2019 (3) TMI 1252 - AT - Income Tax

ITAT affirms CIT(A)'s decision on TDS compliance, no liability due to material cost exceeding contractor payments.

Income Tax Officer (TDS) TDS Ward-1 Rajahmundry Versus M/s Om Sai Ram Enterprises Ravulapalem

The ITAT upheld the CIT(A)'s decision, dismissing the revenue's appeal and the assessee's cross objections. The ITAT affirmed the assessee's compliance ... Levy of penalty u/s 271C - TDS default u/s 194C - deduction of TDS at the year end - assessee is consistently following the practice of arriving the TDS liability at the end of the year since, the material supplies are involved in the contract and material supply would be more than the payments to the contractor during the interim period thus the assessee contended that the assessee should not be treated as offender for non-deduction of tax at source - default u/s 201(1) - HELD THAT:- Assessee was supplying the material to the contractor throughout the year and at the end of the year, after receiving the bills, the assessee is making the payments to the contractor duly deducting the tax at source and remitting to the Govt. account and no default is committed. From verification of the account copy of M/s S.V.Constructions, we observe that the assessee has continuously supplied and material and there was no payment made by the assessee to the contractor till 31.12.2013. However, on 31.12.2013, the assessee passed a journal entry for a sum of ₹ 3,21,77,600/- against which the material supplied was ₹ 5,96,72,210/-. Since the assessee had duly deducted the tax at source u/s 194C as at the end of the year and remitted to the Govt. account, the assessee’s case is squarely covered by the decision in the case of CIT-XVIII, Delhi Vs. Bank of Nova Scotia [2016 (1) TMI 583 - SUPREME COURT]. In the instant case, as observed earlier, there is no doubt that the assessee has duly deducted the TDS and remitted to Govt. account. - Decided against revenue Issues:Levy of penalty under section 271C of the Income Tax Act, 1961 for failure to deduct TDS and remit to Government account.Analysis:1. The appeal was filed by the revenue against the order of the Commissioner of Income Tax (Appeals) regarding the levy of penalty under section 271C of the Income Tax Act. The Assessing Officer observed that the assessee had not deducted TDS as required under section 194C of the Act. The Addl.CIT initiated penalty proceedings, and despite the assessee's explanation, levied a penalty of Rs. 20,28,670 for the failure to deduct tax at source on payments made to the contractor.2. The CIT(A) found discrepancies in the penalty amount levied by the Addl.CIT compared to the TDS default amount. The Addl.CIT treated the assessee as in default for a different period than the AO, leading to a penalty higher than the default amount. The CIT(A) held that no penalty should exceed the amount of tax not deducted or paid. After considering explanations and clarifications, the CIT(A) deleted the penalty as the material supplied by the assessee exceeded the payments made to the contractor, resulting in no TDS liability.3. The revenue appealed the CIT(A)'s decision before the ITAT. The ITAT reviewed the facts and arguments presented by both parties. It was noted that the assessee supplied material to the contractor, and after adjustments, the TDS liability was nil. The ITAT considered the assessee's compliance with TDS regulations and cited a relevant Supreme Court decision to support the assessee's position.4. The ITAT upheld the CIT(A)'s decision, stating that the assessee had deducted TDS and remitted it to the Government account. The ITAT dismissed the revenue's appeal and also dismissed the assessee's cross objections due to a delay in filing without a condonation petition.5. In conclusion, the ITAT affirmed the CIT(A)'s order, emphasizing the assessee's compliance with TDS requirements and dismissing both the revenue's appeal and the assessee's cross objections.Judgment: The ITAT upheld the CIT(A)'s decision, dismissing the revenue's appeal and the assessee's cross objections.