The Commissioner Of Income Tax-L, Central Revenue Building, Bathinda v. The Improvement Irust, Bathinda

ITA No. 78 of 2006 =|. IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH IIA No. 7/8 of 2006 Date of Decision: 8./.2014 | The Commissioner of Income Tax-l, Central Revenue Building, Bathinda ...Appellant Versus The improvement Irust, Bathinda ... Respondent CORAM:-HON BLE MR. JUSTICE AJAY KUMAR MITTAL.HON BLE MR. JUSTICE JASPAL SINGH. PRESENT: Mr. Gaurav Singh Hooda, Advocate for the appellant. Mr. S.K. Mukhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been filed by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act’) against the orderdated 28.7.2005 (Annexure A-5) passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar (hereinafter referred to as ‘theTribunal’) for the assessment year 1994-95, claiming the followingsubstantial question of law:- “Whether on the facts and circumstances of the case,the Hon'ble ITAT ts justified in deleting the penaltyimposed u/s 2/1C of the Income Tax Act, 1961, forthe assessment year 1994-95 holding that penalty Isnot leviable because order u/s 201(1) and 201(1A) of ITA No. 78 of 2006 =2= the Act has been quashed? 2 The facts, in brief, necessary for adjudication of the presentappeal as narrated therein may be noticed. Ihe assessee had failed todeduct and deposit the tax at source for the assessment year 1994-95from the interest paid for delayed/enhanced payment of landcompensation in accordance with the provisions of Section 194A of theAct. The Assessing Officer vide order dated 19.1.1995 (Annexure A-2)made a demand ot 43,14,144/- under Section 201(1) of the Act onaccount of tax at source and 439,343/- under Section 201(1A) of the Acton account of interest. Further, vide order dated 8.3.1995 (Annexure A-3) penalty amounting to43,14,144/- under Section 2/71C of the Act wasalso imposed upon the assessee. Feeling aggrieved, the assessee filed|an appeal before the Commissioner of Income Tax (Appeals) [for brevity‘the CIT(A)]. Tne Cll (A) vide consolidated order dated 12.9.1996(Annexure A-4) for the assessment years 1993-94 and 1994-95 partlyallowed the appeals and directed the Assessing Officer to consider thereasonable cause. Still not satisfied, the assessee filed an appealbefore the Tribunal. The Tribunal vide order dated 28.7.2005 (AnnexureA-5) set aside the penalty order as well as the order dated 12.9.1996passed by the CIT(A) and deleted the penalty. It was held that since theorder under Section 201(1) and 201(1A) of the Act have been quashed,section 194A of the Act was not applicable and, therefore, the penaltyunder Section 2/71C of the Act was not leviable. It was also recordedthat the assessee had reasonable cause for failure to comply with theprovisions of the Act. Hence, the present appeal by the revenue. 3 We have heard learned counsel for the parties. ITA No. 78 of 2006 a 4Learned counsel for the revenue submitted that theassessee was required to deduct tax at source under Section 194A ofthe Act, therefore, failure to deduct tax at source had made the assesseeliable under Section 201(1) of tne Act and interest under Section 201(1A)of the Act and the assessee Naving failed to do so, was liable to penalaction under Section 2/1C of the Act. 5 On the other hand, learned counsel for the assesseesubmitted tnat the order under section 201(1) and 201(1A) of the Actnad peen quashed and, therefore, no penalty could be Imposed.Further, rellance was placed upon the decision of tne Dein! Hign Court in Woodward Governor India (P) Ltd. v. CIT 253 ITR 745 3 We have heard learned counsel for the parties. ITA No. 78 of 2006 a 4Learned counsel for the revenue submitted that theassessee was required to deduct tax at source under Section 194A ofthe Act, therefore, failure to deduct tax at source had made the assesseeliable under Section 201(1) of tne Act and interest under Section 201(1A)of the Act and the assessee Naving failed to do so, was liable to penalaction under Section 2/1C of the Act. 5 On the other hand, learned counsel for the assesseesubmitted tnat the order under section 201(1) and 201(1A) of the Actnad peen quashed and, therefore, no penalty could be Imposed.Further, rellance was placed upon the decision of tne Dein! Hign Court in Woodward Governor India (P) Ltd. v. CIT 253 ITR 745 6,Learned counsel for the revenue was unable to show thatany error or perversity in the order passed by the Tribunal. Once anorder under Section 201(1) and 201(1A) of the Act was quashed, thelevy of penalty under Section 271C of the Act could not be maintained.Further, the Iribunal had concluded that the assessee had reasonablecause for not deducting tax at source, which finding has not been shownto be erroneous or perverse In any manner. [.In view of the above, the substantial question of law isdecided against the revenue. Finding no merit in the Instant appeal, the same Is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE July 8, 2014 /6 (JASPAL SINGH) JUDGE