M/s Ilabs Information Technology & Life Science Park (P) Ltd (Taurus Bio-tech (P) Limited), Hyderabad v. Addl. CIT, Hyderabad

ITA 222/HYD/2010 | 2001-2002
Pronouncement Date: 23-04-2010 | Result: Dismissed

Appeal Details

RSA Number 22222514 RSA 2010
Assessee PAN AABCT3762A
Bench Hyderabad
Appeal Number ITA 222/HYD/2010
Duration Of Justice 2 month(s) 7 day(s)
Appellant M/s Ilabs Information Technology & Life Science Park (P) Ltd (Taurus Bio-tech (P) Limited), Hyderabad
Respondent Addl. CIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 23-04-2010
Date Of Final Hearing 29-03-2010
Next Hearing Date 29-03-2010
Assessment Year 2001-2002
Appeal Filed On 15-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C.GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NOS.222 AND 223/HYD/2010 ASST. YEARS : 2001-02 AND 2002-03 M/S ILABS INFORMATION TECHNOLOGY AND LIFE SCIENCE PARK PVT.LTD. HYDERABAD PAN AABCT 3762A (APPELLANT) VERSUS ADDL.COMMISSIONER OF INCOME TAX RANGE 15 (TDS) HYDERABAD (RESPONDENT) APPELLANT BY : SHRI V.RAGHAVENDRA RAO ADVOCATE RESPONDENT BY : SHRI K.V.N.CHARYA DR O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST TH E ORDER PASSED BY THE LEARNED CIT(A)II HYDERABAD 5-1-2010 AND THEY PERTAIN TO THE ASSESSMENT YEARS 2001-02 AND 2002-03. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH ARE COMMON IN BOTH THE APPEALS FOR THE ASSESSMENT YEARS UNDER APPEAL: 1. THE CIT(A) HAS ERRED ON THE FACTS AND IN LAW WH ILE PASSING THE APPELLATE ORDER. 2 2. THE CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO REASONABLE CAUSE FOR NON DEDUCTION OF TAX AT SOURCE. 3. THE CIT(A) HAS ERRED IN HOLDING THAT THE EVENTS AND FACTS SUBSEQUENT TO THE FAILURE TO DEDUCT THE TAX AT SOURCE CANNOT BE TAKEN INTO CONSIDERATION AT ALL FOR FINDING OUT THE REASONABLENESS OF THE CAUSE. 4. THE CIT(A) IS NOT CORRECT IN LAW IN RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF HINDUSTAN VOCA COLA BEVERAGES (P) LTD. (293 ITR 226) WHICH IS NOT RELEVANT TO THE FACTS AND CIRCUMSTANCE S OF THE CASE. 5. THE CIT(A) HAS FAILED TO FOLLOW THE RATIO OF TH E DECISION OF THE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (83 ITR 26). 6. THE CIT(A) HAS ERRED IN HOLDING THAT INITIATION OF PENALTY PROCEEDINGS ARE NOT BARRED BY LIMITATION. HE IGNORED THE JUDICIAL DECISIONS IN THIS REGARD. HE HAS NOT NOTICED THE DECISION OF THE SPECIAL BENCH O F THE ITAT IN THE CASE OF MAHINDRA & MAHINDRA LTD. 7. THE CIT(A) IS NOT CORRECT IN APPLYING THE PROVI SIONS OF SEC. 292BB TO THE FACTS OF THE CASE. THOSE PROVISIONS ARE APPLICABLE ONLY FOR ASSESSMENT PROCEEDINGS AND NOT PENALTY PROCEEDINGS. 