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2015 (12) TMI 1537 - ITAT CHANDIGARH

2015 (12) TMI 1537 - ITAT CHANDIGARH - TMI - Levy of penalty u/s 271C - non deducting the tax at source - assessee treated as 'assessee in default' - Held that:- 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 in the case of ACIT Vs. M/s Good .....

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d. 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. - 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 .....

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tribution 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 company i.e. PGCIL. TDS inspection / survey u/s 133A of the Income Tax Act was conducted at the business premises of the assessee on 11-02-2009, during the course of which it was .....

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e the assessee argued that it had reasonable cause for not deducting the tax at source and that since it was not treated as an assessee in default u/s 201 of the Act, penalty u/s 271C could not be levied. Ld. CIT(A) rejected the contention of the assessee and dismissed the appeal of the assessee, upholding the levy of penalty u/s 271C by holding at para 5.1 to 5.4 of its order as follows : 5.1 The main issue in this case is whether penalty u/s 271C is imposable in the fact and circumstances of t .....

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201 and section 271C are independent sections. As far as time limit for completion of penalty u/s 271C is concerned, it is governed by section 275(1)(c) i.e. when the A.O. initiated the independent penalty proceedings u/s 271C on 16/05/2012 the order should have been passed on or before 31/03/2013, in accordance to the above mentioned provisions. Thus the order passed on 20/03/2013 is a valid order. As such no time limit for initiation of penalty proceedings u/s 271C has been provided under the .....

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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 .....

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as under honest belief that since the transmission charges are regulated by CERC, the assessee was not to deduct TDS on transmission charges. This argument cannot be accepted as reasonable cause for failure to deduct. Keeping in view, above facts, the contention of assessee is not accepted and appeal is dismissed. 4. Aggrieved by the same the assessee filed the present appeal before us taking the following grounds: 1. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commission .....

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ed the contentions raised before the Ld. CIT(A) and argued that no penalty u/s 271C was leviable since the assessee had not been treated as an assessee in default for the purpose of section 201(1) of the Income Tax Act, 1961, by the Ld. ITO (TDS) vide his order dt. 30/03/2010 which was confirmed by the Hon ble ITAT, Chandigarh Benches in para 5 of their order dt. 28th February 2012. The Ld. AR further submitted that penalty/s 271C is consequential in nature for the default committed/s 201(1) of .....

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), Hyderabad. Vs. Good Health Plan Ltd. ITA No.155/ Hyd/2013. Ld. AR further stated that the assessee had not deducted tax at source under a bonafide belief. Ld. AR stated that as per agreement entered into with PGCIL, the tariff was to be decided by Central Electricity Regulatory Commission(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 vi .....

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ovision 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 submissions made by the .....

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n its income received from the assessee and hence the assessee was not treated as an assessee in default u/s 201 of the Act by the ITO(TDS) vide his order dt. 30/03/2010 and affirmed by the Hon ble Tribunal in its order dt. 28/02/2012 In the backdrop of the above facts it has now to be seen whether the assesee is liable to penalty u/s 271C of the Income Tax Act. 10. For a better understanding of the issue we hereby reproduce the provision of section 271C of the Income Tax Act, 1961. 271 C. (1) I .....

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int Commissioner A bare perusal of the provision reveals that penalty u/s 271C is levied for failure to deduct tax as required by the provisions of Chapter-XVII-B of the Income Tax Act, 1961 and the same is quantified as being equal to the amount of tax which such person fails to deduct or pay as stated in the provision. Chapter XVIIB which deals with the provisions relating to tax deduction at source, outlines the incomes on which the provision applies and other procedural aspects of TDS. Secti .....

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yment 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 tha .....

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fault. The Hon ble Tribunal while deleting the penalty held as follows: 22. When the AO himself treated the assessee as an assessee not in default in respect of the amounts of TDS to be deducted, then there cannot be any scope for levying penalty u/s 271C of the Act. As in this case the amount of tax has been paid by the recipient of the income. Being so, the provision of section 271C cannot be applied to the assessee s case as these provisions clearly state that if any person fails to deduct wh .....

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the cumulative effect of all the facts and circumstances of the case, we are inclined to confirm deletion of penalty by the CIT(A). In view of the same we hold that no penalty u/s 271(C) could be levied in the present case. Moreover the fact that the tax on the impugned sums had been reimbursed to PGCIL has not been controverted by the Revenue. In such circumstances the belief harboured by the assessee that by deducting further TDS, it would tantamount to double taxation, appears to be a reason .....

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ead any ordinary prudent and cautious man placed in the position of the person concerned to come to the conclusion that same was the right thing to do. The cause shown has to be considered and only 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 .....

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