Prime Co-Operative Pvt.Ltd., Surat vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL " B " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M.& SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No. 2040 to 2043/AHD/2011 (Assessment Year: 2003-04 to 2006-07)

The Prime Co-operative V/S The Joint Commissioner of Bank Ltd. 2nd Floor, Income-tax, (TDS), Range, Meridian Tower, Udhna Surat Darwaja, Khatodara, Surat

(Appellant) (Respondent)

PAN:AABCP7117M

Appellant by : Written Submission Respondent by : Shri Roop Chand, Sr. D.R.

(आदेश )/ORDER

Date of hearing : 17-12-2014 Date of Pronouncement : 09 -01-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. These 4 appeals are filed by the Assessee against the order of CIT(A)-I, Surat dated 30.06.2011 for A.Ys. 2003-04 to 2006-07.

2. None appeared on behalf of Assessee but however written submissions were filed on 15.12.2014. We therefore proceed to decide the issue ex parte qua the Assessee and on the basis of written submissions of Assessee material on record.

3. Before us, the ld. D.R. submitted that the facts and circumstances of all the cases are similar except for the assessment years and amounts and the submissions are also common for all the appeals and therefore all the appeals 2 ITA Nos. 2040 to 2043/AHD/2011 . A.Ys. 2003-04 to 2006-07 can be heard together. We therefore proceed to dispose of all the appeals together for the sake of convenience and thus proceed with the facts in A.Y. 2003-04.

4. The relevant facts as culled out from the material on record are as under.

5. Assessee is a Co-op. Society registered under the Gujarat State Co-op. Society Act, 1962 and is interalia engaged in banking business. In this case ITO TDS-1, noticed that Assessee had made payments to State Bank of India towards MICR charges during the relevant year but had not deducted tax u/s. 194J of the Act before making the payment. ITO was of the view that Assessee should have deducted TDS u/s. 194J of the Act as the payments of MICR charges were towards "fees for technical charges". The Assessee was asked to show cause as to why proceedings for penalty u/s. 271C of the Act be not initiated against it to which Assessee interalia submitted that State Bank of India does not raise any bills for MICR charges but the account of Assessee is debited at regular intervals, it receives the intimation after a lapse of time and thus it has no control over the alleged tax liability. It was further submitted that the MICR charges recovered from the Assessee has been included in the income of State Bank of India (S.B.I) and S.B.I has paid tax on such income and therefore tax cannot be recovered again from Assessee. It was further submitted that the omission to deduct tax was not intentional but was due to the difference in accounting adopted by S.B.I. The submissions of the Assessee were not found acceptable to the A.O, as he was of the view that Assessee has not been able to substantiate the circumstances beyond its control which prevented it from complying with the provisions of TDS. He accordingly relying on the decision of Ahmedabad Tribunal in the case of Canara Bank vs. ITO 113 ITD 207 concluded that Assessee has committed default within the meaning of Section 271C and accordingly vide order dated 14.10.2010 imposed a penalty of RS. 60,127/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who dismissed the appeal of the Assessee by holding as under:-

3 ITA Nos. 2040 to 2043/AHD/2011 . A.Ys. 2003-04 to 2006-07

Decision:

The arguments of the A.O. as well as appellant have been considered. There is considerable force in the arguments of the A.O. Having regard to the strong arguments put forth by the A.O. and the decision of the Hon'ble ITAT, B-Bench, Ahmedabad, wherein on identical facts in the case of Canara Bank, it has been held that the bank was liable to deduct TDS on the MICR charges, the penalty imposed u/s.271C of the I.T. Act is confirmed.

6. Aggrieved by the order of CIT(A), Assessee is now in appeal before us and has raised the following grounds:-.

1. On the facts and circumstances of the case, the learned The Joint Commissioner of Income-tax (Appeals) added in conforming penalty u/s. 271C of the Act.