8. FOR THESE AND ANY OTHER GROUNDS THAT MAY BE URG ED AT BEFORE THE DATE OF HEARING IT IS PRAYED THAT THE PENALTY U/S 271 C BE DELETED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF PENALTY BY CIT(A) LEVIE D U/S 271C INCOME TAX ACT AT RS.3 36 085/- AND RS.6 94 733/- FOR THE ASSESSM ENT YEAR 2001-02 AND 2002-03 RESPECTIVELY FOR NOT DEDUCTING IN COME TAX FROM INTEREST CREDITED AS REQUIRED U/S 194A OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RECIPIENT OF INTERE ST ARE SISTER CONCERNS OF THE ASSESSEE COMPANY THROUGH SRI C.SRINIVASA R AJU WHO/FAMILY MEMBERS ARE SUBSTANTIAL HOLDERS EITHER DIR ECTLY OR THROUGH OTHER COMPANIES. IT WAS SUBMITTED BY THE LEARNED COUNSE L FOR THE ASSESSEE THAT ALTHOUGH THE INTEREST CREDITED AT THE END OF THE YEAR TO M/S NIMBHA BIO-TECH WAS RS.12 10 174 FOR ASSESSMENT YE AR 2001- 2002 ITS TOTAL INCOME FOR THAT YEAR WAS RS.17 953 AN D TAX PAYABLE WAS RS.7 100/-. INTEREST U/S 234C AND 234B WERE AL SO PAID WHILE PAYING THE SELF-ASSESSMENT TAX AT THE TIME OF FILING THE RETURN. INTEREST CHARGED UNDER SECTION 201(1A) FOR THE SA ME PERIOD 1-4- 3 2001 TO 31-10-2001 AGAINST THE ASSESSEE. THE INCOME OF M /S V. PROJECTS FOR 2001-02 WAS ONLY A LOSS. THE INCOME WAS AT R S.1188 U/S 115JB AND TAX PAYABLE THERE WAS RS.101. REFUND DUE WAS RS.14 859 OUT OF TDS DEDUCTED. THE ASSESSMENT OF M/S VK PROJECTS W AS COMPLETED U/S 143(3) ON A TOTAL INCOME OF RS.23 479 AND TAX PAYABLE WAS RS.9 282 WHICH IS LESS THAN THE TDS OF RS.14 960. LIK EWISE INCOME OF RS.24 164/- OF M/S NIMBHA BIO-TECH PVT. LTD. FOR A SSESSMENT YEAR 2002-03 AND RS.8 626 WAS PAID AS SELF ASSESSMENT TAX. INT EREST CHARGED U/S 201 (1A) WAS PROMPTLY PAID. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS THE FIRST YEAR OF EXISTENCE O F THE ASSESSEE COMPANY. INTEREST CHARGED U/S 201(1A) WAS ALSO PAID PROMPTLY. THIS SHOWS THAT THE CONDUCT OF THE ASSESSEE WAS N OT CONTUMACIOUS BUT VERY COMPLIANT. IT WAS SUBMITTED THAT NO PREJUDICE WAS CAUSED TO THE INTEREST OF THE REVENUE AS INTEREST WAS PAID ON THE TAX PAYABLE BY THE PAYEE ITSELF U/S 234B AND AGAIN BY THE ASSESSEE- PAYER ON THE SAME AMOUNT U/S 201(1A). THE PAYEE DID NOT CLAIM THAT 234B INTEREST WAS NOT ITS LIABILITY AS THE INTEREST INCOM E WAS TAXABLE. ASSESSEES COUNSEL SUBMITTED THAT IN REPLY TO THE SHOW CAUSE N OTICE AS TO WHY PENALTY SHOULD NOT LEVIED FOR FAILURE TO DEDU CT TAX FROM INTEREST CREDITED IT WAS STATED BY THE ASSESSEE THAT FAILURE TO E FFECT TDS WAS INADVERTENT AND NOT INTENTIONAL AND THAT THERE WERE NO MALA FIDES IN NOT DEDUCTING THE TAX. THE EXISTENCE OF REASONABLE CAUSE CAN ALSO BE NOTICED FROM THE FACT THAT THE PAYEE PAID THE TAX DUE WHICH COVERS INTEREST INCOME RECEIVED FROM THE ASSESEE IN DUE TIME WHI LE FILING THE RETURN AND NOT AFTER DISCOVERY BY THE DEPARTMENT AND THE PAYEE IS A SISTER CONCERN OF THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESEE S COUNSEL THAT THE ADDL. CIT WAS NOT RIGHT IN LEVYING PE NALTY IN VIEW OF THE FACTS STATED BY THE ASSESSING OFFICER IN HIS ORDER U/S 201(1A ) THAT INTEREST INCOME WAS ADMITTED IN THE RETURNS FILED BY T HE PAYEE. