TaxTMI 
TaxTMI 
2022 (4) TMI 1379
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....ged in these bunch of appeals are identical in nature, they are heard together for being disposed of by a common order and the adjudication in lead case ITA/35/PAN/2019 laid in succeeding paragraphs, shall mutatis mutandis apply to the rest of five appeals. For the sake of convenience, the information of penalty order and first appellate orders is tabulated as under; Sr Appeal No Asstt Year Order Details Penalty Proceedings u/ s 271C First Appellate Proceedings Date of Hearing Date of Penalty Order u/ s 271C Date of Hearing Date First Appellate Order 1 ITA/35/PAN/2019 2011-2012 12/10/2018 12/10/2018 29/01/2019 29/01/2019 2 ITA/36/PAN/2019 2012-2013 12/10/2018 12/10/2018 21/01/2019 21/01/2019 3 ITA/37/PAN/2019 2013-2014 12/10/2018 12/10/2018 21/01/2019 21/01/2019 4 ITA/38/PAN/2019 2014-2015 12/10/2018 12/10/2018 21/01/2019 21/01/2019 5 ITA/39/PAN/2019 2015-2016 12/10/2018 12/10/2018 21/01/2019 21/01/2019 6 ITA/40/PAN/2019 2016-2017 12/10/2018 12/10/2018 21/01/2019 21/01/2019 4. Before adv....
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....by proving the case of the Appellant that the same forms part and parcel of the cost of raw material. 11. The Commissioner of Income Tax (Appeals) ought to have appreciated that the payment being made towards procurement of agricultural produce viz. sugarcane, liability to deduct tax as per provisions of Chapter XVII-B does not arise in the case of the Appellant. 12. The Commissioner of Income Tax (Appeals) ought to have appreciated that the Appellant had entered into agreement with the gang leaders only for the sake of administrative convenience and the payments to each individual harvester under each gang leader would fall below the threshold limit specified u/s. 194C and hence the Appellant is not liable to deduct tax at source. 13. The Appellant contests all the findings of fact and law and all presumptions made against the Assessee by the Commissioner of Income Tax (Appeals). 14. The Appellant craves leave to file additional grounds of appeal at or before the time of hearing." (Emphasis supplied) 5. The ground no 14 is general & residuary ground, whereas ground no 1 to 13 seeks to adjudicate the matter on merits of the case, insofar as it....
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....issue in the present controversy is, as to whether a penalty u/s 271C is attracted for the default in making TDS out of payment made to harvesting contractors, in the circumstance of divergent views and whether there exists reasonable cause for default trigger penalty proceedings. 7.2 It is palpable that, pursuant to a survey proceedings u/s 133A, the assessee company was called upon to produce details regarding harvesting charges paid to the respective contractors in excess of ceiling Rs.30,000/- in each case and in aggregate exceeding Rs.75,000/- and to showcase the TDS/TCS compliance (if any) made relating thereto. Based on the records, submissions, and the confirmation in the form of statement recorded it was alleged that, the appellant company for the payments made to harvesting contractors was liable to deduct TDS at the prescribed rate u/s 194C but failed to deduct applicable TDS and insofar as payment to transport contractors is concern, the assessee was failed to deduct the TDS from the payment of those transport contractors whose PAN has not been placed on records u/s 194(6) of the Act. However, the appellant company in its defence through written submission tendered f....
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....aff of the deductor allots the harvesting contractors the sugarcane field which are supposed to be harvested. The harvesting contractors work as per the direction of the deductor. (iv) The deductor takes legal action against the harvesting contractors who do not fulfil the terms of the contract as agreed by the deductor and the harvesting contractor. The deductor has produced documents wherein it is noticed that, the deductor has actually filed a civil suit for breach of contract against a harvesting contractors." (Emphasis supplied) 7.4 From the statement recorded in the course of survey, the Ld. ITO-TDS established on record that, the appellant procures/d the sugarcane either at ex-gate price or at gate price at the option of the farmers, leaving them with an option to avail the services of harvesting and transporters independently, consequently price for the raw material is bifurcated into two parts; first part to the farmers towards cost of sugarcane and second part towards cost of harvesting and transport. It was also brought on records that, the appellant company in respect of aforesaid transactions generates two separate bills, wherein the cane bill is generated in the na....
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....edings u/s 271C for a default u/s 194C, the assessee deductor filed its detailed reply vide letter dt 26/07/2018. Due to change in incumbent, a fresh notice dt 01/08/2018 u/s 129 of the Act was also served and the assessee was called upon to substantiate its claim against levy of penalty u/s 271 of the Act. Whereupon the representative of the assessee attended the proceedings and reiterated all the submission which were put-forth during the course of TDS assessment, and contended that, there was a reasonable cause for not deducting the tax at source on various counts, hence having regards to the nature of transaction, prayed for dropping of penalty proceedings. The submission of the representative did not impress the mind of Ld. AO, consequently a sum equal to the amount of tax which the appellant failed to deduct was levied as penalty u/s 271 of the Act. 8. Aggrieved, in an appeal before first appellate authority [for short "FAA"] , the assessee company through its authorised representative [for short "AR"] filed analogous submission and in sum & substance contended that, harvesting activity is a part and parcel of growing sugarcane which is done by the farmers, for which the c....
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.... or pay as aforesaid. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. (Emphasis supplied) 10.2 As we see that, chapter XVII-B tax deduction at source (TDS) is one of a system for collection of direct taxes whereby the assessee is mandated for a specified percentage of tax required to be deducted at the time either of crediting such sum or of making certain payments to the payee and the tax so deducted is required to be deposited by the payer assessee to the exchequer and in case the payer either fails to deduct the tax at source or fails deposit the deducted tax, exposes itself to a penalty u/s 271C of the Act, and for the purpose to immune therefrom it is necessary to look into the provision of the Act; 273B. Penalty not to be imposed in curtain case. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B section 271BA, Section 271BB, Section 271C, section 271CA, section 271D, Section 271E, section 271F, section 271FA, section 271FB, section 271G, clause (c) or clause (d) of sub-section (1) or sub-section (2) of....
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....mpensatory or automatic because under Section 273B Parliament has enacted that penalty shall not be imposed in cases falling there under. Section 271C falls in the category of such cases. Section 273B states that notwithstanding anything contained in Section 271C, no penalty shall be imposed on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax." (Emphasis supplied) 10.5 It was submitted during the course of hearing that, the appellant on the basis of divergent judicial precedent and legal advice, had honestly and fairly formed an opinion and arrived at the conclusion that, harvesting services are part and parcel of agricultural activity irrespective of person performing it and hence disregarding the nature & contractual obligation set in the principal-to-principal contract / agreement, but for a reasonable cau....