMI Blog2015 (12) TMI 1537X X X X Extracts X X X X X X X X Extracts X X X X ..... no penalty shall be leviable in cases where reasonable cause for the default committed has been demonstrated, the penalty levied u/s 271C is liable to be deleted. - Decided in favour of assessee - ITA Nos. 38 To 41/Chd/2015 - - - Dated:- 10-12-2015 - SHRI H.L. KARWA, HON BLE VICE PRESIDENT AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER For the Appellant : Sh. Ashwani Kumar For the Respondent : Sh. Manj i t Singh ORDER PER ANNAPURNA MEHROTRA A.M. These four appeals have been filed by the assessee against the order of CIT(A), Shimla, Himachal Pradesh, dated 29-10-2014 in each case, for Assessment year 2007-08 to 2010-11 upholding the levy of penalty u/s 271C of the Income Tax Act, 1961. 2. Brief facts of the case are that the assesee is a company incorporated under the Electricity Act, and engaged in generation, transmission and distribution of power in the state of Himachal Pradesh. The assessee is engaged in purchasing / selling power from / PGCIL and is also selling power to consumers. Power is transmitted through transmission network of PGCIL and the assessee makes payment on account of wheeling charges, SLDC, Transmission charges to the payee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT 293 ITR 226 holding that the assessee may not be liable u/s 201(1) 201(1A). However complete reading of judgment reveals that Hon ble Apex Court in this case has endorsed the provisions of section 271C with a view that section 201 deals with the tax demand on behalf of deductee whereas the failure to deduct is liable to be penalized u/s 271C independently. 5.3 Assessee placed reliance on Good Health Plan Limited ITA No. 155/Hyd/2013 of ITAT Hyderabad in this respect the judgment is not from jurisdictional tribunal and the facts of the case are different from the facts of the assessee s case. Moreover it is pointed out that Chapter XVII-B starts from section 192 to section 206CA. Mere non violation of Section 201 does not exonerate the assesse as deductor to deduct tax within the specific provisions of section 192,194,194A etc. Failure to deduct tax invokes two types of sections one section like 201, where assessee deductor is treated as assessee in default on behalf of tax liability of deductee and second penal provisions such as section 271C wherein failure to deduct tax is liable for penalty independently. Thus the interlinking of two sections 201 271C is violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission(CERC), and as per clause 7 of the Regulation of CERC, tax on incomes of generating companies or transmission licenses was to be computed as an expense and recovered from beneficiary. Ld. AR stated that in view of the same PGCIL had collected all due taxes from the assessee in the various bills raised on it for the relevant assessment years. Therefore Ld. AR stated that the assessee was under the bonafide belief that since it has already paid taxes to PGCIL any further tax deduction at source would only amount to double taxation, and therefore did not deduct tax at source. Ld. AR stated that since there was a reasonable cause for not deduction TDS, penalty u/s 271C was not leviable in view of the provision of section 273B of the Act. 7. Ld. DR on the other hand relied upon the order of the Ld.CIT(A) and stated that there was neither any reasonable cause with the assessee for not deducting tax at source nor did the fact that the assessee was not treated as an assessee in default as per section 201 of the Act, help the assessees case since the two were separate provisions and could not be interlinked and hence penalty u/s 271C was rightly levied. 8. We have heard the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person responsible shall be treated as an assessee in default. The first proviso to section 201 states that if returns have been filed by the recipient of income and he has computed tax liability and has paid the tax, the payer referred to under section 201 of the Act shall not be treated as assessee in default, meaning thereby that the payer would not be liable for payment of tax or deduction of tax. This view has been upheld by the Hon ble Karnataka High Court in the case of Remco (Bhel) House Building Co-operative Society Ltd. Vs. ITO (2015) 273 CTR 0057 (Kar) wherein it was held at para 30 of its order: As per Section 201 if returns has been filed by the recipient and he has computed tax liability and/or has paid the tax, the payer referred to under Section 201 of the Act was not liable for payment of tax or to deduct. 11. In the present case, we find that the assessee has not been treated as an assessee in default as per section 201 of the Act and is therefore neither liable to deduct nor pay any tax as per Chapter XVII B. In such circumstances, we find that the question of levy of penalty u/s 271C, does not arise. This view has been upheld by the Hon ble ITAT Hyderabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if it is found to be frivolous, without substance or foundation, the prescribed consequence follow . In view of the same we find no merit in the contention of the Ld. DR that the assessee had no reasonable cause for not deducting tax at source. Further we hold that in lieu of the provisions of section 273B which states that no penalty shall be leviable in cases where reasonable cause for the default committed has been demonstrated, the penalty levied u/s 271C is liable to be deleted. The Hon ble apex court in the case of CIT Vs. Eli Lilly Co. Pvt. Ltd. 312 ITR 225 has upheld this view while dealing with the scope of Section 271C read with Section 273B as follows: 35. Section 271C inter alia states that if any person fails to deduct the whole or any part of the tax as required by the provisions of Chapter XVII-B 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. In these cases we are concerned with Section 271C(1)(a). Thus Section 271C(1)(a) makes it clear that the penalty leviable shall be equal to the amount of tax which such person failed to deduct. We cannot hold this provision to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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