Ita/57/2007 Of The Commissioner Of Income Tax, Tvm v. M/S.muthoor Bankers (Aryasala), Tvm

PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU MONDAY, THE 6TH DAY OF JUNE 2016/16TH JYAISHTA, 1938 ITA.No. 57 of 2007 --------------------------- AGAINST THE ORDER IN ITA 398/2002 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 28-10-2005 APPELLANT/APPELLANT: - ---------------------------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT: - ------------------------------------------- M/S.MUTHOOT BANKERS (ARYASALA), THIRUVANANTHAPURAM. BY ADV. SRI.C.M.STEPHEN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06-06-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX APPELLANT'S ANNEXURE : // TRUE COPY // P.A. TO JUDGE DMR/- ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. --------------------------------------- I.T. Appeal No. 57 of 2007 --------------------------------------- Dated this the 06[th] day of June, 2016 J U D G M E N T Antony Dominic, J. In this appeal, the Revenue is calling in question the orderpassed by the Income Tax Appellate Tribunal, Cochin Bench in ITANo. 398/2002 for the assessment year 1998-1999. By the saidorder, the Tribunal upheld the order passed by the Commissionerof Income Tax (Appeals), by which the Commissioner cancelledthe penalty levied under Section 271C of the Income Tax Act. Itis in this background, this appeal is filed with the followingquestions of law: “1. Whether, on the facts and in the circumstances ofthe case the Tribunal is right in law and fact inupholding the cancellation of penalty order by theCommissioner of Income Tax (Appeals). 2. Whether, on the facts and in the circumstances of the case, i) did the assessee discharge the burden of proof that lay on it. ii) did the assessee prove that there was reasonable cause for the failure to deduct tax at source? 3. Whether, on the facts and in the circumstances of the case, while considering the cause or causes for the“reasonable cause” under sec 273B should not theTribunal have confined to the causes urged/repeatedbefore the assessing officer/Commissioner of IncomeTax (Appeals) and is not consideration of new reasonsand sustaining the order of CIT(A) on new reasonswithout jurisdiction, illegal and vitiated? 4. Whether, on the facts and in the circumstances ofthe case, are not the reasons urged (para 4 of the orderof the Tribunal) in support of 'reasonable cause' underSection 273B and considered and relied on by the CIT(A) militating against each other and hence both beingnon-existing, baseless, untenable, the Tribunal isjustified in confirming the order of the CIT(A)? 5. Whether, on the facts and in the circumstances ofthe case i) is not the order of the Tribunal against law and facts and also against principle laid down the judgment of the Delhi High Court (253 and facts and also against principle laid down the judgment of the Delhi High Court (253 ITR 745)? ii) the Tribunal is justified in confirming the order of the CIT(A)?order of the CIT(A)? iii) the Tribunal is right in law in interfering with the order of the Joint Commissioner?”with the order of the Joint Commissioner?” 2. On 03.06.2016, we heard the senior counsel for the revenue. On account of absence of the counsel for the assessee,the case was adjourned to 06.06.2016, when also the counsel forthe assessee was absent. Therefore, we proceed to dispose of the I.T. Appeal No. 57 of 2007 appeal on merits. 3. The assessee is a firm engaged in money lending. From ITR 745)? ii) the Tribunal is justified in confirming the order of the CIT(A)?order of the CIT(A)? iii) the Tribunal is right in law in interfering with the order of the Joint Commissioner?”with the order of the Joint Commissioner?” 2. On 03.06.2016, we heard the senior counsel for the revenue. On account of absence of the counsel for the assessee,the case was adjourned to 06.06.2016, when also the counsel forthe assessee was absent. Therefore, we proceed to dispose of the I.T. Appeal No. 57 of 2007 appeal on merits. 3. The assessee is a firm engaged in money lending. From the audit report concerning the assessment year in question, itwas found that the assessee had not deducted tax at source asrequired under Section 194A on the payments of interest it madeto its sister concerns. Therefore, proceedings under Section 271Cwere initiated. In the reply filed, the assessee admitted its lapseand requested that a lenient view should be taken for thetechnical lapse. However, by Annexure A order, penalty ofRs.10,45,000/-under Section 271C was levied. This wascancelled by the Commissioner of Income Tax (Appeals) byAnnexure B order where he concluded thus: “Since the Assessing Officer has not established theabsence of reasonable cause in this case, I am of theview that the penalty cannot be sustained legally.Considering all these aspects, I am of the view that theappellant's case deserves a lenient treatment in respectof the bonafide mistake committed by it. The penaltylevied u/s 271C is accordingly cancelled.” 4. It was this order which was confirmed by the Tribunal. 5. Having heard the Senior Counsel for the revenue andalso going through the orders passed by the statutory authorities,we find that it was the admitted case of the assessee that they I.T. Appeal No. 57 of 2007 did not deduct tax at source as required by them under Section194A. When there is a failure on the part of the assessee todeduct tax at source in violation of Section 194A, the penalprovisions of Section 271C are attracted. In such a case, the onlyway out for the assessee is to take the benefit of Section 273B byestablishing that there was reasonable cause justifying theirfailure to comply with Section 194A. Referring to various precedents this Court had occasion todeal with a similar case in the judgment in ITA 139/2013 where itwas held that the burden under Section 273B is entirely on withthe assessee and that a case which is beyond the control of theassessee and which prevents a reasonable man of ordinaryprudence acting under normal circumstances, without negligenceor inaction or want of bona fides, alone make out a reasonablecause. In this case, Annexure A order of the Joint Commissionershows that the assessee failed to produce any evidence tosubstantiate its claims. However, the Commissioner (Appeals)decided the issue by putting the burden on the revenue, which isevident from the extracted portion of the Annexure B orderpassed by the Commissioner. The order of the Tribunal showsthat the Tribunal has given totally different reasons which are I.T. Appeal No. 57 of 2007 mere surmises and assumptions made by it and are not foundedon any materials that were made available by the assessee. Allthis therefore show that the assessee had not established areasonable cause, as contemplated in Section 273B to resist anorder of penalty under Section 271C. Therefore, we find that theCommissioner (Appeals) and the Tribunal acted illegally incancelling the penalty levied on the assessee. Therefore,answering the question of law in favour of the revenue, thisappeal is disposed of. ANTONY DOMINIC, JUDGE DAMA SESHADRI NAIDU, JUDGE DMR/-