2017 (10) TMI 768

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....e was no revenue loss and consequently no penalty u/s 271C can be imposed. 4. The Ld. CIT (Appeals) without appreciating the submissions on record erred in dismissing the ground no. 2 "order passed by Ld. A.O. imposing the Penalty under section 271C is barred by limitation". 5. The Ld. CIT (A) erred in not considering the following judicial pronouncements: (i) Eli Lilly & Co. (India) (P.) Ltd. [2009] 178 Taxman 505(SC) (ii) Commissioner of Income Tax Vs. Mitsui & Co. Ltd [2004] 140 TAXMAN 430 (DELHI) (iii) Dex Travel (P.) Ltd [2008] 172 TAXMAN 142 (DELHI) (iv) Cadbury India Ltd. [2011] 11 Taxmann.com 66 (Delhi) (v) CIT Vs. Canon India (P) Ltd. [2009] 2 DTLONLINE 32 (Delhi) (vi) Asian Hotels Ltd. [2007] 163 Taxman 243(Delhi) (vii) Jaslok Hospital & Research ITAT, Mumbai 6. The appellant craves leave to add, amend, alter, withdraw any ground of appeal anytime upto the hearing of this appeal. 2. Brief facts of the case are as under: A survey verification exercise was carried out by ACIT (TDS) Noida, on 28.07.2009, during which it was unearthed that assessee had not deducted TDS on payments ....

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....n 201 (A) upon the assessee. As far as the issue regarding verification of double taxation by AO whether the (Deductee)U.P Jal Nigam has paid due taxes on the payment received from the assessee. If on verification, it is found that U.P Jal Nigam (deductee) has paid due taxes on the payment received from the assessee then no demand should be charged under section 201 (1) on the assessee, (deductor). This issue has no concern regarding levy of penalty under section 271C on this stage because assessee was liable to pay or deduct the TDS at the payment of contractual charges which has already been proved by AOs order." 4. Ld. ACIT (TDS) thus levied penalty under section 271C of the Act, by relying upon the decision of Hon'ble Supreme Court in the case of union of India vs Dharmendra Textile Processors reported in 295 ITR 244. He levied penalty as under: S. No. Assessment Year Penalty levied 1. 2003-04 28,25,685 2. 2004-05 21,81,585 3. 2008-09 46,68,372 4. 2009-10 1,02,72,274 5. 2009-10 3,39,90,000 5. Against order by Ld. AO passed under section 271C of the Act, assessee preferred appeal before Ld. CIT(A), who confirme....

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....e for consultancy services and not on amount which was reimbursed on actual expenditure. Ld. AR submitted that there was a reasonable cause for assessee to deduct tax under section 194C only on consultancy charges paid. She placed reliance upon letter dated 03.10.2002 placed at page 16 of paper book where letter has been written by office of U.P Jal Nigam to assessee, requesting them not to deduct any TDS in respect of mobilisation charges (being reimbursement of expenses) paid to them, as they were deducting TDS while making payments to the subcontractors. 9. Ld. AR submitted that it was in light of these directions that no TDS was deducted on reimbursement of expenses. He submitted that there was bona fide belief for deducting TDS on centage charges under section 194C and that reasonable cause existed for not deducting TDS on reimbursement of expenses. 10. On the contrary Ld. Sr. DR submitted that assessee has not provided the bifurcation of payments made for centage and mobilisation expenses and therefore, it is very difficult to accept explanation offered. He submitted that agreement entered into between assessee and U.P Jal Nigam is very general in nature. He placed reli....

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....ances, which assuming them to be true, would reasonably lead an ordinary, prudent and cautious 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, would the prescribed consequences follow." 14. Considering the facts and circumstances discussed above, we are of considered view that there existed a reasonable cause for not deducting tax at source from payments made to U P Jal Nigam on the mobilisation fees paid (being reimbursement of expenses on actual cost) within meaning of section 273B, and accordingly no penalty under section 271C is exigible. Accordingly grounds 1,2,3,5 raised by assessee on merits stands allowed. 15. It is observed that in ground No. 4 for all assessment years assessee has raised legal issue regarding validity of order passed under section 271C, as it is barred by limitation. Since, we have dealt with issue on merits, we do not find it necessary to adjudicate this ground as it becomes academic in nature. 16. Ground No. 6 is general in nature and therefore, does not require an....

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