Reliance On The Judgment Of This Court In U.s. Technologiesinternational (P) Limited v. Commissioner Of Income Tax [(2010

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE SHAJI P.CHALY THURSDAY, THE 21ST DAY OF MAY 2015/31ST VAISAKHA, 1937 I.T.A.No. 90 of 2015 -------------------------- AGAINST THE ORDER IN ITA 470/2014 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 09-01-2015 APPELLANT/APPELLANT/ASSESSEE: ------------------------------------------------- M/S.CLASSIC CONCEPTS HOME INDIA PVT. LTD VI/565, IDA, EDAYAR BINANIPURAM P.O, EDAYAR ALUVA-683 502 REPRESENTED BY ITS MANAGEER (HR) SHRI VINOD KUMAR SINGH BY ADVS.SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN RESPONDENT/REVENUE: --------------------------------- THE COMMISSIONER OF INCOME TAX ERNAKULAM CENTRAL REVENUE BUILDING, I.S PRESS ROAD KOCHI 682 018 R BY P.K.R.MENON (SR.) R BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 21-05-2015,ALONG WITH ITA 89/15 AND CONNECTED CASES THE COURT ON THE SAME DAYDELIVERED THE FOLLOWING: I.T.A.No. 90 of 2015 APPENDIX PETITIONER'S ANNEXURES: ANNEXURE A: TRUE COPY OF THE ORDER DATED 15.11.2013 ISSUED BYTHE ADDL. COMMISSIONER OF INCOME TAX (TDS), ERNAKULAM ALONGWITH DEMAND NOTICE FOR AY 2010-2011. ANNEXURE B: TRUE COPY OF THE APPELLATE ORDER DATED 28.8.2014IN ITA NO.18/TDS/EKM/CIT(A)-III/13-14 OF THE CIT(A), KOCHI FOR AY2010-11. ANNEXURE C: TRUE COPY OF THE COMMON ORDER INI.T.A.NO.470/COCH/2014 AND CONNECTED APPEALS DATED 9.1.2015 OFTHE ITAT, COCHIN BENCH FOR AY 2010-11. // True Copy // P.A. To Judge ANTONY DOMINIC & SHAJI P. CHALY, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A.Nos.89, 90, 91 & 92 of 2015 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Dated this the 21[st] day of May, 2015 Antony Dominic, J. JUDGMENT These appeals are filed by the appellant challenging the orders concurrently passed by the authorities under the Income Tax Act includingthe Tribunal upholding levy of penalty under Section 271C of the IncomeTax Act. In this background, the appellant has raised the followingquestions of law under Section 260A of the Income Tax Act, 1961 forconsideration of this Court: “i) did not the Appellate Tribunal err in law in proceeding onthe assumption that there was continuous delay of four yearsand the belated deposit of deducted amount every yearshowed the assessee as a willful defaulter. ii) in the facts and circumstances of the case, should not theStatutory Authorities and the Appellate Tribunal has foundthat there was reasonable cause for the delay in remitting thetax and that no penalty was exigible u/S 271C since theentire tax along with interest was remitted long before theinitiation of penalty proceedings? iii) is not the order Annexure A barred by limitation onaccount of inordinate delay? iv) should not the Appellate Tribunal have found that thejudgment in the case of M/S U.S.Technologies International(P) Ltd.'s case no penalty is exigible u/s 271C when the entire I.T.A.Nos.89, 90, 91 & 92 of 2015 : 2 : TDS amount and interest was remitted before initiation ofpenalty proceedings? v) did not the Appellate Tribunal err in law in failing toconsider the financial hardship urged before the StatutoryAuthority and the Appellate Tribunal and consider thereasonable cause urged before it? vi) did not the Appellate Tribunal err in law in failing toappreciate that mere delay in remittance of TDS amountresulted in warranting levy of penalty when there wasreasonable cause for the delay? vii) is not the order Annexure A erroneous andunsustainable in law for failure to apply the correctprinciples of law in regard to the levy of penalty? 2. We heard the Senior Counsel for the appellant and theStanding Counsel appearing for the respondent. 3. Admittedly, it is the case where tax was deducted at source and v) did not the Appellate Tribunal err in law in failing toconsider the financial hardship urged before the StatutoryAuthority and the Appellate Tribunal and consider thereasonable cause urged before it? vi) did not the Appellate Tribunal err in law in failing toappreciate that mere delay in remittance of TDS amountresulted in warranting levy of penalty when there wasreasonable cause for the delay? vii) is not the order Annexure A erroneous andunsustainable in law for failure to apply the correctprinciples of law in regard to the levy of penalty? 2. We heard the Senior Counsel for the appellant and theStanding Counsel appearing for the respondent. 3. Admittedly, it is the case where tax was deducted at source and was remitted belatedly. It was in such a factual background thatproceedings were initiated and penalty was levied under Section 271Cof the Income Tax Act. In order to sustain the appeals filed, the learnedSenior Counsel for the appellant referred us to the provisions of Section271C and contented that there was no willful or deliberate delayattracting the penalty provisions under Section 271C. He also placed I.T.A.Nos.89, 90, 91 & 92 of 2015 : 3 : reliance on the judgment of this Court in U.S. TechnologiesInternational (P) Limited v. Commissioner of Income Tax [(2010) 195 TAXMAN 323 (Ker)]. Learned counsel also placed reliance onSection 276B and Circular No.551 dated 23.1.1990. 