Ita/26/2016 Of M/S. Subscribers Chits (P) Ltd v. Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 23RD DAY OF MARCH 2021 / 2ND CHAITHRA, 1943 ITA.No.26 OF 2016 AGAINST THE ORDER/JUDGMENT DTD 26.10.2015 IN ITA 227/2015 OFI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. SUBSCRIBERS CHITS (P) LTD.PRESIDENCY COMPLEX, XX/338/13(1), PARAYIL LANE, POTHOLE ROAD, THRISSUR – 680 004. RESPONDENT/S: BY ADV. DR.K.P.PRADEEP COMMISSIONER OF INCOME TAXAYKAR BHAVAN, C.R.BUILDINGS, I.S.PRESS ROAD, KOCHI 682 018. SC CHRISTOPHER ABRAHAM THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON23.03.2021, ALONG WITH ITA.34/2016, ITA.52/2016, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: -2- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 23RD DAY OF MARCH 2021 / 2ND CHAITHRA, 1943 ITA.No.34 OF 2016 AGAINST THE ORDER/JUDGMENT DTD 26.10.2015 IN ITA 228/2015 OFI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. SUBSCRIBERS CHITS (P) LTD.RESIDENCY COMPLEX, XX/338 13(1), PARAYIL LANE, POTHOLE ROAD, THRISSUR-680 004. BY ADV. DR.K.P.PRADEEP RESPONDENT/S: COMMISSIONER OF INCOME TAXAYKAR BHAVAN, C.R.BUILDINGS, I.S.PRESS ROAD, KOCHI-682 018. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON23.03.2021, ALONG WITH ITA.26/2016, ITA.52/2016, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 23RD DAY OF MARCH 2021 / 2ND CHAITHRA, 1943 ITA.No.52 OF 2016 AGAINST THE ORDER/JUDGMENT DTD 26.10.2015 IN ITA 229/COCH/2015 OFI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. SUBSCRIBERS CHITS (P) LTD.PRESIDENCY COMPLEX, XX/338/13(1), PARAYIL LANE, POTHOLE ROAD, THRISSUR 680 004. RESPONDENT/S: BY ADV. DR.K.P.PRADEEP COMMISSIONER OF INCOME TAXAYKAR BHAVAN, C.R.BUILDING, IS PRESS ROAD, KOCHI 682 018 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON23.03.2021, ALONG WITH ITA.26/2016, ITA.34/2016, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: J U D G M E N T [ ITA.26/2016, ITA.34/2016, ITA.52/2016 ] Dated this the 23rd day of March 2021 S.V.BHATTI,J. M/s.Subscribers Chits (P) Ltd/assessee is the appellant inthese appeals. The appeals are filed against following orderspertaining to the assessment years shown hereunder: 2.Heard Dr.K.P.Pradeep for the appellant and the learned Standing Counsel Mr.Christopher Abraham for respondents. 3.The instant appeals raise the question whether, on the facts and in the circumstances of the case, the explanation offered by the appellant could have been considered positively underSec.273B of the Income Tax Act, 1961 and whether the Tribunalfailed to appreciate the distinction provided under Sec.273B of the Income Tax Act, 1961 vis-à-vis the cases covered by Sec.271C (1) ITA.26/2016, ITA.34/2016, ITA.52/2016 -5- (a) and the imposition of penalty for the delayed deposit of theTDS deducted by the assessee is warranted or not. The operative portion of the order under appeal reads as follows: 2.Heard Dr.K.P.Pradeep for the appellant and the learned Standing Counsel Mr.Christopher Abraham for respondents. 3.The instant appeals raise the question whether, on the facts and in the circumstances of the case, the explanation offered by the appellant could have been considered positively underSec.273B of the Income Tax Act, 1961 and whether the Tribunalfailed to appreciate the distinction provided under Sec.273B of the Income Tax Act, 1961 vis-à-vis the cases covered by Sec.271C (1) ITA.26/2016, ITA.34/2016, ITA.52/2016 -5- (a) and the imposition of penalty for the delayed deposit of theTDS deducted by the assessee is warranted or not. The operative portion of the order under appeal reads as follows: “7.Aggrieved by the penalty impossed, theassessee preferred an appeal before the firstappellate authority. The CIT(A) dismissed theappeals of the assessee and confirmed the penaltyimposed u/s.271C of the Act. The CIT(A) was of theview that the reasons stated by the assessee forbelated deposit of tax deducted at source are not a'reasonable cause' as mentioned u/s. 273B of theAct. The CIT(A) held that when the tax has beendeducted by the assessee and the same has beenpaid belatedly to the Central Government Account,the 'reasonable cause' mentioned u/s. 273B of theAct for waiver or reduction of the penalty, is notapplicable. For the above proposition, the CIT(A)relied on the judgment of the Hon'blejurisdictional High Court in the case of M/s.USTechnologies International (P) Ltd reported in 195Taxman 323 and also the order of the CochinBench of the Tribunal in the case of M/s.ClassicConcept Home India (P) Ltd in ITA No.469 to472/Coch/2014. 