TMI Blog2019 (7) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant : Sh. Ronak Doshi, CA For the Respondent : Ms. Rinku Singh, Sr. DR ORDER PER SUCHITRA KAMBLE, JM These three appeals are filed by the assessee against the orders dated 20.03.2015 passed by CIT(A)-41, New Delhi for assessment years 2003-04, 2004-05 and 2005-06. 2. Grounds of appeals are as under:- ITA No. 3366/Del/2015 (A.Y. 2003-04) Ground no. 1 : Passing of order barred by limitation u/s 275 of the Act 1. On the facts and in circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals)-41, New Delhi ( CIT(A) ) erred in not annulling the penalty order passed u/s 271C of the Income Tax Act, 1961 ( the Act ) by the Additional Commissioner of Income, Range 50, New Delhi ( the TDS Officer ) which was barred by limitation u/s 275 of the Act. 2. The Appellant prays that, the penalty order, being time barred be annulled/set aside as being ab-initio void and bad in law. WITHOUT PREJUDICE TO GROUND I GROUND NO. II : 1. On the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as failed to deduct tax at source u/s. 194H of the Act. 2. He failed to appreciate and ought to have held: a) the Appellant had acted under an honest and bona fide belief that tax was not deductible u/s. 194H of the Act on discount (alleged by the department as commission ) given to distributors; b) Appellant s stand was also approved by the Hon ble Tribunal before the Hon ble High Court reversed those decisions and therefore there was a reasonable cause . c) There was a reasonable cause for non-deduction of TDS and in view of section 273B of the Act, no penalty can be levied. d) Without Prejudice, if the mechanism to deduct TDS fails in absence of payment or credit , there is a reasonable cause for non-deduction of TDS u/s 194H of the Act. 3. The Appellant prays that the penalty amounting to 30,76,179/- levied u/s. 271C of the Act be deleted. GROUND NO. III: The Appellant craves leave to add, to alter and / or amend, withdraw all or any of the foregoing grounds of appeal. ITA no. 3368/Del./2015 (A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule and Recharge Vouchers ( SIM/RV ) to its Distributors at a discounted price. The Distributors are free to resupply them to the retailers at any price subject to the maximum retail price. It is the distributor who pays the discounted price to the assessee and there is no payment of any kind made by the assessee to the distributor for the above transaction. The distributors are required to pay the assessee company, the discounted price of the products purchased by them in the advance irrespective of the fact that whether such products purchased are in tern sold or are remained unsold. The deductor company, M/s Idea Cellular Ltd. started his commercial operation in November, 2002. A Survey was conducted u/s 133(A) of the IT Act, 1961 on the premises of the company at Delhi on 24.03.2003. Statement of General Manager Finance and Account was recorded on oath. The Assessing Officer vide order dated 13.02.2004 held that the transaction between Idea Cellular Ltd. and its prepaid distributor is that Principal and Agent at all times and prepaid distributor is merely selling the prepaid SIM Card / Recharge Coupons on behalf of the Idea Cellular Ltd. The Assessing Officer held that as a lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Retailers/etc. Thus, for example, MRP of a product is ₹ 100 and Discounted Price is ₹ 80. The Distributor pays ₹ 80 in advance. Thereafter, there is no financial transaction between Assessee Distributor. The Distributor is not accountable to Assessee as to at what price it sold to Retailer. Thus, it is not the case that he first sells to Retailer, recovers price and then retains his commission and only remits the net sum. The Assessee is unaware of what price he resells, when he resells etc. The Assessee's reasonable cause for non-deduction of tax at source U/S. I94H was based on the following: Relationship between Assessee and Distributor was on Principal to Principal and hence in absence of Principal and Agent relationship, section 194H would not apply; This view was affirmed by the Tribunal and then reversed by the Hon'ble High Court; While the Hon ble Delhi High Court decided against by stating that services cannot be bought and sold, the Karnataka High Court states that right to avail telecom services and be bought and sold. Without prejudice, in absence of payment or credit by the Appellant of ₹ 20/- and Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt decided against in February 2010, no penalty is leviable u/s. 271C. The Ld. AR submits that the fact that as of date, there are High Courts and Tribunal taking contrary view- and fact that SLP has been admitted, itself shows that assessee has a reasonable cause for non deduction of tax at source on the discount allowed to the Prepaid Distributor. The Ld. AR further prayed that penalty levied u/s 271C of the Act deserves to be deleted. 9. The Ld. DR relied upon the penalty order and the order of the CIT(A). 10. We have heard both the parties and perused all the relevant material available on record. The issue on which the penalty u/s 271C is imposed is debatable as different courts have taken diverse views. Therefore, the fact remains that the assessee has reasonable cause for non deduction of tax at source on the discount allowed to the prepaid distributor as there are decisions of the Hon ble High Courts and Tribunal taking diverse views. Thus, it is contesting issue and the assessee has reasonable cause not to deduct the tax at source. Therefore, the action of non deduction of tax in the present case will not attract the penalty u/s 271C. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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