2. The appellant craves leave to add, alter or vary any of the grounds of appeal.

7. In the written submissions on behalf of Assessee it was submitted that in the present case, the Assessee had not deducted the tax under a bona fide belief that it was not required to deduct tax. It has further submitted that the amount recovered by S.B.I as MICR charges from Assessee and other member banks is shown as its income. It was further submitted that Assessee was not required to make payment u/s. 201 as the payee i.e. State Bank of India has shown the amounts as its income and Department has not collected tax u/s. 201. It was further submitted that penalty u/s. 271C is not automatic consequence of non deduction or none payment of tax if there is a reasonable cause. Reliance was placed on the decisions in the case of Woodward Governor India Pvt. Ltd. vs. CIT 253 ITR 745, Muthoot Bankers vs. JCIT (2011) 12 ITR (Tri) 40 (Cochin), ITO vs. Muthoot Financiers (2006) 286 ITR (AT) 71 (Cochin), ITO vs. Dishergarh Power Supply Company Ltd. (2001) 71 TTJ (Cal) 725 and Indian Petrochemicals Corporation Ltd. vs. JCIT (2010) 129 TTAJ (Ahd) 715. It was thus prayed that the penalty levied be deleted.

8. Ld. D.R. on the other hand supported the order of A.O and CIT(A).

9. We have heard the ld. D.R. and perused the material on record. In the present case it is an undisputed fact that Assessee has paid MICR charges to SBI and it is submitted that the MICR charges were recovered by SBI at regular intervals by 4 ITA Nos. 2040 to 2043/AHD/2011 . A.Ys. 2003-04 to 2006-07 debiting the account of the Assessee. It is also submitted that the MICR charges has been offered as income by S.B.I. and the default of non deduction of tax was not intentional but only due to accounting adopted by S.B.I. Before us, no material has been placed on record by Revenue to controvert the submissions of the Assessee. We find that in the case of Woodward Governors India Pvt. Ltd. (supra), the Hon'ble High Court has held that before levying penalty u/s. 271C, the concerned officer is required to find out that even if there was any failure to deduct tax at source, the same was without reasonable cause. The initial burden is on the Assessee to shown that there exists reasonable cause which was the reason for the failure, thereafter the officer has to consider whether the explanation offered by the Assessee was on account of reasonable cause. It has further held that "reasonable cause" is that which would mean an honest belief founded upon reasonable grounds of the existence of a state of circumstances, which assuming them to be true, would reasonably lead ordinary, prudent and cautious man, placed in the position of the persons concerned, to come to the conclusion that the same was right thing to do so. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation would the prescribed consequences follow.

10. In the case of Muthoot Bankers (supra), the co-ordinate Bench of Tribunal has held that when payment is disclosed in the return, there is no concealment of facts and further when recipients have shown the receipts in the returns and had paid taxes thereon, there was no loss to the Government and therefore penalty cannot be levied.

11. In the case of ITO vs. Dishergarh Power Supply Company Ltd. (supra) , the co- ordinate Bench of Tribunal has held that penalty u/s/ 271C is not an automatic consequence of non deduction or short deduction of tax at source and penalty cannot be imposed in case the person concerned can demonstrate that there was a reasonable cause for his failure referred to in Section 271C. It further held that when an explanation is offered, it is the duty of the officer to objectively consider the same.

5 ITA Nos. 2040 to 2043/AHD/2011 . A.Ys. 2003-04 to 2006-07

12. In the present case, Revenue has not brought any material on record to demonstrate that the reasons given by Assessee for non deduction of tax was not bona fide or to be false. We further find that CIT(A) by a very cryptic order has upheld the action of A.O. Considering the totality of the facts and in view of the decisions relied by the Assessee, we are of the view that in the present case the reasons given by Assessee for non deduction of TDS appears to be bona fide and therefore the provisions for penalty u/s. 271C of the Act are not attracted. We accordingly direct its deletion.

13. In the result, the appeal of the Assessee is allowed.

ITA Nos. 2041 to 2043/AHD/2014 (for A.Y. 2004-05 to 2006-07)

14. In the present cases, since the facts and circumstances of the case are identical to that of A.Y. 2003-04, we for the reasons stated hereinabove while deciding the case in A.Y. 2003-04 and for similar reasons direct the deletion of penalty and thus allow the grounds of Assessee in the captioned appeals.

15. In the result, all the appeals of Assessee are allowed.

Order pronounced in Open Court on 09 - 01 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. TRUE COPY Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad