Itta/411/2014 Of Commissioner Of Income Tax(Tds) v. M/S Good Health Plan Limited

HIGH COURT OF JUDICATURE AT HYDERABADFOR THE STATE OF TELANGANA AND THE STATE OF ANDHRAPRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA ANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.411 OF 2014 DATED: 10.07.2014 Between: Commissioner of Income Tax (TDS), Hyderabad … Appellant And M/s.Good Health Plan Limited … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTAANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.411of2014 JUDGMENT:(per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is intended to be preferred againstjudgment and order, dated 22.01.2014 of the learnedTribunal in relation to the assessment year 2009-10 on thefollowing suggested question of law. “In the facts and circumstances of the case, whetherthe Hon’ble Tribunal (ITAT) is correct in law inupholding the deletion of penalty levied underSection 271C of the Income Tax Act 1961?” It appears from the following summarized fact, whichis concerning this matter, that the assessee was under bonafide belief that Section 194J of the Income-tax Act, 1961(hereinafter referred as ‘the Act’) was not applicable to thefacts and circumstances of the case, as such, no deductionwas made. By Circular No.8/09, dated 24.11.2009, theCentral Board of Direct Taxes clarified that Section 194J ofthe Act is applicable to the case of Third PartyAdministrators, which is as follows: “In view of above all such past transactions between TPAs and hospitals fall within provisionsof Section 194J and consequence of failure todeduct tax or after deducting tax, failure to pay onall such transactions would make the deductor(TPAs) deemed to be an assessee in default inrespect of such tax charging of interest and alsoliable for under Section 201(1A) and penalty underSection 271C.” Number of High Courts set aside the said Board’s Circular to the extent of levying penalty under Section 271Cof the Act. The issue before the Tribunal was that whetherdropping of penalty proceedings was justified or not. On thebackdrop of above fact the Tribunal on fact found tracingfinding of Assessing Officer, that there is no failure on part ofthe assessee as required under Section 271C of the Act.When precondition for taking penal measure is not satisfied,entire proceeding is without jurisdiction. It is legally wellsettled that penal provision is to be strictly construed moreso when above clarificatory Circular of the Board seekingpenalty was set aside. Accordingly, the appeal is dismissed. No order as tocosts. Consequently, miscellaneous petitions, if anypending, shall stand dismissed. ___________________ K.J. SENGUPTA, CJ 10[th] JULY, 2014. __________________ SANJAY KUMAR, J kvni/va