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A ) ERRED IN PLACING RELIANCE ON THE JUDGEMENT OF THE SUPREME COUR T IN THE CASE OF 4 HINDUSTAN COCA COLA BEVERAGES PVT. LTD. (293 ITR 226) A ND HE SUBMITTED THAT JUDGEMENT IN THE CASE OF ITO VS. MUTTOO T FINANCIERS (286 ITR 71) (AT) (COCHIN) IS APPLICABLE TO THE FACTS O F THE CASE. HE SUBMITTED THAT THIS DECISION OF COCHIN BENCH IS DIRECTLY O N 271C WHILE THE SUPREME COURT DECISION IS ON NON-CHARGEABILITY OF T HE AMOUNT OF DEDUCTED TAX U/S 201 WHERE THE RECIPIENT HAD PAID THE TAX IN REGULAR ASSESSMENT PROCEEDINGS. THE SUPREME COURT ADVERTED TO C BDTS CIRCULAR WHICH ENJOINED THAT DEMAND U/S 201 BE NOT RAI SED IN SUPPORT OF THEIR DECISION REUSING TO PRONOUNCE ON WHETHER DEMAND U/S 201 COULD BE MADE WHERE THE TAX HAD BEEN PAID BY THE RECIPIENT . HE SUBMITTED THAT THE DECISION HAD NOTHING TO DO WITH THE LATER SENTENCE QUOTED BY THE SUPREME COURT FROM THE CIRCULAR. THE CIRCULAR DOES NOT SAY THAT THE PENALTY U/S 271C IS INVARIABLY LEVIABLE WITHOUT CONSID ERING THE REASONABLE CAUSE. RELIANCE ON THIS PART OF THE CIRCULAR I N THE SUPREME COURT JUDGMENT SHOWS THAT THE LEARNED ADDL. CIT LEVIE D PENALTY ONLY BECAUSE IT IS LAWFUL TO DO SO. THIS IS PRECISELY WHAT THE HO NORABLE SUPREME COURT HELD IN THE JUDGEMENT IN THE CASE OF HIN DUSTAN STEEL LTD. V. STATE OF ORISSA (83 IT 26). THE ASSESSEES COUNSEL SUBMITTED THAT THE LEARNED ADDL. CIT OBSERVED THAT SECTION 201 (1A) INTEREST WAS PAID BEFORE FILING UP THE RETURN OF INCOME WHILE COMM ENTING ON THE ORDER OF THE TRIBUNAL IN THE CASE OF MUTTOOT FINANCIER S. THERE APPEARS NO SUCH OBSERVATION IN THE ORDER OF THE COCHIN BENCH. O N THE OTHER HAND AS SUBMITTED ABOVE INTEREST WAS PAID U/S 234B FO R THE SAME PERIOD FOR WHICH INTEREST U/S 201(1A) WAS CHARGED THUS THE ASSESSEE MEETS EVEN THIS REQUIREMENT. AS REGARDS SEC. 44AB REP ORT THE LEARNED ADDL. CIT HAS NOT NOTICED THAT THE ASSESSEE IS NOT COMING UNDER U/S 44AB REPORT REQUIREMENTS AS THE TURNOVER AS LESS THAN RS. 40 LAKHS. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN LEVYING PENALTY AND THAT SUCH LEVY OF PENALTY SHOULD NOT HAVE BEEN SUSTAINED BY THE LD. CIT(A). AS SU BMITTED ABOVE 5 THE ASESSEE HAS REASONABLE CAUSE FOR NOT DEDUCTION TAX AND THERE IS NO CASE FOR LEVYING PENALTY ON APPLYING THE PRINCIPLES OF DECISION OF SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. V. ST ATE OF ORISSA (83 ITR 26). IT WAS SUBMITTED THAT ON THE OTHER HAND THE RATIO OF THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF MAH ADESWARA MOVIES V. CIT (144 ITR 127) IS APPLICABLE BECAUSE THE OMISSION IS INADVERTENT AND NON INTENTIONAL AS IN THAT CASE. SUMMING UP HIS AR GUMENTS