8.The assessee being aggrieved is in appealsbefore us. The ld counsel for the assesseereiterated the submissions made before theauthorities below. The ld DR on the other hand,contended that the issue in question is squarelycovered by the recent judgment of the Hon'bleJurisdictional High Court in the case of ClassicConcepts Home India Ltd in ITA No.90 of 2015(judgment dated 21.05.2015) 9.We have heard the rival submissions andperused the material on record. Admittedly, inthe instant case it is a situation where the assesseehad deducted tax at source and failed to remit thesame to the Central Government Account in time.The Hon'ble jurisdictional High Court in the case ofClassic Concepts Home India Pvt Ltd (supra) had categorically held that in a case where tax hasbeen deducted but not paid within the time limitprescribed under the law, reasonable causementioned u/s 273B would not come to the rescueof the assessee. In the light of the judgment of theHon'ble jurisdictional High Court, cited supra, wehold that the CIT(A) is justified in confirming thepenalty imposed u/s 271C of the Act. It is orderedaccordingly.” 4.Dr.K.P Pradeep relying on the Full Bench judgment of this Court in Lakshadweep Development Corporation Ltd v.Additional Commissioner of Income tax (TDS)[1] argues that the resquestions framed in the instant tax appeals are no more integra and are covered in favour of the appellant/assessee. Tobring home his arguments, he invites our attention to thequestion considered by the Full Bench in LakshadweepDevelopment Corporation Ltdsupra which reads thus: “The pertinent question sought to be answered as perthe Reference Order dated 06.12.2017 passed by aDivision Bench of this Court is whether Clause (b) ofSub-Section (1) of Section 271C of the Income Tax Act(hereinafter referred to as 'the Act), of an equalamount of tax on the failure of the person concernedto deduct or pay the tax, would take in the situationunder Clause (a) of sub-section (1) of Section 271C aswell; or in other words; are not the above two -7- resquestions framed in the instant tax appeals are no more integra and are covered in favour of the appellant/assessee. Tobring home his arguments, he invites our attention to thequestion considered by the Full Bench in LakshadweepDevelopment Corporation Ltdsupra which reads thus: “The pertinent question sought to be answered as perthe Reference Order dated 06.12.2017 passed by aDivision Bench of this Court is whether Clause (b) ofSub-Section (1) of Section 271C of the Income Tax Act(hereinafter referred to as 'the Act), of an equalamount of tax on the failure of the person concernedto deduct or pay the tax, would take in the situationunder Clause (a) of sub-section (1) of Section 271C aswell; or in other words; are not the above two -7- provisions, clauses (a) and (b), operating in twodifferent spheres, independent of each other, toattract penalty on establishing the specified event?.One step further; does the lapse to deduct the whole orany part of the tax [as required by or under theprovisions of Chapter XVIIB of the Act] stipulatedunder Sec.271C(1)(a) will result in any automaticimposition of penalty, even denying the eligibility toclaim the benefit of Section 273B of the Act, as held bya Division Bench of this Court in U.S.TechnologiesInternational Pvt. Ltd. vs. Commissioner of IncomeTax[2010 KHC 6118 =2010(1)KLT SN 66]? Does the lawdeclared by the Division Bench in U.S.Technologiescase(cited supra) and the one in Classic Concepts HomeIndia Pvt. Ltd. vs. Commissioner