TMI Blog2023 (9) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... e of SIM Card and Recharge vouchers are in the nature of sale and discount allowed by the assessee to the distributors is in the nature of commission attracting the provision of section 194H and consequently, the assessee was rightly held as deemed to be an assessee is in default as per the provision of section 201 of the Act. Similarly, a good number of other decisions have held that transaction in question does not fall in the ambit of section 194H and thereby the assessee was not liable to deduct TDS at source on these transactions. Apart from a series of decisions of this Tribunal there are divergent views of Hon ble High courts on this issue of liability of the assessee to deduct tax u/s 194H. It is undisputed fact that this is debatable issue having two possible views and the assessee was of the view that it was not under obligation to deduct tax at source as per the provisions of chapter XVII of Income Tax and particularly u/s 194H of the tax. This belief of the assessee is one of the possible view and therefore failure to deduct the tax at source in respect of the discount/commission allowed to the distributors in light of divergent decisions by the different High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceedings u/s 201 201(A) of the Income Tax Act due to failure on the part of the assessee to deduct tax on the amount allowed by the assessee to its distributors/dealers which in the opinion of the department was in the nature of commission and therefore was subjected to TDS u/s 194H of the Act. The Ld. AO has passed the orders for various assessment years u/s 201 and 201(A) of the Act treating the assessee as assessee in default. Simultaneously, the AO initiated the proceedings of penalty under section 271 C of the Act for default of non-Deduction of TDS on the amount allowed to the distributors/dealers being commission. Therefore the AO was of the view that assessee has committed a default in compliance of provision of section194H of the Act and consequently liable to be charged with penalty u/s 271C of the Act. Ld. AO has finally levied the penalty vide order dated 1st August 2013 passed u/s 271C equivalent to the tax which the assessee has failed to deduct in compliance to chapter XVII of I.T. Act. The assessee challenged the action of the AO before the Ld. CIT(A) but could not succeed. 3. Before the Tribunal the Ld. Sr. counsel of the assessee has submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns u/s 194H of the Act and it is only because of difference of opinion between the assessee and the revenue, the penalty has been levied by the AO. 4. Thus he has contended that in view of the provisions of section 273B, no penalty u/s 271C shall be levied when this issue has been contested right from the AO to the Hon ble Supreme Court and there were diversion views on the point whether the discount allowed by the assessee is in the nature of commission attracting the provision of section 194H and thereby assessee could be responsible for deducting tax at source. The assessee has good and sufficient reason for non-deducting the tax at source and therefore, there was a reasonable cause for failure to deduct the tax at source which is cover u/s 273B of the Act. 5. He has also relied upon the judgment of Hon ble Allahabad High Court in case of CIT-TDS vs. G.M. (Telecom), BSNL dated 13.02.2014, Income Tax Appeal no.39 of 2014 and submitted that there was a decision in assessee s own case on the issue of liability of assessee to deduct at source u/s 194H and consequently, the assessee was under bona fide belief that no tax was liable to be deducted on the alleged commission/disco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (Delhi) In favour of the Revenue (i).Bharti Cellular ltd. Vs. AcIT (2011) 244 ITR 185 (Calcutta) (ii). Vodafone Essar Cellular ltd. Vs. AcIT (2011) 332 ITR 255 (Kerala) 9. It is clear from the above mentioned decisions that the issue of applicability of section 194H in respect of the transactions in question is highly debatable and now pending adjudication before the Hon ble Supreme Court in SLP no.22317 of 2011 as well as in SLP no.36446 to 3645 of 2010. The Ld. Sr. counsel for the assessee has stated that the Hon ble Supreme Court has granted interim relief to the assessee against recovery of tax. 10. It is undisputed fact that this is debatable issue having two possible views and the assessee was of the view that it was not under obligation to deduct tax at source as per the provisions of chapter XVII of Income Tax and particularly u/s 194H of the tax. This belief of the assessee is one of the possible view and therefore failure to deduct the tax at source in respect of the discount/commission allowed to the distributors in light of divergent decisions by the different High Courts as well as by the different benches of this Tribunal clearly established the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Subsection (2) of Section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. 60. The ambit of reasonable cause under Section 273B requires our scrutiny before we reach the conclusion that the Assessing Officer is required to also calculate potential penalties to be levied against the Assessees. This Court in Eli Lilly Co. (Supra) had elaborated, in the passage extracted below, on the context in which Section 273B may be utilized: 94 Section 273B states that notwithstanding anything contained in Section 271C, no penalty shall be imposed on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering an arguable and nascent legal issue that required resolution by the Apex Court has held that there was a reasonable cause for the airlines who have not deducted TDS at the relevant period and consequently the penalty proceedings u/s 271C were quashed. In case of the assessee before us the issue involved in the quantum proceeding holding the assessee as assessee in default for non- deduction of tax at source u/s 194H of the Act and consequently, was liable to pay the tax u/s 201 201A of the Act has travelled up to the Hon ble Supreme Court and pending adjudication. The nature of the said issue itself highlights genuine and bona fide belief on the part of the assessee for not deducting tax at source on these transactions as the said issue has undergone the various stages of examination and pronouncements resulting divergent decisions at the level of this Tribunal as well as at the level of the Hon ble High Courts and finally reached to the Hon ble Supreme Court for final resolution. The Hon ble Allahabad High Court in the case of CIT-TDS vs. GM (Telecome) BSNL (supra) has also considered the issue of levy of penalty u/s 271C on the identical facts in para 5 as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since this issue is decided in case of assessee's own case for earlier assessment years the same will be followed. 14. Similar in another decision in case of Vodafone Idea Ltd. New Delhi vs. DCIT-TDS (supra) vide order dated 29.09.2017 the Allahabad Bench of the Tribunal has decided this issue in para 98 and 99 as under: 98. This takes us to the penalty levied by TDS Officer u/s 271C of the Act. The case of assessee is that under similar circumstances the ITAT Hyderabad Bench (2009) [317 ITR (A.T.) 176] vide its order dated 26.02.2009 had taken a view that the relationship between a cellular operator and distributor is on 'principal to principal' basis and 'discount' given by the assessee cannot be considered as 'brokerage' or 'commission'. It had also taken support of an earlier decision of the ITAT Delhi Bench passed on 28.03.2008 [313 ITR (A.T.) 55] whereby it was concluded that the provisions of section 201(1) and 201(1A) are not applicable, under identical circumstances. In such an event of matter - since the decision of ITAT Delhi Bench was already available before the commencement of Previous Year relevant to Assessment Year 2010- ..... 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