LEARNED COUNSEL SUBMITTED THAT THERE IS REASONABLE CAUSE FOR FAILU RE TO DEDUCT TAX AND PENALTY IS NOT LEVIABLE U/S 271C FOR THE FOLL OWING REASONS. A) THERE IS NO CONTUMACIOUS CONDUCT. B) REGULAR TAX WAS PAID BY THE PAYEE SISTER-CONCERN O F THE ASSESSEE ALONG WITH INTEREST U/S 234B ON THE DUE DATE OF FILIN G THE RETURN WITHOUT MAKING ANY CLAIM THAT INTEREST U/S 234B WAS NOT CHARGEAB LE AS THE INCOME WAS TAX-DEDUCTIBLE. AGAIN ASSESSEE PAID INTEREST U/ S 201(1A) FOR THE SAME PERIOD ONCE AGAIN. THUS NO PREJUDICE WAS CAUSED T O THE REVENUE IN TERMS OF TAX AND INTEREST THEREON. C) THE TAX AND INTEREST WERE PAID IN THE USUAL COURSE UN DER THE PROVISIONS OF THE ACT BY THE PAYEES SISTER-CONCERNS WITH OUT AND BEFORE ANY DEMAND FOR TDS U/S 201(1) OF 201(1A) AS MADE. WI PRO GE MEDICAL SYSTEM LTD. V. ITO (30 SOT 627) (BANG) AND INDIA NISS IN FOODS LTD. V. JCIT 3 SOT 495 (BANG) ARE APPLICABLE. D) THIS IS THE FIRST YEAR OF EXISTENCE OF THE ASSESSEE-COMPA NY AND THE OMISSION TO EFFECT TDS WAS INADVERTENT BUT NO INTENTION AL (MAHADESWARA MOVIES V. CIT (144 ITR 127 )(KAR). E) WITHOUT PREJUDICE TO THE ABOVE SUBMISSION INITIAT ION OF 201(1A) PROCEEDINGS AND THE CONSEQUENTIAL PENALTY PROCEEDINGS ARE TIME-BARRED IN VIEW OF THE JUDGEMENT OF THE DELHI BENCH OF TRIBU NAL IN THE CASE OF MISTUBISHI CORPORATION VS. DCIT (86 TTJ 139) AND ALSO HE RELIED JUDGEMENT IN THE CASE OF SAHARA AIRLINES LTD. VS. DCIT (79 TTJ 268). 6 5. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT THE LEARNED CIT(A) WAS RIGHT IN OBSERVI NG THAT THE DEFAULT ON THE PART OF THE ASESSEE FOR FAILURE TO DEDUCT TAX U/ S 194A ON THE INTEREST PAYMENTS TO ITS SISTER CONCERNS CAME TO LIGHT ONLY AFTER SURVEY OPERATIONS U/S 133A OF THE ACT. THAT THE DEFAULT IS SUBSTANTIAL AND HAPPENED YEAR AFTER YEAR. THE ASSESSEE COMPANY BEING C ORPORATE BODY ADVISED BY COMPETENT AND HIGHLY PAID PROFESSIONAL CANN OT PLEAD IGNORANCE OF LAW. THE LD. DR SUBMITTED THAT THE CONTE NTION OF ASSESSEE THAT THE FAILURE TO DEDUCT TAX AS REQUIRED U/S 194A WA S INADVERTENT AND UNINTENTIONAL CANNOT BE ACCEPTED YEAR AFTER YEAR. SECO NDLY THE PAYMENT INVOLVED ARE SUBSTANTIAL AND BY THEMSELVES ARE SUCH AMOUNTS WHICH COULD LEAD TO HUGE TAX LIABILITY. THEREFORE AS A PRUDENT COMPANY IT SHOULD HAVE DEDUCTED TAX AT SOURCE. THE DR SUBMITTED THAT THERE SHOULD BE REASONABLE CAUSE FOR NOT DEDUCTING THE TDS AT THE TIME OF MAKING THAT PAYMENT BY THE ASSESSEE AND SUBSEQUENTLY THA T ENTIRE EXPLANATIONS STATED BY ASSESSEE ALL RELATE TO THE CIRCUMSTAN CES AFTER THE PAYMENTS ARE MADE. THE EXPLANATION OF THE ASSESSEE IS THA T RECIPIENT OF THE AMOUNT AS MADE GOOD THE REVENUE BY FILING THEIR RETURNS OF INCOME AND PAYING THE TAX IS NOT A SUBSTITUTE TO EXPLAIN ITS FAILURE TO DEDUCT TAX AT SOURCE. HE RELIED ON THE JUDGEMENT OF SUPREME