TMI Blog2018 (5) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... legal opinion of an Advocate of Hon’ble Supreme Court who had opined that the assessee was not liable to collect the TCS on the items it dealt with. Similarly, the assessee has referred to the correspondence with the Assessing Officer seeking clarification from time to time. Hence, it can be reasonably construed that the assessee’s case falls under the ambit of section 273B of the Act which is attributable for non–collection of TCS by the assessee due to his bonafide belief that the cut to size planks of timber logs are not liable to TCS. Furthermore, we find that the decision referred to by the learned Counsel for assessee in support of his case are germane and support the case of the assessee - Decided in favour of assessee - ITA No. 346/Nag./2017, ITA No.348/Nag./2017, ITA No. 347/Nag./2017 - - - Dated:- 11-5-2018 - Shri Shamim Yahya, Accountant Member And Shri Ram Lal Negi, Judicial Member Revenue by : Shri Gitesh Kumar Assessee by : Shri Abhay Agrawal ORDER Per Bench The aforesaid appeals at the instance of the Revenue are directed against common orders dated 30th June 2017, passed by the learned Commissioner (Appeals) 2, Nagpur, for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at TCS is applicable on sale of timber logs and not on sale of timber planks cut into various sizes and sold in the market. It was also explained by the assessee that the deductee / buyers had included the corresponding purchases in their books of account and have paid taxes thereon. The assessee in this regard has also filed confirmations and acknowledgement of return of income in respect of most of the cases of deductee assessees. The Assessing Officer considering the submissions of the assessee and keeping in view the decision of the Hon ble Karnataka High Court in Sree Manjunath Wines v/s CIT, accepted the contention of the assessee to the extent of confirmation / ITR acknowledgment of deductee filed by the assessee. The Assessing Officer, however, in respect of remaining sales made by the assessee has held assessee to be assessee in default in respect of tax and interest. The assessee has accepted the order of the Assessing Officer passed under section 201(1) and has duly paid the taxes including the interest in respect of TCS amount of ₹ 54,83,450 in respect of which the assessee has been held to be assessee in default under section 201(1) of the Act. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the order sheet and agreed to it by the TAN holder. After verification of all the evidences submitted by the TAN holder, the TAN holder is treated as an assessee in default for non collection of TCS on sale amounting to ₹ 54,83,410/-. Confirmations submitted by the TAN holder related to sale amounting to ₹ 12,40,93,199/- have been accepted and the TAN holder is not treated as an assessee in default for this amount. The reconciliation of sale and calculation of default is given in annexure 1, which forms part of this order. 9.3 It is thus seen from the above that the Id. AO has treated the assessee as an ^assessee in default' u/s 201(1) in respect of the amount of ₹ 54,83,410/- only. However, the AO has levied the penalty u/s 271CA in respect of the entire sale amount of ₹ 12,95,76,609/-(Rs.12,40,93,199 + ₹ 54,83,410). 9.4 On perusal of the Board's Circular referred by the Hon'ble Apex Court, it becomes abundantly clear that the proceedings for levy of penalty u/s 271CA of the I.T. Act, are independent of substantive provisions of law as stipulated u/s 201(1) of the Act. Penalty can be levied only in case of violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o my considered opinion, the levy of penalty on the amount of sale in this case u/s 271C, when the assessee has been held to be not an assessee in default in respect of the substantial amount of sale of ₹ 12,40,93,199/- by the AO is not justified. 9.6 The appellant has also challenged the levy of penalty u/s 271CA on the ground that the penalty has been levied without considering the reasonable cause provided by the assessee u/s 273B of the Act. In this regard, the appellant has submitted that by virtue of clarification issued by the Ministry of Finance vide notification No. F.N0.150/131/88-TPL dated 22.06.1988 to the Nagpur Timber Merchants Association, the assessee was under the bona-fide belief that the provisions of section 206C are not applicable to the assessee. The relevant point raised and the clarification given is as under: Whether Saw Mill owners after purchasing and cutting it into various sizes will be covered under section 44AC and 206C. Reply - Round Timber processed and cut into various sizes as per orders from markets will amount to processing and as such provision of section 44AC will not apply to saw mill owners. Hence no tax is to be coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant