Ma/451/2015 Of State Bank Of India Raj Bhawan Branch v. Additional Commissioner Of Income Tax Range-2 Patna

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.451 of 2015 ====================================================== State Bank of India Raj Bhawan Branch having its office at Raj BhawanCampus, P.O. Raj Bhawan P.S. Sachivalaya through its Branch Manager, ShriRakesh Kumar, son of Shri Shyam Bihari Prasad resident of Flat No. F 202Mundeshwari Enclave P.O. B.V. College P.S. Rajiv Nagar, District Patna. ... ... Appellant/s Versus Additional Commissioner of Income Tax Range-2 Patna having its officeRevenue Building, Beer Chand Patel Marg, Patna. ... ... Respondent/s ====================================================== withMiscellaneous Appeal No. 452 of 2015 ====================================================== State Bank of India Raj Bhawan Branch having its office at Raj BhawanCampus, P.O. Raj Bhawan P.S. Sachivalaya through its Branch Manager, ShriRakesh Kumar, son of Shri Shyam Bihari Prasad resident of Flat No. F 202Mundeshwari Enclave P.O. B.V. College P.S. Rajiv Nagar, District Patna. ... ... Appellant/s Versus Additional Commissioner of Income Tax, Range-2, Patna. ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE And HONOURABLE MR. JUSTICE PARTHA SARTHY ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 08-08-2023 The appeals arise from the orders of the Tribunalfor the assessment year 2003-04. One confirming the levy ofinterest under Section 201 of the Income Tax Act, 1961 (for brevity, ‘the Act’) and the other confirming the order of penaltyunder Section 271C of the Act. The order inpugned in M.A. No.451 of 2015, which is against the imposition of interest underSection 201 raises the following questions of law. (i) Whether the Tribunal erred in holding thatthe Government entities or its constituentswere liable to deduction of tax at sourcenotwithstanding the exemption available tothem from payment of tax in respect of theirtotal income?the Government entities or its constituentswere liable to deduction of tax at sourcenotwithstanding the exemption available tothem from payment of tax in respect of theirtotal income? (ii) Whether in the facts and circumstances ofthe case, the interest levied under Section201 was proper?the case, the interest levied under Section201 was proper? 2. In M.A. No. 452 of 2015, the only question arising is as to: Whether in the facts andcircumstances of the case penalty wasleviable under Section 271C, especially,when there was no purposeful evasion of taxintended by the assessee? 3. On facts, with respect to the relevant assessment year, the appellant-Bank had paid interest to various entities,which were styled as payments made to Government and hencenot liable for any tax deduction at source. The Assessing Officerfound otherwise. An appeal was filed to the Commissioner ofIncome Tax under section 264 of the Act. The Commissioner ofIncome Tax found that the assessee-Bank had deducted tax at source in accordance with the provisions of 194A in respect ofcertain depositors; while the assessee failed so to do in the caseof the other depositors; finding them to be entitled to exemptionfrom payment of tax. With respect to the defective declarations,the Commissioner permitted the assessee to cure the defectsbefore the Assessing Officer. Insofar as the remainingdepositors, whose interest payments were made withoutdeduction of tax at source, without any declaration in Form-15furnished, the assessee was held liable to pay tax and interest. Arectification petition under Section 154 of the Act was filed,which was rejected by order dated 25.08.2010. A writ petitionwas filed in which Annexure-8 judgment was passed. TheCommissioner, TDS, was directed to decide the application forrectification made by the petitioner-Bank under Section 154 onmerits after giving opportunity of hearing to the petitioner Bank. 4. Both on the levy of interest and penalty, theCommissioner passed orders under Section 264 / 154 of the Actdated 15.03.2012, which are produced in both the appeals asAnnexure-9. The Commissioner found an amount of interestcoming to Rs. 5,42,470.13/-, paid to various departments of thePolice under the Government, not liable for deduction of tax atsource. The Commissioner found the same to be a mistake apparent on the record and rectified it, under Section 264deducting the said amount from the total amount payable. 5. By the order produced as Annexure-9 in M.A.No. 451 of 2015, the Tribunal found the amount of TDS defaultfor the relevant assessment year to be Rs.1,36,040/- and theAssessing Officer was directed to pass revised order underSection 201 of the Act. Similarly, reckoning the deduction madeunder Annexure-9 produced in M.A. No. 452 of 2015, theCommissioner restricted the penalty under Section 271C toRs.74,669/-. Both the orders of the Commissioner wereconfirmed by the Tribunal by Annexure-8 orders produced inboth the appeals. 6. Before us the learned counsel for the appellantsSri D. V. Pathy did not argue on the liability to tax deduction atsource with respect to the various entities as listed out in theorder under Section 264 read with Section 152 of the Act. But itwas argued that the tax deduction was not made on bonafidebelief of exemption. We have to only notice Section 194A,which mandates deduction of tax from interest payable by anyperson to a resident, at the time of credit of such interest incometo the account of the payee or at the time of payment thereof bycash or by issuance of a cheque or draft or by any other mode. Sub-section (3) of Section 194A provides for circumstances inwhich the provisions of sub-section (1) are not applicable. Theentities to which interest was paid, without deduction of tax atsource, does not come under any of the contingencies of sub-section (3) and there is no notification issued by the CentralGovernment under sub-clause(iii)(f) of the said provision.Hence, the first question raised in M.A. No. 451 of 2015 has tobe answered in favour of the revenue and against the assessee. 7. The second question framed in M.A. No. 451 of2015 is the levy of interest, which is automatic under Section201 of the Act. As per Section 201, dealing with consequencesof failure to deduct or pay, any person including the PrincipalOfficer of a Company, who is required to deduct any sum inaccordance with the provisions of the Act; if he does not deductor does not pay or after so deducting fails to pay the whole orany part of the tax, then such person shall be deemed to be anassessee in default, in respect of such tax and shall also be liableto pay tax under sub-section 1(A) of Section 201 of the Act. 8. There can be no question urged on the automaticstatutory consequence as coming forth from Section 201. Thesecond question framed in M.A. No. 451 of 2015, is alsoanswered in favour of the revenue and against the assessee. 