TaxTMI 
TaxTMI 
2018 (5) TMI 1252
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....default whereas the assessee could not make out a reasonable cause for the said default by substantiating the claims with any cogent evidence. iii) On the facts and in the circumstances of the case the Ld. C!T(A) has erred in not considering the facts of the law, whereupon, the determination had been made by the A.O. Section 271CA is plain and simpliciter. It states in no ambiguous terms that" if any person fails to collect the whole or any part of the tax as required by or under the provisions of chapter XVII-BB, 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 collect as aforesaid. The penalty imposable under section 271CA is, thus, mandatory, unless the assessee is able to prove the reasonable cause. It was for this reason that the Supreme Court in Hindustan Coca Cola (Judgement dated 16/08/2007 in Civil Appeal Number 3675/2007) had stated that interest and penalty would still be liable even if an assessee is able to show that taxes due have been paid by the deductee-assessee." 2. Brief facts of the case levying penalty are that the assessee is engaged in timber business and imports rat timber l....
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....sions made by the assessee deleted the penalty by observing as under:- "9.1 On careful examination of the material facts, it is seen that the AO has accepted the contentions of the assessee in respect of sale amounting to Rs. 12,40,93,199/- on the basis of the confirmations submitted by the TAN holder treating the assessee 'as not an assessee in default'. But the AO has treated the assessee as an "assessee in default" for non-collection of TCS on the amount of sale to the tune of Rs. 54,83,410/-. The AO has accepted the explanation of the assessee in view of the decision of the Hon'ble Apex Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. in the Civil Appeal No.3675/2007 dated 16.08.2007. In its decision, the Hon'ble Apex Court has held that the Circular No.275/201/95-IT(B) dated 29.01.1997 issued by CBDT put an end to the controversy. The said Circular declares that "No demand visualized under section 201 (1) of the Income tax Act should be enforced after the tax deductor has satisfied the office-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section ....
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....eld the assessee as assessee in default in respect of sale amounting to Rs. 54,83,410/- only within the meaning of section 201(1) of the Act and the AO has not treated the assessee as an assessee in default for non-collection of TCS in respect of sale amounting to Rs. 12,40,93,199/- on the basis of the confirmations filed by the TAN holder which has been accepted by the AO in view of the decision of Hon'ble Apex court in the case of Hindustan Coca Cola (supra). In other words, since the assessee has satisfied the Assessing Officer that taxes due have been paid by the deductee - assessee in respect of sale amounting to Rs. 12,40,93,199/-, therefore, the AO has treated the assessee as an assessee not in default within the meaning of section 201(1) of the Act. But in respect of the balance amount of sale of Rs. 54,83,410/- since the assessee could not satisfy the Assessing Officer, the assessee has been treated as an assessee in default u/s 201(1) of the Act. Thus once the assessee has been held to be 'not an assessee in default' with reference to the sale amount of Rs. 12,40, 93, 199/-, the ld. AO was not justified in levying the penalty in respect of the sale amount of R....
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....nt had further relied on CBDT Circular No.660 issued on 15/09/1993 wherein it was clarified that TCS is not applicable to any buyer who obtains the specified goods for subsequent or second sale. However, out of abundant precaution, in case of logs to logs sale, the appellant had collected Form 27C or TCS was collected and paid accordingly. The appellant has further submitted that subsequently, the Appellant had attended one Seminar organized in the Timber Bhawan, Nagpur during April/May 2012 wherein various issues were discussed and clarifications were provided and Appellant to be on a safer side started collecting TCS or Form No. 27C from 01.04.2012 and onwards on planks sale as well. On 04/02/2013, Survey proceeding had been carried out by TDS Cell of the Department. The Appellant has specifically sought the clarification from Department regarding applicability of TCS provisions in his case. In support of his contentions, the appellant has filed Copy of submissions filed before the Assessing Officer (TDS) Ward-1(1), Nagpur on 07/02/2013 & 15/04/2013 annexed at Page 1 to 10 of the submission dated 11th April, 2013 wherein the appellant has also referred to Board's Circular No.....
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....r Timber Merchants Association, the assessee being a dealer of timber products is not liable to collect tax at source and the provisions of section 206C are not applicable in the case of assessee. It is further submitted that the assessee is not selling timber logs as envisaged u/s 206C of Income Tax Act 1961 but timber products which are different from timber logs. 9.10 In support of his contention of bona fide belief that TCS is not applicable on processing of timber logs by cutting them into different size of PLANKS, the appellant has relied on the legal opinion sought in this regard from Sri Vijay H. Patil, Advocate, Supreme Court. The relevant finding of his legal opinion is reproduced below: "As it is, only few specified goods are covered by the provisions for collection of tax at source. Timber is one of such items. If anything is sold which is basically not a timber, but timber made article, as long as what is sold is not Timber, then the provisions dealing with collection of tax at source will not be applicable. Therefore, if the saw mill converts them into some other article which though made out of timber, it cannot be called timber, though it is an art....
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....controversial addition-Further, in most of the cases, the assessees have not claimed deduction under s. 40 (a) (Hi) -In some cases, the expatriate employees have directly paid the taxes due on foreign salary by way of advance tax/self assessment tax- Assessees were under genuine and bona fide belief that there was no obligation to deduct tax at source from the home salary paid by the foreign company/head office-Consequently, penalty under S.271C is not leviable in any case." 9.15 The appellant has also relied on the decision of Hon'ble Delhi High Court in the case of Woodward Governers India Pvt. Ltd., wherein the Hon'ble High Court has held that "Penalty under s. 271C-Failure to deduct tax at source-Reasonable cause-Sec. 273B starts with a non obstante clause which means that it has an overriding effect over other provisions of the Act-Initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in s. 271C- Thereafter the officer dealing with the matter has to consider the explanation offered by the assessee and ascertain as to whether the failure was on account of reasonable cause-Non-consideration of plea....
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....4. The Revenue, being aggrieved by the aforesaid order passed by the learned CIT(A), is in appeal before us. 5. The learned Departmental Representative relied upon the order of the Assessing Officer. 6. Per-contra, the learned Counsel for assessee submitted that the Assessing Officer himself has not treated the assessee as "assessee in default". For this proposition, he referred to the orders passed by the Income Tax Officer (TDS) for assessment years 2010-11, 2011-12 and 2012-13 respectively which are placed in paper book. Furthermore, the learned Counsel for assessee submitted that there was a reasonable cause for the assessee for non-compliance of the concerned provisions. In this regard, he referred to the legal opinion obtained from an Advocate of Hon'ble Supreme Court a copy of which is placed in paper book. The learned Counsel for assessee further submitted that the learned CIT(A) after appreciating all these documents / matters has rightly deleted the penalty. The learned Counsel for assessee, in support of his contentions, relied upon the following case laws:- i) CIT v/s Bank of Nova Scotia, 380 ITR 550 (SC); ii) CIT v. Eli Lilly & Company (India) (....