TaxTMI 
TaxTMI 
2005 (10) TMI 224
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....urn of income for the assessment year 1999-2000 along with the Audit Report on 31-12-1999. The Assessing Officer, on verification of the audit report, noticed that the assessee has made short deduction of tax at source in respect of the payments made by it on account of interest to its other sister concerns. The Assessing Officer initiated penalty proceedings under section 271C of the Act against the assessee and a show-cause notice was issued to the assessee. The assessee filed its reply to the Assessing Officer incorporating a statement of interest paid, tax deductible, deducted and short deduction in respect of the interest payments to its associate concerns. The assessee admitted that there was a short deduction of tax amounting to Rs. 3,30,000. The Assessing Officer sent draft penalty order to the assessee and the assessee was finally heard on 24-1-2002. It was the contention of the assessee that there was no loss to the Revenue due to the non-deduction/short deduction of tax in respect of the payment of interest made to its associate/sister concerns. It was the further contention of the assessee before the Assessing Officer that whatever interest is paid to its sister concern....
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....er of intra-group transactions take place involving huge sums. When such a large volume of transactions take place, certain omissions can happen and it is necessary to see if these omissions had taken place with a view to avoid payment of tax. The contention that the omission was of a bona fide nature is acceptable since the omission to deduct the tax has been faithfully reported by the appellant's Auditors in the tax audit report. Only from this report, the Assessing Officer has found out the omission and initiated the action. As such, I am of the view that the omission had taken place in the appellant's case in a bona fide manner.In the case of Woodward Governor India (P.) Ltd. (253 ITR 745), the Delhi High Court has held that penalty for failure to deduct tax at source was not automatic and absence of reasonable cause is necessary for the levy. The Court further observed that the initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure. Thereafter the Officer has to consider whether the explanation offered by the assessee or other person as regards the reason for failure was on account of reasonable cause. In the present ....
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.... could have insisted the recipient or payee sister concern to produce a certificate under section 197. The ld. DR relied on the judgment of the Hon'ble Kerala High Court in the case of CIT v. Sree Krishna Trading Co. [2002] 253 ITR 645 and she submitted that the order of the CIT(A) may be set aside and that of the Assessing Officer may be restored. 6. The ld. CA for the assessee reiterated the same arguments which were made before the CIT (Appeals). He submitted that there are about 150 separate concerns of this group at various places and large number of intra-group transactions take place, involving huge sums. He further contended that when such large volume of transaction take place, certain omissions can happen and it is necessary to see whether these omissions are deliberate on the part of the assessee to dodge the legitimate payment of tax. He further contended that it is not disputed by the revenue that the assessee itself and other payee sister concerns are assessed to tax and they are regularly filing their returns of income. It was further contended that in respect of the payee-sister concerns, most of the concerns have no tax liability at all as per returns filed by t....
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.... therefore submitted that there was no wilful defiance of law. There is an omission on the part of the assessee as there is a short deduction in some cases or in some cases there is no deduction, but it was not a deliberate one as the assessee was aware that the payee-sister concerns will be declaring its interest income in their returns of income and there will not be a tax liability. He further contended that from the data available on record it is crystal clear that in many cases the recipient sister concerns have paid substantial amount of advance tax and there are refunds due in many cases. The ld. CA relied on the following precedents: 1. Woodward Governor India (P.) Ltd. v. CIT [2002] 253 ITR 745 (Delhi); 2. CIT v. Mitsui & Co. Ltd. [2005] 272 ITR 545 (Delhi); 3. CIT v. Itochu Corpn. [2004] 268 ITR 172 (Delhi); 4. Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 27 (SC); 5. Indo Nissin Foods Ltd. v. Jt. CIT [2004] 83 TTJ (Bang.) 440; 6. Wipro GE Medical Systems Ltd. v. ITO [2005] 3 SOT 627 (Bang.). 7. We have heard the rival submissions of the parties. We have also carefully considered the facts of this case as per record before us. We have carefull....
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.... true that means rea has no role to lay as far as penalty provisions under taxing statute are concerned, but at the same time the nature of the proceedings cannot be neglected that it is a quasi-criminal proceeding. As far as section 273B is concerned, which is introduced by Taxation Laws (Amendment) Act, 1986, which start with a non obstante clause, the Hon'ble High Court of Delhi had an occasion to interpret section 273B in the case of Woodward Governor India Ltd. and it is held that the clause beginning with "notwithstanding anything" is sometimes appended to a section in the beginning with a view to give the enacting part of the section, in case of conflict, an overriding effect over the provisions of the Act mentioned in the non obstante clause .... The true effect of the non obstante clause is that in spite of the provision of Act mentioned therein the enactment following it will have full operation of that the provisions embraced in the non obstante clause will not be an impediment for the operation of the enactment. The Hon'ble High Court further held that levy of penalty under section 271C is not automatic. Before levying penalty, the concerned officer is required to find ....