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2016 (6) TMI 938 - ITAT CHANDIGARH

2016 (6) TMI 938 - ITAT CHANDIGARH - TMI - Penalty under section 271CA - assessee had not deducted TCS @ 1% on the sales and failed to explain any reasonable cause for non deduction of tax at source - Held that:- CIT(Appeals) has recorded specific finding of fact that assessee furnished complete details of sales of scrap made to various traders alongwith copies of their Income Tax returns of relevant assessment year proving that payment of due taxes have been made by the respective purchasers. I .....

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ered reasonable cause for not levying the penalty when sufficient compliance was made because of the tax demand had already been paid. Since taxes have already been paid by the buyers and there was no tax demand remained. Therefore, ld. CIT(Appeals) correctly held that there was reasonable cause for failure to comply with provisions of law. - Decided against revenue - ITA Nos. 341 & 342/CHD/2016 - Dated:- 20-6-2016 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER Appellant by : Shri S.K.Mittal Respondent .....

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d made purchases, yet the assessee deductor had not collected tax on further sales of this scrap i.e. neither he collected tax nor deposited the same into government account as required under section 206C(1) of the Income Tax Act. Therefore, penalty proceedings under section 271CA were initiated. The Assessing Officer held that assessee had defaulted on TCS amounting to ₹ 7,42,086/- on scrap sale of ₹ 7.42 Cr made by him to the traders. The Assessing Officer issued show cause notice .....

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t same has not reached finality. The Assessing Officer followed CBDT circular dated 16.07.2013. According to the Assessing Officer, since assessee had not deducted TCS @ 1% on the sales and failed to explain any reasonable cause for non deduction of tax at source, therefore, penalty under section 271CA was imposed. 3. Penalty orders were challenged before ld. CIT(Appeals). The written statement of the assessee is reproduced in the impugned order in which the assessee briefly explained that asses .....

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ed by the Assessing Officer also and where no tax is required to be collected at source in such case, no penalty is leviable under section 271CA of the Act as is held in the case of Vipro GE Medical Systems Ltd. (supra) in which it was held that, where amount of tax has already been paid by the payee and Assessing Officer has raised nil demand against the assessee, in such a case there is no reason for levy of penalty . 3(i) The assessee also relied upon decision in the case of Shri Manjunath Wi .....

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already been paid and in such a case, no tax could be recovered from the assessee. It was submitted that buyers are income tax assessees and paid the tax due on their income. Material sold are duly accounted in their books of account, hence non-deduction of TCS is no ground for levy of penalty and relied upon decision of the Supreme Court in the case of Hindustan Coco cola Beverage P.Ltd. V CIT 293 ITR 226. In the present case also, there is no dispute that tax payable by the parties on their in .....

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n para 6.4 of the appellate order are reproduced as under : 6.4 With regard to grounds no 5, 6, 7 and 9 raised by the appellant, as far assessment order is concerned there is no doubt that the assessing officer has stated all the necessary facts along with explanations and reasons for non acceptance of appellant's plea. It is an admitted fact that the appellant has furnished complete details of sales of scrap made to various traders along with copies of their income tax returns of the releva .....

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while holding that the buyers have paid the taxes on their respective income, her action clearly establishes that she has not treated the appellant as assessee in default as far as TCS is concerned. It is an accepted legal position that where the purchaser has paid the tax on his income, the revenue can only charge interest on the tax not so collected u/s 206(7) of the Act, till the filling of ITR by him. I have considered the case laws referred by the appellant and am of firm view that the jud .....

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ght to our notice, the decision of the Bangalore Bench of the Tribunal in Wipro Finance Ltd. (supra), wherein a number of decisions were relied upon by the Tribunal on this issue. In the case of the Azadi Bachao Andolan (supra), the Hon'ble Delhi High Court has held that levy of penalty under s. 271C for failure to deduct tax at source is not automatic. Absence of reasonable cause has to be established before levy of such penalty." As aforesaid, the facts of the present case are covered .....

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e. Further, various courts have also settled the issue as in the case of Sree Manjunathan Wines vs CIT (2011) 202 Taxman (Karn) which held that in case appellant has not collected the tax u/s 206C from , it is held that to impose penalty for non collection of tax at source, it is necessary out whether buyer has paid tax in accordance with the provisions of the Act and only when the buyer has not paid the tax then the authorities can proceed against the appellant, who was under obligation to coll .....

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of their Income Tax returns of relevant assessment year proving that payment of due taxes have been made by the respective purchasers. It was also recorded that no demand on account of non-deduction of tax at source has been raised by the Assessing Officer and only interest has been charged. It is, therefore, clearly established that Revenue Department has not treated the assessee as assessee in default as far as TCS is concerned. The ld. CIT(Appeals) was, therefore, justified in following decis .....

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