COUR T IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. (293 ITR 226) W HEREIN IT WAS HELD THAT IF THE DEDUCTEE MAKES THE PAYMENTS THIS WI LL NOT ALTER THE LIABILITY OF THE ASSESSEE TO PAY INTEREST U/S 201(1A) AND PENALTY U/S 271C. REGARDING THE PENALTY PROCEEDINGS OR TIME B ARRED AS THEY ARE INITIATED BEYOND 4 YEARS OF THE RELEVANT FINANCIAL Y EARS HE SUBMITTED THAT THE PENALTY PROCEEDINGS FOR THE ASSESSMENT YEAR 200 1-02 WERE INITIATED VIDE ADDL. CIT PENALTY NOTICE DATED 25.7. 2007. HE SUBMITTED THAT THERE WAS NO TIME LIMIT PRESCRIBED FOR PASSING THE ORDER U/S 201(1) AND 201(1A) OF THE IT ACT. THE LEVYING OF PENALTY U /S 271C ARE PROVIDED U/S 275. ACCORDING TO CLAUSE ( C ) OF SUB SECTION (1) OF SECTION 275 NO ORDER IMPOSING PENALTY COULD BE PASSED AFTER EXPIRY OF THE FINANCIAL YEAR 7 IN WHICH SUCH PENALTY PROCEEDINGS ARE INITIATED OR SIX M ONTHS FROM THE END OF MONTH IN WHICH ACTION FOR IMPOSITION OF PENALT Y IS INITIATED WHICHEVER PERIOD EXPIRES LATER. HE SUBMITTED THAT IN T HIS CASE PENALTY PROCEEDINGS WERE INITIATED ON 25.7.2007 AND THE PENAL TY ORDER WAS PASSED ON 31.1.2008 AND THE SAME IS THUS WITHIN SIX MON THS OF INITIATION OF PROCEEDINGS AND WELL WITHIN THE LIMITAT ION OF PERIOD. SIMILARLY IN THE CASE OF PENALTY PROCEEDINGS FOR THE ASSESSMENT YEAR 2002-03 ARE INITIATED ON 25.7.2007 AND PENALTY ORDE R PASSED ON 31.1.2008 WHICH IS WITHIN THE SIX MONTHS OF DATE OF IN ITIATION. FURTHER HE SUBMITTED THAT THE ASSESSEE HAS NOT CHALLENGED ORDER PA SSED U/S 201(1) AND 201(1A) AND WHICH WERE DULY ACCEPTED BY TH E ASSESSEE. AS SUCH IT CANNOT CHALLENGE THE VALIDITY OF THE PENALTY ORDER ON TIME LIMIT. HE RELIED ON THE ORDER OF THE TRIBUNAL DELHI BENCH IN THE CASE OF THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LTD. VS. ACIT (2 SOT 389) WHEREIN IT WAS HELD THAT THERE IS NO TIME LIMIT LAID DOWN UNDER THE PROVISIONS OF THE IT ACT PASSING ORDER U/S 201(1) AND 201 (1A) OF THE IT ACT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 194A 201(1) 201(1A) 271C AND 273B OF THE IT ACT. THE A SSESSEE NOT DISPUTED ITS LIABILITY TO DEDUCT TAX U/S 194A OF THE IT ACT. THE ONLY ARGUMENT OF THE ASSESSEE COUNSEL IS THAT THE PENALTY CANNO T BE LEVIED BECAUSE THE TAX LIABILITY IN THE MEANTIME HAS BEEN DISCH ARGED BY THE DEDUCTEE. IN THIS CONNECTION A REFERENCE TO A JUDGEMEN T OF HONBLE SUPREME COURT IN THE CASE OF COCA COLA BEVERAGES (P) LT D. VS. CIT (293 ITR 226). IN SUPPORT OF THE CONTENTION THAT WHEN THE LIABILITY OF THE TAX ON THE PART OF THE DEDUCTEE HAS BEEN DISCHARGED THE VI CARIOUS LIABILITY OF TAX ON THE PART OF THE DEDUCTOR DOES NOT SURVIVE T HE ASSESSEE HAS DERIVED STRENGTH FROM THE SAID DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. (SUPRA ). IN THIS 8 CASE THE HONBLE SUPREME COURT HAS HELD THAT IN VIEW O F