TaxTMI 
TaxTMI 
2015 (7) TMI 955
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....e Partners of a firm M/s.Muthoot Estate Investments. They had drawn funds from the firm over and above their respective capital and paid interest to the firm on the amounts overdrawn by them. Accordingly, respondent in ITA No.139/13 paid a sum of Rs. 1,39,00,000/- and the respondent in ITA No.177/13 paid a sum of Rs. 6,28,28,000/- as interest to the firm. Both of them did not deduct tax at source on the interest paid by them and noticing this as a violation of Section 194A of the Income Tax Act, 1961 (hereinafter, the 'Act', for short) the Joint Commissioner of Income Tax levied penalty under Section 271C. Accordingly, Rs. 15,69,664/- and Rs. 70,49,302/- were levied as penalty on the respondents in ITA Nos.139/13 and 177/13, respect....
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.... of debate being raised by the assessee, the Tribunal is right in law and fact in introducing the concept of debate in the order and is not the order based on a "debatable issue" extraneous and perverse?" 3.We heard the senior Standing Counsel for the Revenue and also the learned senior counsel for the respondent assessees. 4.Section 194A of the Act requires any person, not being an individual who is exempted, and responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall deduct income tax thereon at the rates in force, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by cheque or draft or by any other mode. Secti....
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....It is a standard of proof which is applied to a set of facts or actions to prove whether a reasonable person have come to the same conclusion or acted in the same way given the totality of the circumstances. 6.In this context, it is also relevant to note that in Commissioner of Income Tax v. Sri Jagdish Prasad Choudhary [(211) ITR 472], a Full Bench of the Patna High Court has interpreted the expression "reasonable cause", as follows: "The word "reasonable cause" has not been defined under the Act but it could receive the same interpretation which is given to the expression "sufficient cause". Therefore, in the context of the penalty provisions, the word "reasonable cause" would mean a cause which is beyond the control of the assessee. "R....
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....ch would constrain a person of average intelligence and ordinary prudence. It can be described as probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautions man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences follow." 9.Bearing in mind the above provisions of the Act and principles, the facts of the case are to be seen. The case pleaded by the assessees was that they were under the bonaf....
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....ssees is one of ignorance of law. Ignorance of law, it is trite, is no excuse in law and if that be so, ignorance of law cannot also be a reasonable cause as contemplated under Section 273B. This view has been taken by the Apex Court in Sitaram Ramcharan v. M.N.Nagrashana [AIR 1960 SC 260]. 12.The learned counsel for the assessees contended that Section 194A excludes Rsperson' from the liability to deduct tax at source. Therefore, according to the learned counsel, the very proceedings against the assessees is untenable. We are unable to accept this contention. First of all, this contention was not raised before any one of the authorities, including the Tribunal and the parties proceeded thus far, on the conceded basis that the assesees....
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....tted, though tax cannot be recovered again, penalty and interest can be recovered. 15.As contended by the learned counsel, it may be true that penalty levied under section 201 read with Section 221 has been set aside by the Tribunal accepting the plea of "good and sufficient" reasons urged by the assessees. However, the object of these provisions being different from section 194A read with Section 271C, such an order passed by the Tribunal cannot come to the rescue of the assessees. In any case, principles of res-judicata and estoppel are alien to tax jurisprudence and therefore, this contention also cannot improve the case of the assessees. One another reason which has weighed with the Tribunal is that the firm had declared the interest r....