TaxTMI 
TaxTMI 
2015 (11) TMI 116
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....facts and circumstances of the case Ld. CIT(A) was not justified in deleting the penalty of Rs. 8,80,89,883/- imposed u/s. 271C though the deductor could not deny the fact it failed to deduct tax and deposit to Govt. account. 2. On the facts and circumstances of the case Ld. CIT(a) was not justified in deleting the penalty imposed u/s. 271C though the Apex Court has clear verdict in the judgment in the case of Union of India Vs. Dharmendra Textiles Processors (2008) 306 ITR 277 (SC) that willful concealment is not an essential ingredient for attracting civil liability." 3. Briefly stated and undisputed facts are that a survey u/s. 133A of the Act was conducted on the business premises of the assessee, which is corporate agent of Reliance Life Insurance Co. Ltd. (in short RLICL). The assessee is engaged in the business of insurance and in lieu of work it receives insurance commission. The assessee in order to carry out work entered into agreement with Global Trust Financial Services (in short GTFS) and as per terms of agreement GTFS finds prospective customers through its net work on behalf of assessee and those customers will in turn purchase insurance policy from RLICL....
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....r the assessee Shri R. N. Bajoria, Sr. Advocate, first of all, drew out attention to the agreement entered into between assessee and GTFS dated 01.08.2008 wherein assessee disclosed it as an agency company and pure agent is the GTFS and life insurance company is Reliance Life Insurance Co. Ltd. Ld. Counsel for the assessee drew our attention to page 2 of the agreement wherein the agency company i.e. the assessee agreed to appoint GTFS as pure agent for the following purposes. The relevant purposes are mentioned in the agreement, which reads as under: "(i) Procurement of prospect for insurance business on account of the Agency Company by utilizing the services of the Network. (ii) Payment of incentive / other expenses/ service charges / to the Network on behalf of the Agency Company for the prospect of insurance business procured by the Network on account of the Agency Company. (iii) Authorising the Golden Trust Financial Services to make payment to the Network for the prospect of insurance business procured by the Network on behalf of the Agency Company." Ld. Counsel for the assessee also drew our attention to Article-1 of the agreement wherein the inf....
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....ng premiums, issuing receipts thereof, as and when required. 2.6. Golden Trust Financial Services shall permit the Directors executives and the employees, if any, of the Agency Company to use and/or operate its computers and other office equipments. 2.7. Golden Trust Financial Services shall assist the Agency Company in all possible manners so as to enable the Agency Company to carry on the Agency Business. ARTICLE 3: OBLIGATIONS OF THE HEIGHT INSURANCE SERVICES LTD 3.1. The Agency Company shall from time to time provide the following to Golden Trust Financial Services so as to enable Golden Trust Financial Services to perform its obligations under this Agreement: (a) Provide adequate quantity of all necessary forms of stationery, publicity materials, brochures, proposal forms, claim forms etc. to enable it to distribute the same to the Network according to its requirements. (b) Provide the terms and conditions of various policies available with Reliance Life Insurance Co Ltd. Rate Tables and/or Charts, Customer Data, Claim Records etc. to supply the same to the Network as and when needed. 3.2. The Agency Company shall ....
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....at in the case of a person carrying on banking business, the appropriate expression to be considered for deciding the applicability of the provisions of section 44AB of the Act would be on the term "gross receipts" and on the basis of this opinion, Hon'ble Gujarat High Court deleted the penalty by treating the same as reasonable cause by observing as under: "In the circumstances, without entering into the analysis of the provisions of section 44AB of the Act, for the purpose of determining whether in the case of money-lender, turnover would constitute the basis for invoking the said provision or gross receipts would constitute the basis for applying the said provision, the appeal is decided on the ground as to whether the assessee had a bona fide belief which constituted reasonable cause in the facts and circumstances of the case. Under the provisions of section 273B of the Act, the Legislature has provided that notwithstanding anything contained in the provisions of section 271B of the Act, no penalty shall be imposable on a person or an assessee for any failure referred to in the said provisions if it is proved that there was reasonable cause for the said failure." 7.....
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....t issue. It has not been considered by this court before. Further, in most of these cases, the tax deductor-assessee has not claimed deduction under section 40(a)(iii) in computation of its business income. This is one more reason for not imposing penalty under section 271C because by not claiming deduction under section 40(a)(iii), in some cases, higher corporate tax has been paid to the extent of Rs. 906.52 lakhs (see Civil Appeal No. 1778 of 2006 entitled CIT v. Bank of Tokyo-Mitsubishi Ltd.). In some of the cases, it is undisputed that each of the expatriate employees have paid directly the taxes due on the foreign salary by way of advance tax/self-assessment tax. The tax-deductor-assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/head office and, consequently, we are of the view that in none of the 104 cases penalty was leviable under section 271C as the respondent in each case has discharged its burden of showing reasonable cause for failure to deduct tax at source." 8. Ld. Sr. Dr, however, relied on the decision of Hon'ble Kerala High Court in the case of CIT Vs. M....