Case Law Details
Ghaziabad Development Authority Vs ACIT (ITAT Delhi)
We find that on the issue of reasonable cause u/s.273B, assessee does has a prima facie case, because as per the CBDT Circular No. 275 dated 21.09.1994, it has been clarified that responsibility for making deduction tax at source u/s. 194A should be that of Collector (Land Acquisition) or any authority empowered under the Land Acquisition Act, 1894 who acquires the land for the public purpose. When concerned parties whose land has been acquired, go to the Court of law seeking higher compensation with interest and if the court allows the claim then the concerned authority which had acquired the land, shall, while paying the compensation deduct tax at source on the amount of interest bearing part of the compensation and deposit the remaining amount with the court of law with disbursement to the successful litigant. Hence the same authority was required to issue TDS certificate to the concerned parties. As per the documents submitted by the assessee before the authorities below, the assessee has filed the proof that the payment was not made in the name of land owner but was made in the name of Special Judge, Ghaziabad. Apart from that, assessee have being a State Government Authority had made the payments in the name of Special Judge, Ghaziabad and not to any person directly on which TDS was to be deducted. Under these circumstances it cannot be held that non deduction of TDS was intentional and there was no reasonable cause. Once there is a bonafide dispute as to who is liable to deduct TDS, then it cannot be held that there is a contumacious conduct on the part of the assessee, in view of the principle laid down by the Hon’ble Supreme Court in the case of CIT vs. Bank of Nova Scotia (supra) wherein it has been held that in absence of any finding that the assessee had deliberately avoid the TDS provision and there is no contumacious conduct on the part of the assessee then no penalty could be levied. Accordingly, the penalty under section 271C levied by the ld. Assessing Officer is deleted on the ground that there was bona fide and reasonable cause in not deducting the TDS. Thus, this ground of the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeal has been filed by the assessee against the impugned order dated 15.02.2016 passed by Commissioner of Income Tax (Appeals), Muzaffarnagar in relation to penalty proceedings u/s.271C whereby Ld. CIT(A) has upheld the penalty of Rs.6,03,857/-.
2. The facts in brief are that an interest of Rs.57,87,227/- on enhanced compensation against land acquisition in Govindpuram Scheme, Ghaziabad was paid through Court to various persons during the Financial Year 2003-04. The Assessing Officer observed that no TDS has been deducted on the interest payment u/s.194A by the Secretary, Ghaziabad Development Authority, Ghaziabad who was the person responsible to deduct tax at source. In the original order u/s. 201(1) and 201(1A), the assessee was found to be in default and the said order was confirmed by the Tribunal also. However, before the Tribunal assessee has raised chargeability of compensation among many assessment years, which was not raised earlier. Accordingly, the matter was restored to the file of the Assessing Officer on the issue of chargeability of compensation among many assessment years. However, in the set aside proceedings as per the Assessing Officer none appeared on behalf of the assessee and assessee having failed to furnish evidence that the compensation pertains to different assessment years. He held that interest on enhancement compensation paid by the assessee relates to financial year, i.e., Assessment Year 2004-05. Accordingly, he raise the demand of Rs.10,74,795/- which included amount of TDS at the interest u/s.201(1A), thereafter penalty proceedings u/s.271C was initiated. Ld. Assessing Officer thereafter in his impugned penalty order has levied the penalty of Rs.6,03,857/- u/s.271C.
3. Ld. CIT (A) has confirmed the penalty on the ground that in view of the Assessing Officer in the proceedings u/s.201(1) and 201(1A) has been upheld by the Tribunal and the reliance placed by the assessee on the CBDT Circular dated 21.09.1994 was rejected and he held that there was a clear cut default and therefore the assessee was liable for penalty u/s.271C. On the issue of penalty barred by limitation in terms of Section 275, the relevant observation and the finding of the Ld. CIT (A) reads as under:
““In the light of the above facts, it is clear that it was Principal Officer, Ghaziabad Development Authority who was the payer in respect of compensation to the land owners and has failed to deduct TDS on the said payments u/s.194A of the Act. The view of the Assessing Officer has been upheld by the Hon’ble ITAT, New Delhi in the appellant’s case. The reliance of the appellant on the circular of the CBDT does not help its case. The appellant is assessee in default on this account and is therefore liable for penalty u/s. 271C of the Act. The submission of the appellant that the order passed by the Addl. CIT(TDS) u/s 271-C has become barred by limitation as provided u/s 275 is not correct interpretation of law. In this case order u/s 271-C has been passed on 24.8.2011. Proceedings for levy of penalty u/s 271-C have been initiated by the Addl.CIT(TDS) on 8.1.2010 and the same were kept in abeyance on the request of the appellant till the disposal of the appeal by the Ld. CIT(Appeals), Ghaziabad. The order of the Ld. CIT(Appeals) was received on 10.2.2011. Further opportunity was given by the AO to the appellant vide notice dated 10.8.2011 and the order u/s.271C of the Act has been passed on 24.8.2011 i.e. within six months from the receipt of the order of the Ld. CIT(Appeals) by the AO. Therefore, the argument of the appellant that the penalty order has become barred by limitation is not based on correct interpretation of law as provided u/s 275 of the Act.