of IncomeTax[(2016)383 ITR 626 (Ker.)] reflect the correctposition of law? These are the points to be clarified bythis Court in the appeals preferred by the assessee,raising substantial questions of law under Section 260Aof the Act.” and thereafter the following paras answering the referencein the Full Bench judgment are read out: 33.The next point to be considered is with regardto the observation/finding rendered by the Bench inU.S. Technologies case, holding that failure to remitthe tax after deducting the same, will constitute amore grievous default than the omission to deduct thetax under Section 271C(1)(a) and hence it cannot comewithin the purview of Section 273B for claiming the ITA.26/2016, ITA.34/2016, ITA.52/2016 benefit of waiver or reduction of penalty for good andsufficient reason. The said finding has also been notedas not acceptable in the Order of Reference and henceit requires to be dealt with. 34. Section 273B of theIncome Tax Act stipulates that no penalty shall beimposed on the person or the assessee, as the case maybe, for any failure referred to in the provisionsmentioned therein, if he proves that there wasreasonable cause for the failure. The said provision hasalready been extracted. One among the provisionsmentioned therein is Section '271C'. To put it moreclear, the whole provision of Section 271Cis reckonedas such, and no segregation has been effected unlikethe limited extent of reckoning clause(b) of sub-section (1) of Section 271. In other words, clause (b) ofsub-section (1) of Section 271C(dealing with failure toremit the deducted tax) is not excluded or the benefitis not confined to the instance covered by Section271C(1)(a)alone. Section 273B itself starts with a 'non-obstante clause' saying that the benefit is to beextended, to the extent as specified therein,notwithstanding anything contained in the provisionsmentioned above, which includes Section 271C in toto.As it stands so, it is quite open for the person/assesseeconcerned to claim the benefit of Section 273B even ina case covered by Sec.271C(1)(b)(failure to remit thetax deducted at source), despite the fact that it m ay bea more serious default, than the failure to deduct thetax at source. XXX XXX XXX XXX XXX XXX 36.From the above, it is crystal-clear that, once theburden is discharged by the person/assessee as to theexistence of good and sufficient reason for notcomplying with the stipulation under Section 271C, itis for the authorities to consider with properapplication of mind, whether the penalty is to bewaived or reduced, based on the facts andcircumstances. 37.Section 271C of the Income Tax Act is quitecategoric. Its scope and extent of application isdiscernible from the provision itself, in unambiguousterms. When the non-deduction of the whole or anypart of the tax, as required by or under the variousinstances/provisions of Chapter XVII-B would invitepenalty under Clause 271C(1)(a); only to a limitedextent, involving sub-section (2) of Sec.115-O(comingunder Chapter XIID) or covered by the 'second proviso'to Section 194B (coming under Chapter XVIIB) alonewould constitute an instance where penalty can beimposed in terms of Section 271C(1)(b) of the Act.Since there is no obscurity in the above provision, it isnot for the Court to read something more into it,contrary to the intent and legislative wisdom, whichstands to be a forbidden field for the Court. It is settledlaw that the rule of 'strict interpretation' is therelevant one in so far as the fiscal statute is concerned.We find support from the ruling rendered by the ApexCourt in Sneh Enterprises vs. Commissioner ofCustoms, New Delhi [(2006)7 SCC 714]. 