9. The further question raised is on thesustainability of the levy of penalty, especially relying on thedecision of the Hon’ble Supreme Court Union of India v.Rajasthan Spg. & Wvg. Mills, (2009) 13 SCC 448. 10. The learned counsel for the appellant Sri D.V.Pathy also raised a contention that despite the direction of thisCourt in Annexure-8 judgment to consider the issue on meritsunder Section 154, there is no consideration of the questionwhether the penalty could be levied at all, in Annexure-9 orderpassed by the Commissioner of Income Tax. 8. There can be no question urged on the automaticstatutory consequence as coming forth from Section 201. Thesecond question framed in M.A. No. 451 of 2015, is alsoanswered in favour of the revenue and against the assessee. 9. The further question raised is on thesustainability of the levy of penalty, especially relying on thedecision of the Hon’ble Supreme Court Union of India v.Rajasthan Spg. & Wvg. Mills, (2009) 13 SCC 448. 10. The learned counsel for the appellant Sri D.V.Pathy also raised a contention that despite the direction of thisCourt in Annexure-8 judgment to consider the issue on meritsunder Section 154, there is no consideration of the questionwhether the penalty could be levied at all, in Annexure-9 orderpassed by the Commissioner of Income Tax. 11. The learned counsel would seek for a remand,for such consideration in compliance with the judgment of thisCourt. In this context, we specifically notice the Tribunal’sobservations with respect to the identical ground raised before itof non-consideration of all the grounds despite a clear directionby the High Court. It was recorded by the Tribunal “He (thelearned counsel for the assessee) conceded not to press the saidgrounds and also to the instant appeals being decided on thebasis of the assessee’s contention” (sic). In the abovecircumstances, the assessee cannot be allowed to raise the saidcontention again before this Court. 12. In any event, we find that the question is inextricably linked with the imposition of penalty as coming outfrom the order. Especially, when, there is no dispute as to therequirement to deduct tax at source from the interest payment tothe entities; who were found to be not eligible to exemptionfrom tax liability. The imposition of interest under Section 201and penalty under Section 271C of the Act on grounds of failureto deduct tax at source, is statutory and automatic. 13. Rajasthan Spg. & Wvg. Mills (supra)considered the question of penalty under Section 11AC of theCentral Excise Act, 1944, and whether it applies to every case ofnon-payment or short payment of duty, regardless of conditionsexpressly mentioned in Section 11AC, for its application. It wasfound that the main body of Section 11AC lays down theconditions and circumstances that would attract penalty; beingthe absence of levy or non-payment or short levy or shortpayment or an erroneous refund by reasons of fraud, collusionor any willful misstatement or suppression of facts orcontravention of any of the provisions of this Act or of the rulesmade there under with intent to evade payment of duty. Theproviso to sub-section(1) of Section 11A and Section 11AC usethe same expression and insofar as the period of limitation forlevy of penalty under Section 11AC, it stands extended from the normal period of one year to five years. Hence, if a notice underSection 11A states that, the escaped duty was a result of anyconscious and deliberate wrong doing and in the order passedunder Section 11A(2), there is a legally tenable finding to thateffect, only then the provision under Section 11AC would getattracted. In the absence of such an allegation, though theescaped duty may be reclaimed within one year, there cannot beany imposition of penalty under Section 11AC. Section 11 AC,in paragraph no. 29 of the said judgment, was declared to be“punishment for an Act of deliberate deception by the assesseewith the intent to evade duty by adopting any of the meansmentioned in the Section” (sic). normal period of one year to five years. Hence, if a notice underSection 11A states that, the escaped duty was a result of anyconscious and deliberate wrong doing and in the order passedunder Section 11A(2), there is a legally tenable finding to thateffect, only then the provision under Section 11AC would getattracted. In the absence of such an allegation, though theescaped duty may be reclaimed within one year, there cannot beany imposition of penalty under Section 11AC. Section 11 AC,in paragraph no. 29 of the said judgment, was declared to be“punishment for an Act of deliberate deception by the assesseewith the intent to evade duty by adopting any of the meansmentioned in the Section” (sic). 14. We have to examine the provision underSection 271C in the background of the aforesaid declaration oflaw made based on the specific words employed in the provisionunder Section 11AC. Section 271C does not have any restrictioninsofar as the penalty being leviable only on the consciouswrong doing or deliberate deception by the assessee. The merefailure to deduct the whole or any part of the tax as requiredunder the provisions of Chapter-XVII-B, 115-O(2)(i) and thesecond proviso to Section 194B(ii) would be liable to penalty.The assessee’s claim of exemption from tax by reason of the interest being paid to Government entities cannot be sustained.Exemption from tax is a statutory mandate, to be decided by theauthorities under the Income Tax Act and not the assessee.There is hence no ground to absolve the imposition of penalty,as discernible from the words employed in the provision; whichis distinct and different from those employed in Section 11ACof the Central Excise Act. The question with respect to thesustainability of a penalty on the facts and circumstances of thecase is found in favour of the revenue and against the assessee. 15. The appeals stand dismissed answering all thequestions in favour of the revenue and against the assessee. (K. Vinod Chandran, CJ) aditya/- AFR/NAFRCAV DATEUploading Date17.08.2023.Transmission Date (Partha Sarthy, J)