Panchsheel Mercantile Co. Op. Bank ... vs Assessee

(BEFORE SHRI PRAMOD KUMAR, A.M. AND SHRI S.S. GODARA, J.M.)

ITA Nos.3055, 3056, 3057 & 3058/Ahd/2011

A.Ys. 2003-04, 2004-05, 2005-06 & 2006-07 respectively

The Panchsheel Mercantile Co-operative vs. Joint C.I.T.,

Bank Limited , TDS Range, Surat

Silver Plaza Complex,

Belgium Tower,

Ring Road, Surat

(PAN: AAACT 8950 B)

(Appellant) (Respondent)

Assessee/Appellant by : Shri M.J. Shah, Advocate

Revenue/Respondent by : Shri P.L. Kureel, Sr. D.R.

Date of hearing : 20.04.2015

Date of pronouncement : 24. 04.2015

PER S.S. GODARA, JUDICIAL MEMBER:

These Assessee's appeals for A.Ys. 2003-04, 2004-05, 2005-06 & 2006-07 arise from four different orders, all dated 27.09.2011, passed by the CIT(A)-I, Surat upholding penalties of Rs.27,689/-, Rs.28,520/-, Rs.37,465/- and Rs.39,621/- respectively for non- deduction of TDS on MICR charges paid to the State Bank of India, in proceedings under section 271C of the Income Tax Act, 1961 (hereafter "the Act').

Both parties inform us at the outset that facts involved in all four cases are identical. Therefore, we treat ITA No.3055/Ahd/2011 as the 'lead' case.

2. The assessee is a Co-operative Bank. It is a deductor for TDS purposes. The assessee had paid MICR charges to the State Bank of India in the relevant previous year. The ITO (TDS)-I noticed that the assessee not to have deducted TDS on the aforesaid MICR charges. He referred the case to the Joint Commissioner of Income Tax for initiation of penalty and other corresponding proceedings.

3. The case reveals that the Joint Commissioner of Income Tax issued notice to the assessee on 08.09.2006 proposing to levy section 271C penalty for non-deduction of TDS. The assessee does not appear to have filed any reply. The Joint Commissioner of Income Tax held in the penalty order dated 06.10.2010 that the assessee had not explained reasonable cause for dropping the penalty proceedings. Thus, he levied the impugned penalty of Rs.27,689/- in the present case.

4. The assessee preferred an appeal. It filed written submission pleading denial of fair opportunity of hearing in the penalty proceedings. It would further quote it's genuine belief for not subjecting the aforesaid MICR charges to TDS provisions that the same did not come under the purview of technical services defined in section 194J of the Act. The assessee would claim to have complied TDS provisions in question for A.Y. 2007-08. It was averred that the receipt of the MICR charges i.e. the State Bank of India must have paid tax on the impugned payments. The CIT(A) rejected all of the assessee's submissions and affirmed the impugned penalty.

Therefore, the assessee is in appeal.

5. We have heard both the parties and gone through the case file. The assessee reiterates its submission made in the lower appellate proceeding hereinabove. The Revenue supports the CIT(A)'s order. We deal with the assessee's technical objection first that the Joint Commissioner of Income Tax had denied it fair opportunity of hearing. It is evident that the penalty order was passed on 06.10.2006. The assessee's relevant explanation was received on 09.10.2006. Therefore, we construe that the same was filed post facto penalty order. There is no material on record to rebut the factual position that necessary penalty notice stood issued on 23.09.2006. The assessee had sufficient time to respond. Therefore, it's technical argument fails.

6. Now we come to the assessee's contentions on merits. It had made payments of MICR charges to State Bank of India without deducting any TDS. It has come on record that it has started deducting TDS on the said payments w.e.f A.Y. 2007-08. The authorities below nowhere specifically reject its plea that the recipient herein i.e. the State Bank of India has declared the impugned payments as its income. Nor does the CIT(A) deal with its ground of genuine belief regarding non-applicability of section 194J in case of these MICR payments. We make it clear that now it is a settled law that section 194J applies in such kind of payments. A co-ordinate bench of "tribunal" in ITA Nos.2924, 2925, 2926 & 2927/Ahd/2011 in the case of The Jammu Kashmir Bank Limited, Surat vs. Joint Commissioner of Income Tax, Surat in deciding a batch of similar issues holds that such a genuine belief forms a reasonable cause for deleting identical penalties imposed u/s 271C of the Act. The co-ordinate bench also takes notice of the fact that the payees concern had already declared the very sums as income. The Revenue fails to quote any case law to the contrary. In these circumstances, we follow co-ordinate bench's decision and treat the assessee's explanation tendered in the lower appellate proceedings as a reasonable cause for accepting its grounds challenging the impugned penalty of Rs.27,689/- under section 271C of the Act for non-deduction of TDS. The assessee's grounds on merits succeed.

ITA no.3055/Ahd/2011 is allowed.

7. Same order to follow in ITA Nos.3056 to 3058 all of the assessee's appeals

8. In the result, all the assessee's appeals ITA Nos.3055 to 3058/Ahd/2011 are allowed. Order pronounced in the open court on 24th April, 2015.

Sd/- Sd/-

(PRAMOD KUMAR) (S.S. GODARA)

Accountant Member Judicial |Member

Ahmedabad; Dated 24th April, 2015 PBN/*

Copy of the order forwarded to:

1. The Appellant 2. The Respondent 3. Concerned CIT 4. CIT(A) 5. D.R., ITAT, Ahmedabad 6. Guard File

By order,

Dy./Asstt. Registrar

ITAT, Ahmedabad