38.The Division Bench of this Court in U.S ITA.26/2016, ITA.34/2016, ITA.52/2016 Technologies case, despite the specific extent andapplication stipulated under Section 271C(1)(a)and271C(1)(b) for imposition of penalty for omission(i)to deduct tax at source and (ii) in not remitting thetax deducted at source separately, to the specifiedextent and within the boundaries mentioned thereinheld that the circumstances under Section 271C(1)(a)can be read into Section 271C(1)(b). Whether such'reading into' the provision is possible or permissiblein a 'fiscal statute' is an important question. XXX XXX XXX 44. Having answered the reference as above, thequestion is whether anything survives to beconsidered. It is quite open for this Court to decide themerit as well, by virtue of the specific power conferredunder 'Section 7' of the Kerala High Court Act, insteadof having the case sent back to the same/appropriateBench for further consideration, after answering thereference. In view of our declaration that non-remittance of tax deducted at source as in the instantcase (which comes under Section 194C of ChapterXVIIB of the Act) is not covered by Section 271C(1)(b)of the ct to attract penalty, nothing remains to beconsidered further, either by the Tribunal or by thisCourt since the verdict passed by the departmentalauthorities and the Tribunal (copies of which havebeen produced as Annexures A, B and C) standcontrary to the declaration as above. The said ordersstand set aside. The appeals are allowed accordingly.The parties are to bear the costs. ITA.26/2016, ITA.34/2016, ITA.52/2016 5.The learned Standing Counsel does not dispute the applicability of the dictum laid down by the Full Bench to the caseon hand. 6.We are pursuaded that the questions falling forresconsideration in the instant tax appeals are no more remain integra and covered by the Full Bench judgment in Lakshadweep in favour of the assessee.Development Corporation Ltd supra Hence levy of penalty, for delayed deposit of TDS is not attractedto the case on hand. By following the Full Bench judgment, the impugned orders are set aside. Appeals stand allowed accordingly. No order as tocosts. Sd/- S.V.BHATTI JUDGE Sd/- BECHU KURIAN THOMAS JUDGE APPENDIX OF ITA 26/2016 PETITIONER'S/S EXHIBITS: ANNEXURE A ITA.26/2016, ITA.34/2016, ITA.52/2016 5.The learned Standing Counsel does not dispute the applicability of the dictum laid down by the Full Bench to the caseon hand. 6.We are pursuaded that the questions falling forresconsideration in the instant tax appeals are no more remain integra and covered by the Full Bench judgment in Lakshadweep in favour of the assessee.Development Corporation Ltd supra Hence levy of penalty, for delayed deposit of TDS is not attractedto the case on hand. By following the Full Bench judgment, the impugned orders are set aside. Appeals stand allowed accordingly. No order as tocosts. Sd/- S.V.BHATTI JUDGE Sd/- BECHU KURIAN THOMAS JUDGE APPENDIX OF ITA 26/2016 PETITIONER'S/S EXHIBITS: ANNEXURE A TRUE COPY OF THE PENALTY ORDER NO AAJCS6954M/2010-11 DATED 28-08-2013 ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, KOCHI ANNEXURE BTRUE COPY OF THE ORDER IN APPEAL IN ITA NO 104(G)/TDS/CIT(A)/TSR/2009-10 DATED 27-2-2015 OF THE COMMISSIONER OF INCOME TAX (APPEAL), THRISSUR ANNEXURE C TRUE COPY OF THE ORDER IN APPEAL IN ITA NO 227/COCH/2014 DATED 26-10-2015 THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH APPENDIX OF ITA 34/2016 PETITIONER'S/S EXHIBITS: ANNEXURE A TRUE COPY OF THE PENALTY ORDER NO.AAJC6954M/2010-11 DATED 28.08.2013 ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, KOCHI. ANNEXURE B TRUE COPY OF THE ORDER IN APPEAL IN ITA NO.104(F)/TDS/CIT(A)/TSR/2009-10 DATED 27.2.2015 OF THE COMMISSIONER OF INCOME TAX(APPEAL), THRISSUR. ANNEXURE C TRUE COPY OF THE ORDER IN APPEAL IN ITA NO.228/COCH/2015 DATED 26.10.2015 THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. APPENDIX OF ITA 52/2016 PETITIONER'S/S EXHIBITS: ANNEXURE A TRUE COPY OF THE PENALTY ORDER NO AAJCS6954M/2012-13 DATED 28.8.2013 ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, KOCHI ANNEXURE B TRUE COPY OF THE ORDER IN APPEAL IN ITA NO 104(H)/TDS/CIT(A)TSR/2009-10 DATED 27.2.2015 OF THE COMMISSIONER OF INCOME TAX(APPEAL),THRISSUR ANNEXURE C TRUE COPY OF THE ORDER IN APPEAL IN ITA NO 229/COCH/2014 DATED 26.10.2015 THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH