TaxTMI 
TaxTMI 
2016 (5) TMI 69
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....on account of wheeling charges, SLDC, transmission charges to the payee company, i.e., PGCIL. 3. TDS inspection/survey under section 133A of the Income-tax Act was conducted at the business premises of the assessee on February 11, 2009, during the course of which it was noticed that the assessee had made payments of transmission charges to PGCIL without deducting tax at source. The Assessing Officer, after detailed discussion in the assessment order, imposed penalty under section 271C of the Act, amounting to Rs. 1,36,00,187, Rs. 2,48,13,453, Rs. 2,76,67,625 and Rs. 5,71,017 for the financial years 2006-07, 2007-08, 2008-09 and 2009-10 after finding that there was no reasonable cause for the deductor-assessee not to deduct tax at source. 4. The matter was taken up in appeal before the learned Commissioner of Income-tax (Appeals), where the assessee argued that it had reasonable cause for not deducting the tax at source and that since it was not treated as an assessee-in-default under section 201 of the Act, penalty under section 271C could not be levied. The learned Commissioner of Income-tax (Appeals) rejected the contention of the assessee and dismissed the appeal of the assess....
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....92 to section 206CA. Mere non-violation of section 201 does not exonerate the assessee as deductor to deduct tax within the specific provisions of sections 192, 194, 194A, etc. Failure to deduct tax invokes two types of sections one section like 201, where the assessee-deductor is treated as assessee-in-default on behalf of tax liability of deductee and second the penal provisions such as section 271C wherein failure to deduct tax is liable for penalty independently. Thus, the interlinking of two sections 201 and 271C is violation of the separate provisions of Act. 5.4 The assessee has further argued that the assessee was under honest belief that since the transmission charges are regulated by CERC, the assessee was not to deduct TDS on transmission charges. This argument cannot be accepted as reasonable cause for failure to deduct. Keeping in view, above facts, the contention of the assessee is not accepted and the appeal is dismissed." 5. Aggrieved by the same the assessee filed the present appeal before us taking the following grounds : 1. That the order passed under section 250(6) of the Income-tax Act, 1961, by the learned Commissioner of Income-tax (Appeals), Shimla, is ....
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....ted all due taxes from the assessee in the various bills raised on it for the relevant assessment years. Therefore, the learned authorised representative stated that the assessee was under the bona fide belief that since it has already paid taxes to PGCIL any further tax deduction at source would only amount to double taxation, and, therefore, did not deduct tax at source. The learned authorised representative stated that since there was a reasonable cause for not deducting TDS, penalty under section 271C was not leviable in view of the provision of section 273B of the Act. 9. The learned Departmental representative on the other hand relied upon the order of the learned Commissioner of Income-tax (Appeals) and stated that there was neither any reasonable cause with the assessee for not deducting tax at source nor did the fact that the assessee was not treated as an assessee-in-default as per section 201 of the Act, help the assessee's case since the two were separate provisions and could not be interlinked and hence penalty under section 271C was rightly levied. 10. We have heard the submissions made by the representative of both the parties and perused documents placed befor....
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....he tax, the payer referred to under section 201 of the Act shall not be treated as assessee-in-default, meaning thereby that the payer would not be liable for payment of tax or deduction of tax. This view has been upheld by the hon'ble Karnataka High Court in the case of Remco (BHEL) House Building Co-operative Society Ltd. v. ITO [2015] 273 CTR (Karn) 57 wherein it was held at paragraph 30 of its order : "As per section 201 if returns has been filed by the recipient and he has computed tax liability and/or has paid the tax, the payer referred to under section 201 of the Act was not liable for payment of tax or to deduct." 17. In the present case, we find that the assessee has not been treated as an "assessee-in-default" as per section 201 of the Act and is, therefore, neither liable to deduct nor pay any tax as per Chapter XVII-B. In such circumstances, we find that the question of levy of penalty under section 271C does not arise. This view has been upheld by the hon'ble Income-tax Appellate Tribunal Hyderabad in the case of Asst. CIT v. Good Health Plan Ltd. (M. A. No. 155/Hyd/2013), wherein penalty levied under section 271C was deleted since the assessee was not held....
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....hout substance or foundation, the prescribed consequences follow." 20. In view of the same we find no merit in the contention of the learned Departmental representative that the assessee had no reasonable cause for not deducting tax at source. Further, we hold that in lieu of the provisions of section 273B which states that no penalty shall be leviable in cases where reasonable cause for the default committed has been demonstrated, the penalty levied under section 271C is liable to be deleted. The hon'ble apex court in the case of CIT v. Eli Lilly and Co. (India) P. Ltd. [2009] 312 ITR 225 (SC) has upheld this view while dealing with the scope of section 271C read with section 273B as follows (page 251) : "36. Section 271C, inter alia, states that if any person fails to deduct the whole or any part of the tax as required by the provisions of Chapter XVII-B then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct. In these cases we are concerned with section 271C(1)(a). Thus section 271C(1)(a) makes it clear that the penalty leviable shall be equal to the amount of tax which such person failed to deduct. W....