4. Having considered the submissions made, we confess ourinability to accept the case of the appellant. As we have already noticed,it is the admitted case of the parties that the tax was deducted at sourceand the same was remitted belatedly, though with interest. In such acase, the provisions of Section 271C of the Income Tax Act are fullyapplicable. In so far as the judgment of this Court in the U.S.Technologies International Private Limited (supra) is concerned, what isrelevant is paragraph 4 thereof which reads thus: “The next question to be considered is the quantum ofpenalty which in this case is above Rs.1.1 crore. Counselfor the appellant referred to Section 273B of the Actauthorising the officer to waive or reduce the penalty ifthe defaulted assessee proves that there was reasonablecause for such failure which attracts penalty. StandingCounsel has referred to the findings on cash flow and theapplication of funds by assessee for other purposes andcontended that there was no reasonable cause justifyingthe failure on the part of the assessee. He has furthercontended that even for earlier year assessee hadremitted recovered tax with delay. In our view, the “The next question to be considered is the quantum ofpenalty which in this case is above Rs.1.1 crore. Counselfor the appellant referred to Section 273B of the Actauthorising the officer to waive or reduce the penalty ifthe defaulted assessee proves that there was reasonablecause for such failure which attracts penalty. StandingCounsel has referred to the findings on cash flow and theapplication of funds by assessee for other purposes andcontended that there was no reasonable cause justifyingthe failure on the part of the assessee. He has furthercontended that even for earlier year assessee hadremitted recovered tax with delay. In our view, the Tribunal has not considered challenge against quantumof penalty in so much details probably because in thepenalty order it is stated that only minimum penalty islevied. So far as failure on the part of the assessee toremit the tax recovered at source is concerned, we do notthink there can be any justifying circumstance for delay inremittance because assessee cannot divert tax recoveredfor the Government towards working capital or any otherpurpose. So much so, in our view, defence available underSection 273B does not cover failure in payment ofrecovered tax. However, if there is failure to remit onaccount of failure to recover for any reason whatsoever,then the case calls for reduction of penalty, if not waiver.Similarly, we feel recovery and remittance of tax, thoughwith delay but with interest, before detection is certainlya mitigating circumstance for waiver or reduction ofpenalty. Further, if full amount of tax with interest waspaid before levy of penalty, we feel quantum reduction iscalled for by the AO. Therefore, we direct the AO toreconsider the quantum of penalty by giving one moreopportunity to the assessee to furnish facts in the light ofour observations above. The appeal is accordinglydisposed of upholding the order of the Tribunal on thelevy of penalty, but with direction to the AO to grantfurther reduction in penalty, if any new fact orcircumstance is brought to the notice of the AO based onobservations above or otherwise in terms of Section 273Bof the Act.” 5. Reading of the above paragraph shows that even Section 273B, providing for waiver or reduction of penalty is not attracted in a casewhere tax is deducted and not remitted to the revenue. Therefore, the I.T.A.Nos.89, 90, 91 & 92 of 2015 : 5 : judgment in U.S. Technologies International Private Limited (supra), inour view, does not support the case of the appellant in any manner. 6. In so far as paragraph 16.5 of the Circular 551 relied on by thelearned counsel for the appellant is concerned, the relevant paragraphreads thus: 16.5 Insertion of a new Section 271C to provide for levy ofpenalty for failure to deduct tax at source--Under the oldprovisions of Chapter XXI of the Income Tax Act no penaltywas provided for failure to deduct tax at source. This default,however, attracted prosecution under the provisions ofSection 276B, which prescribed punishment for failure todeduct tax at source or after deducting, failure to pay thesame to the Govt. It was decided that the first part of thedefault, i.e. failure to deduct tax at source should be madeliable to liable to levy of penalty, while the second part of thedefault, i.e., failure to pay the tax deducted at source to theGovt. which is a more serious offence, should continue toattract prosecution. The Amending Act, 1987 hasaccordingly inserted a new section 271C to provide forimposition of penalty on any person who fails to deduct tax atsource as required under the provisions of Chapter XVIIB ofthe Act. The penalty is of a sum equal to the amount of taxwhich should have been deducted at source. 7. Reading of this paragraph also shows that the provisions thereof have no relevance in so far as the case of the appellant isconcerned. I.T.A.Nos.89, 90, 91 & 92 of 2015 : 6 : 7. Reading of this paragraph also shows that the provisions thereof have no relevance in so far as the case of the appellant isconcerned. I.T.A.Nos.89, 90, 91 & 92 of 2015 : 6 : 8. In our view, the authorities were fully justified in levyingpenalty under Section 271C and in the facts and circumstances of thecase, we do not find any question of law arising in these appeals to beconsidered by this Court under Section 260A of the Income Tax Act.Appeals are dismissed. Sd/- ANTONY DOMINIC JUDGE jes Sd/- SHAJI P. CHALY JUDGE