CIRCULAR NO.275/201/95-IT(B) DATED 29.1.1997 AND SINCE THE ASS ESSEE HAS PAID THE INTEREST U/S 201(1A) AND THERE WAS NO DISPUTE THAT THE TAX DUE HAD BEEN PAID BY THE DEDUCTEE THE TRIBUNAL CAME TO THE R IGHTLY CONCLUSION THAT THE TAX COULD NOT BE RECOVERED ONCE AGAIN FROM T HE ASSESSEE. THE RELEVANT PORTION OF THE DECISION OF THE HONBLE SUPRE ME COURT IN THIS CASE READS AS UNDER: BE THAT AS IT MAY CIRCULAR NO.275/201/95/IT(B) DA TED 29.1.1997 ISSUED BY THE CBDT IN OUR CONSIDERED OPINION SHOULD PUT AN E ND TO THE CONTROVERSY. THE CIRCULAR DECLARES NO DEMAND VISUALIZED U/S 20 1(1) OF THE ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE O FFICER IN CHARGE OF TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. HOWEVER THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE ASSESSEE OR THE LI ABILITY FOR PENALTY U/S 271C OF THE IT ACT. 7. IN THE INSTANT CASE THE ASSESSEE HAD PAID THE INTERE ST U/S 201(1A) OF THE ACT AND THERE IS NO DISPUTE THAT THE TA X DUE HAD BEEN PAID BY THE DEDUCTEE ASSESSEE. IT IS NOT DISPUTED BEFOR E US THAT THE CIRCULAR IS APPLICABLE TO THE FACTS OF SITUATION ON HAND . ON READING THE AFORESAID DECISION OF THE HONBLE SUPREM E COURT IT IS CLEAR THAT NO DEMAND VISUALIZED U/S 201(1) OF THE ACT SHOULD BE ENFORCED AGAINST THE DEDUCTOR AFTER TAX DEDUCTOR HAS SATI SFIED THAT THE TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. HOWEV ER THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST U/S 201(1A ) OF THE ACT TILL THE PAYMENT OF TAXES BY THE DEDUCTEE OR WILL NOT ALTER T HE LIABILITY FOR PENALTY U/S 271C OF THE ACT. THIS POSITION IS CLEAR FROM THE AFORESAID DECISION OF THE HONBLE SUPREME COURT. THEREFORE MER ELY BECAUSE THE TAXES DUE HAVE IN THE MEANTIME BEEN PAID BY THE DEDU CTEE THIS WOULD NOT ABSOLVE THE ASSESSEE FROM THE LIABILITY OF PENALTY U/S 271C OF THE ACT. IN THIS CONNECTION THE ASSESSEE HAS RELIED UPON OF CO ORDINATE BENCH OF TRIBUNAL AND CONTENDED THAT THERE WILL BE NO REASON FOR LEVY OF PENALTY FOR THE DEFAULT IN NOT DEDUCTING THE TAX AT SOURCE ONCE THE 9 AMOUNTY OF TAX HAS ALREADY BEEN PAID BY THE ASSESSEE DE DUCTEE. THE DECISION OF THE COORDINATE BENCH IN THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD. VS. ITO (2005) 3 SOT 627 (BANGALORE) AND INDO NISSAIN FOODS LTD. VS. JCIT 3 SOT 495 (BANGALORE) WOULD NOT BE RELEVANT IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. (SUPRA). THEREFO RE THE ASSESSEES CONTENTION THAT NO PENALTY U/S 271C SHOULD BE IM POSED FOR THE ASSESSEES ALLEGED DEFAULT IN NOT DEDUCTING THE TAX A T SOURCE SINCE THE TAX LIABILITY HAS ALREADY BEEN DISCHARGED BY THE A SSESSEE DEDUCTEE IS REJECTED. 