Further the appellant has submitted that penalty in this case is not livable and relied upon the decision of Hon’ble Apex Court in the case of CIT Vs. Bank of Nova Scotia dated 7.1.2016 on the ground that it is necessary to establish that there was contumacious conduct on the part of appellant to levy penalty u/s. 271C of the Act. The facts of the above referred case have been gone through. In this case the appellant has relied upon the circular No.275/109/92-iT(B) dated 21-9-1994 of CBDT for non deduction of TDS on compensation payment. The reliance of the appellant on the said circular has been found not in accordance with the provisions of Income Tax Act by the Ld. CIT(Appeals), Ghaziabad and by the Hon’ble ITAT, Delhi. In this case the appellant could not establish that failure for non deduction of TDS was due to a reasonable cause. In the present case the appellant is a Development Authority having legal assistance of various experts at its disposal. It cannot be said that it wrongly relied upon circular No.275/109/92-IT(B) dated 21-9-1994 of the CBDT for non deduction of TDS on – compensation u/s Sec.l94A of the Act. In the circumstances in this case it cannot be said that the failure on the part of the appellant for non deduction of TDS was with a reasonable cause. Accordingly penalty levied by the A.O. u/s. 271C is hereby confirmed. Grounds of appeals are dismissed.”
4. Before us, ld. counsel besides challenging the validity of penalty on the ground that it has been passed beyond the limitation period as per section 275, he submitted that there was a reasonable cause within the terms of Section 273B, because as per the CBDT Circular, assessee was not required to deduct tax at source on the interest paid on enhanced compensation, as the liability of deduction of tax at source was of ADM (LA). This has been demonstrated by filing of proof that payment was not made in the name of land owner but was paid in the name of Special Judge, Ghaziabad. Further considering these facts, ITO has passed the order u/s. 271C of the Act and later on CIT-TDS dropped the penalty proceedings. However Assessing Officer on change of incumbent has passed second order without verifying the fact that demand has been cancelled by earlier Assessing Officer and penalty has been dropped in Assessment Year 2003-04. Lastly, he submitted that assessee is a State Government Authority and payments made in the name of Special Judge, Ghaziabad and not to made to any person directly on which is TDS is deductible. In support, he relying upon the judgment of Hon’ble Supreme Court in the case of CIT vs. Bank of Nova Scotia, reported in 380 ITR 550.
5. On the other hand, ld. DR after referring to the various observation of the Ld. CIT(A) submitted that once it has been established that there was clear cut default by the assessee and has not deducted TDS, then penalty u/s.271C has rightly been levied and when there 1s a statutory obligation, there cannot be any reasonable cause.
6. After considering the rival submission and on perusal of the relevant findings given in the impugned orders, we find that on the issue of reasonable cause u/s.273B, assessee does has a prima facie case, because as per the CBDT Circular No. 275 dated 21.09.1994, it has been clarified that responsibility for making deduction tax at source u/s.194A should be that of Collector (Land Acquisition) or any authority empowered under the Land Acquisition Act, 1894 who acquires the land for the public purpose. When concerned parties whose land has been acquired, go to the Court of law seeking higher compensation with interest and if the court allows the claim then the concerned authority which had acquired the land, shall, while paying the compensation deduct tax at source on the amount of interest bearing part of the compensation and deposit the remaining amount with the court of law with disbursement to the successful litigant. Hence the same authority was required to issue TDS certificate to the concerned parties. As per the documents submitted by the assessee before the authorities below, the assessee has filed the proof that the payment was not made in the name of land owner but was made in the name of Special Judge, Ghaziabad. Apart from that, assessee have being a State Government Authority had made the payments in the name of Special Judge, Ghaziabad and not to any person directly on which TDS was to be deducted. Under these circumstances it cannot be held that non deduction of TDS was intentional and there was no reasonable cause. Once there is a bonafide dispute as to who is liable to deduct TDS, then it cannot be held that there is a contumacious conduct on the part of the assessee, in view of the principle laid down by the Hon’ble Supreme Court in the case of CIT vs. Bank of Nova Scotia (supra) wherein it has been held that in absence of any finding that the assessee had deliberately avoid the TDS provision and there is no contumacious conduct on the part of the assessee then no penalty could be levied. Accordingly, the penalty levied by the ld. Assessing Officer is deleted on the ground that there was bona fide and reasonable cause in not deducting the TDS. Thus, this ground of the assessee is allowed.
7. The other ground raised by the assessee has become purely academic and the same is treated as infructuous.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 27th January, 2020.
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