2019 (3) TMI 1252

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....rt of the order of the Ld.CIT(A) for the Assessment Year (A.Y.) 2014-15. 2. All the grounds of appeal are related to the levy of penalty u/s 271C of the Income Tax Act, 1961 ('Act' in short). The assessee concern is engaged in the business of civil contract works and is one of the 5 firms that formed as joint venture. M/s S.V.Constructions, Ubalanka is the lead partner of the joint venture. A survey u/s 133A was conducted in the business premises of the assessee by TDS Unit of Income Tax Department, Rajahmundry on 29.01.2014 to verify the deduction of TDS and remittance to Govt. of India account. Subsequent to the survey, from the books of accounts of Om Sai Ram Enterprises, the Assessing Officer (AO) noticed that the deductor (assessee)....

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....ructions and the material being more than the actual sub contract bill, there is no requirement to make the TDS and accordingly requested to drop the penalty proceedings. The Addl.CIT not being convinced with the explanation of the assessee, levied the penalty of Rs. 20,28,670/- for the assessee's failure to the deduct the tax at source on payments made to the contractor for the period from 01.04.2013 to 31.03.2014 @2% on total gross payment of Rs. 10,14,34,980/-. 3. Aggrieved by the order of the Addl.CIT, the assessee went on appeal before the CIT(A) and challenged that the assessee is not liable to deduct TDS and the assessee's case falls under section 194C(1)(3) of the Act for supply of material. The Ld.CIT(A) found that the AO had ar....

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....AO. 4. Aggrieved by the order of the Ld.CIT(A), the revenue has filed the appeal before this Tribunal. During the appeal hearing, the Ld.DR relied on the orders of the Addl.CIT, per contra, the assessee relied on the orders of the Ld.CIT(A). 5. We have heard both the parties and perused the material placed on record. We have observed from the orders of the lower authorities that the assessee has awarded contract work to M/s S.V.Constructions during the period 01.04.2013 to 31.03.2014. For the period from 01.04.2013 to 31.12.2013, M/s S.V.Constructions has executed the works worth Rs. 3,21,77,612/-. At the same time, the assessee had supplied the material to the contractor for a sum of Rs. 5,96,72,210/- which is to be excluded from the....

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....essee should not be treated as offender for non-deduction of tax at source and accordingly requested to cancel the penalty. 7. The second argument by the Ld.AR is that the AO treated the assessee in default for a sum of Rs. 11,93,445/- and passed the orders u/s 201(1) of the Act. Though the assessee has not committed any default by virtue of section 194C(1)(3) of the Act the assessee paid the demand without raising the dispute to purchase peace with the department. The Addl.CIT issued show cause notice dated 20.02.2014 for the default of nondeduction of tax at source for a sum of Rs. 5,96,72,209/-, but levied the penalty of Rs. 20,28,700/- which is unjustified and in violation of the provisions of section 271C of the Act. The Ld.AR al....

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....,544/- raised u/s 201(1) and 201(1A) of the Act. The assessee further submitted that the assessee was supplying the material to the contractor throughout the year and at the end of the year, after receiving the bills, the assessee is making the payments to the contractor duly deducting the tax at source and remitting to the Govt. account and no default is committed. From verification of the account copy of M/s S.V.Constructions, we observe that the assessee has continuously supplied and material and there was no payment made by the assessee to the contractor till 31.12.2013. However, on 31.12.2013, the assessee passed a journal entry for a sum of Rs. 3,21,77,600/- against which the material supplied was Rs. 5,96,72,210/-. Since the asses....