Case Law Details
M/s P.S.R. Associates Vs. The JCIT (ITAT Visakhapatnam)
The assessee has not deducted the TDS on sub contract payments amounting to Rs. 38,12,952/- on which the penalty was imposed by the JCIT and confirmed by the Ld.CIT(A). The assessee has deducted the TDS on all the payments, except short deduction and non deduction to the extent of payments included in the purchase account, there was no other default in respect of complying the provisions of TDS by the assesse and this fact was not disputed by the AO. The AO also did not treat the assessee as assessee in default u/s 201(1) and 201(1A) of I.T.Act for any other non compliance of the provisions of TDS including the present issue of non deduction of tax at source. The assessee has debited the payments in soil purchase account instead of sub contract payments which is evidenced by the assessment order. As per section 271B of I.T.Act, no penalty shall be imposed if the assessee proves that there is reasonable cause for the failure of the assessee.
In the instant case, the tax has not deducted the TDS due to wrong classification of the payments made which was included under the heading ‘purchases’ and the purchases do not attract the TDS, whereas the sub contract payments attract TDS. Since the payments were included in the purchases account which does not attract the TDS, the assessee could not take immediate attention and deduct the TDS. Since there was no failure on the part of the assessee in respect of other TDS payments, we hold the explanation offered by the assessee is reasonable. The assessee also explained that the said explanation could not be taken before the AO as well as the Ld.CIT(A) due to oversight. Therefore, we are of the considered opinion that the assessee’s explanation of inclusion of sub contract payments in the soil purchase account skipped the attention of the assessee for deduction of tax at source appears to be genuine and reasonable. Accordingly, we set aside the order of the Ld.CIT(A) and cancel the penalty imposed by the AO u/s 271(1)(c) for non deduction of tax at source. Appeal of the assessee on this ground is allowed.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
1. This appeal is filed by the assessee against the order of the Commissioner of Income-Tax (Appeals)-2, [CIT(A)], Visakhapatnam vide ITA No. 0043/0728/13-14/Jt.CIT,R-6(TDS)/VSP/14-15 dated 27.02.2015 for the assessment year 2009-10.
2. The assessee filed the original grounds challenging the penalty imposed by the AO u/s 271C of I.T. Act. Subsequently vide petition dated 20.10.2017, the assessee has raised the following additional grounds :
“a. Whether the order passed u/s 271C is barred by limitation as per the provisions of S.275(1)(c) of the Income Tax Act, 1961 and hence the penalty order is liable to be cancelled?
b. Whether the Joint Commissioner of Income Tax is justified in levying the penalty u/s 271C when the assessee is not held to be deemed to be in default u/s 201(1) of the Income Tax Act, 1961?”
The additional grounds are also related to the imposition of penalty u/s 271C of I.T.Act, but raised the validity of imposing penalty u/s 271C without treating the assessee as assessee in default u/s 201(1) of the I.T. Act. During the assessment proceedings, the assessing officer (AO) found that the assessee has not deducted the TDS on certain payments which attracts the tax deduction at source and made short deduction in respect of certain payments. The short deduction was made u/s 194I of I.T.Act and non deduction was made u/s 194C on sub contracts. The Joint Commissioner of Income Tax (JCIT), Range-6(TDS), Visakhapatnam has passed the order u/s 271C imposing penalty of Rs. 14,76,479/- for short deduction / non deduction of tax at source. Aggrieved by the order of the Jt.CIT, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the penalty imposed on short deduction amounting to Rs. 11,57,677/- and confirmed the penalty on non deduction of tax at source to the tune of Rs. 3,18,802/-.
3. Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that the assessee made the payments for hire charges and sub contract payments but accounted the same inadvertently in the soil purchase account though the same represented the sub contract payments. Due to inclusion of sub contracts accounts in the soil purchase account, the assessee was under the impression that the payment represented the purchases and hence the TDS was not made. Further, the Ld.AR submitted that the assessee has deducted the TDS of all the remaining payments except the soil purchase account which evidences the bonafides of the assessee. Therefore, the Ld.AR argued that due to inclusion of payment in the soil purchase account it has skipped the very attention of assessee for deduction of tax at source and argued that this is a reasonable cause, hence, requested to cancel the penalty imposed by the AO. The Ld.AR further argued that section 271C should be r.w.s. 273B and if there is reasonable cause, there is no reason to impose the penalty. In this case, the Ld.AR argued that, having deducted the TDS on all payments except the sub contract payments which were included in the soil purchase account mistake in bonafide and hence requested to cancel the penalty,
4. On the other hand, Ld.DR argued that accounting of sub contract payment in soil purchase account itself is incorrect classification and argued that the CIT(A) has rightly upheld the order of the AO which require no interference.
5. We have heard both the parties and perused the material placed on The assessee has not deducted the TDS on sub contract payments amounting to Rs. 38,12,952/- on which the penalty was imposed by the JCIT and confirmed by the Ld.CIT(A). The assessee has deducted the TDS on all the payments, except short deduction and non deduction to the extent of payments included in the purchase account, there was no other default in respect of complying the provisions of TDS by the assesse and this fact was not disputed by the AO. The AO also did not treat the assessee as assessee in default u/s 20 1(1) and 201(1A) of I.T.Act for any other non compliance of the provisions of TDS including the present issue of non deduction of tax at source. The assessee has debited the payments in soil purchase account instead of sub contract payments which is evidenced by the assessment order. As per section 271B of I.T.Act, no penalty shall be imposed if the assessee proves that there is reasonable cause for the failure of the assessee. In the instant case, the tax has not deducted the TDS due to wrong classification of the payments made which was included under the heading ‘purchases’ and the purchases do not attract the TDS, whereas the sub contract payments attract TDS. Since the payments were included in the purchases account which does not attract the TDS, the assessee could not take immediate attention and deduct the TDS. Since there was no failure on the part of the assessee in respect of other TDS payments, we hold the explanation offered by the assessee is reasonable. The assessee also explained that the said explanation could not be taken before the AO as well as the Ld.CIT(A) due to oversight. Therefore, we are of the considered opinion that the assessee’s explanation of inclusion of sub contract payments in the soil purchase account skipped the attention of the assessee for deduction of tax at source appears to be genuine and reasonable. Accordingly, we set aside the order of the Ld.CIT(A) and cancel the penalty imposed by the AO u/s 271(1)(c) for non deduction of tax at source. Appeal of the assessee on this ground is allowed.
6. The assessee has raised additional ground with regard to the limitation of passing the penalty order u/s 271C and the validity of imposing the penalty u/s 271C without deeming the assessee as assessee in default which was not argued by Ld.A.R, hence, both the grounds are dismissed as not pressed.
7. In the result, appeal of the assessee is partly allowed.
The above order was pronounced in the open court on 22nd Nov 2017.
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