had sought clarifications from the Department from time-to-time but no clarification was provided. The appellant submits that the Department has not provided any clarification on appellant's express requests made in this regard, that the TCS provisions were not applicable on sale of processed cut-to-size planks. Copies of submissions filed before the lower Authorities are found to have been annexed at page No.l to 10 of appellant's submission dated 11.04.2017. The appellant thus contended that due to lack of clarity, the appellant had relied on the legal opinion sought by Timber Merchant Association and hence, based on the opinion of the legal expert, the appellant was under a bona-fide belief that TCS was not to be collected on Cut-size wooden planks. The copy of legal opinion sought is also found annexed at Page 01 to 15 of submission dated 27.04.2017. 9.9 The appellant during the penalty proceedings has submitted before the AO that the assessee was under the bona-fide belief that since they were dealing into cut size timbers which are directly used for the purpose of making of furniture etc. hence are not liable to TCS. Thus contended that they are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not arise. 9.11 In this regard, the appellant has relied on the following judicial decisions: 9.12 CIT v. Mitsui Company Ltd ANR (272 ITR 0545) (Delhi HC) : In this case the Hon'ble High Court has held that Bona-fide belief of the asses see-company based on legal opinion of its internal legal cell that the retention/continuation pay paid by it in Japan to its expatriate employees deputed to India is not taxable in India and accordingly the provisions of Chapter XVII-B are not applicable, constituted a reasonable cause for not deducting tax at source and, therefore, the Tribunal was justified in cancelling the penalty under s. 271C. 9.13 CIT v. Sencma SA France (288 ITR 0076) (Delhi HC) : In this case also the Hon'ble High Court has held that Assessee, a foreign company, having not deducted tax at source from the salaries paid by it outside India to expatriate employees working in India in view of certain confusion that existed in relation to the obligation to make such deductions, Tribunal was justified in holding that penalty u/s 271C not leviable no substantial question of law arises. 9.14 The appellant in this regard has also relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f activity of cutting the timber logs into PLANKS by the assessee, it, to my considered opinion, constitute a reasonable cause within section 273B of the Act, attributable to the non-collection of tax at source on sale of processed Timber by the appellant. The ratio of the decision of the Hon'ble Apex court in the case of CIT vs. Eli Lilly Company India Pvt. Ltd. (supra) is applicable to the facts of the case of the appellant. 9.17 Thus, on careful examination of the material facts, it is seen that the submissions made by the appellant along with the documentary evidences such as copy of legal opinion of Supreme Court Advocate and correspondence with the AO seeking clarification from time to time on the issue of making TCS constitute a reasonable cause that the appellant was under a bona fide belief that TCS was not to be collected on cut size wooden planks. Therefore, to my considered opinion, under the facts and circumstances, this is not a fit case for levy of penalty u/s. 271CA for the reasons firstly; that the Ld. AO has treated the appellant as 'an assessee not in default' u/s. 201 in respect of substantial amount of sale in view of the Supreme Court decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xii) CIT v. Hindustan Coca Cola Beverage (P) Ltd v. CIT (293 ITR 226) (SC). 7. We have heard the rival contentions and perused the material available on record. We find that, in this case, the Assessing Officer has held the assessee as assessee in default in respect of sale amounting to ₹ 54,53,414 only within the meaning of section 201(1) of the Act and the Assessing Officer has not treated the assessee as assessee in default for collection of TCS in respect of sale amounting to ₹ 12,40,93,199 on the basis of confirmation filed by TAN holder which has been accepted by the Assessing Officer in view of the decision of the Hon ble Supreme Court in Hindustan Coco Cola (supra). Thus, it is clear that the assessee has satisfied the Assessing Officer that tax have been paid by the deducted / assessee in respect of sale of ₹ 12,40,93,199. It is only in respect of balance amount of sale of ₹ 54,83,410, the assessee could not satisfy the Assessing Officer and the assessee has been treated as assessee in default under section 201(1) of the Act. In these circumstances, we agree with the learned Commissioner (Appeals) that once the assessee has been held t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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