8. THE ASSESSEE ALSO TAKEN A PLEA THAT ASSESSEE FAILURE TO EFFECT TDS WAS INADVERTENT AND NOT INTENTIONAL AND THAT THE RE WERE NO MALA FIDES IN NOT DEDUCTING THE TDS. IT WAS ALSO STATED BY T HE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT THE EXISTENCE OF REASO NABLE CAUSE CAN ALSO BE NOTICED FROM THE FACT THAT THE PAYEE PAID T HE TAX DUE WHICH COVERS INTEREST INCOME RECEIVED FROM THE ASSESSEE IN DUE TIM E WHILE FILING THE RETURN AND NOT AFTER DISCOVERY BY THE DEPA RTMENT. AND THE PAYEE IS A SISTER CONCERN OF THE ASSESSEE. FURTHER IT WAS SUBMITTED THAT THIS IS THE FIRST OF YEAR OF EXISTENCE OF ASSESSEE COMPANY AND RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (83 ITR 26). WE HAVE CAREFULLY CONSIDE RED THIS ARGUMENT. THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY MAT ERIAL TO PROVE THAT THE ASSESSEE WAS UNDER A BONA FIDE BELIEVE TH AT PAYMENT OF INTEREST TAX AT SOURCES WAS NOT DEDUCTIBLE. THE ASSESSEE IS ASSISTED BY PROFESSIONALS ON TAX MATTERS. THE CONTENTION OF THE ASS ESSEE IS THAT THERE IS IGNORANCE OF LAW. THE IGNORANCE OF LAW IS NO EXCUSE AS HELD BY SUPREME COURT IN THE CASE OF MOTILAL PADMAPAT SUGAR MILLS CO. LTD. VS. STATE OF UTTAR PRADESH (118 ITR 326) (SC) . ALSO HEL D IN THE CASE OF R.M. DONDE ITO VS. MUKUNDRAI KUBERDAS KATAKIA (176 I TR 381) (BOMBAY) HELD THAT THE WORDS THE REASONABLE CAUSE WO ULD NOT TAKE IN 10 ITS SWEEP AN ERROR OR MISCONCEPTION OF LAW. THEREFORE THE CONTENTION OF THE LEARNED AR OF THE ASSESSEE THAT THERE WAS A CONFUSION ABOUT THE NATURE OF SO CALLED PAYMENT OF INTEREST CANNOT BE TREAT ED AS REASONABLE CAUSE THAT ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE T AX AT SOURCES WAS NOT DEDUCTIBLE. THIS CANNOT BE A REASONABLE CAUSE FOR NON DEDUCTION OF TAX U/S. FURTHER THE PROVISIONS OF SEC. 2 71C IS EVEN APPLICABLE TO THE ASSESSEE WHO IS IN FIRST YEAR OF OPERAT ION. THE STATUTE DOES NOT MAKE ANY DIFFERENCE WHETHER ASSESSEE IS IN FIRST Y EAR OR OTHERWISE. THERE IS NOTHING ON RECORD TO SHOW THAT THE MISTAKE WAS ACCIDENTAL OR INADVERTENT. 9. NEXT ARGUMENT OF THE ASSESSEE IS THAT THE PENALTY PROCEEDINGS TIME BARRED IS ALSO CANNOT BE CONSIDERED IN VI EW OF THE JUDGEMENT OF ITAT DELHI BENCH IN THE CASE OF THAI AIR WAYS INTERNATIONAL PUBLIC COMPANY LTD. VS. ACIT (2005) (2 SOT 389) WHER EIN IT WAS HELD THAT THERE WAS NOT TIME LIMIT LAID DOWN UNDER THE PR OVISIONS OF IT ACT FOR PASSING PENALTY ORDER. IN VIEW OF THE ABOVE DISCUSSION W E DISMISS THE APPEALS OF THE ASSESSEE. 10. IN THE RESULT THE APPEALS OF THE ASSESSEES ARE DI SMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 23 : 4.201 0 SD/- SD/- G.C.GUPTA CHANDRA POJARI VICE PRESIDENT ACCOUNTANT MEMBER DT/- 23 RD APRIL 2010 *VNR 11 COPY FORWARDED TO: 1. M/S ILABS INFORMATION TECHNOLOGY & LIFE SCIENCE PART (P) LTD. PLOT 18 SOFTWARE UNIT LAYOUR MADHAPUR HYDERABAD. 2 ADDL. CIT RANGE 15 (TDS) HYDERABAD 3 4. C.I.T (A)-II HYDERABAD. CIT A P. HYDERABAD. 5. THE D.R. ITAT HYDERABAD.