PORWAL CREATIVE VISION P. LTD, MUMBAI v. ADDL CIT (TDS) RG2, MUMBAI

ITA 5556/MUM/2009 | 2006-2007
Pronouncement Date: 18-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 555619914 RSA 2009
Assessee PAN AACCP2177N
Bench Mumbai
Appeal Number ITA 5556/MUM/2009
Duration Of Justice 1 year(s) 5 month(s) 9 day(s)
Appellant PORWAL CREATIVE VISION P. LTD, MUMBAI
Respondent ADDL CIT (TDS) RG2, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 18-03-2011
Date Of Final Hearing 10-03-2011
Next Hearing Date 10-03-2011
Assessment Year 2006-2007
Appeal Filed On 09-10-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI N.V. VASUDEVAN (JM) & SHRI RAJENDRA SI NGH (AM) I.T.A.NOS.5556 & 5557/MUM/2009 (A.YS. : 2006-07 & 2007-08)) M/S. PORWAL CREATIVE VISION P.LTD. 59 KHADILKAR ROAD NR. MADHAV BHAVAN MUMBAI-400 004. PAN: AACCP2177N VS. ADDL. COMMR. OF INCOME-TAX (TDS) RANGE-2 MUMBAI. APPELLANT RESPONDENT APPELLANT BY S/SHRI H.N. MOTIWALLA & M.P. CHHAJED. RESPONDENT BY SHRI SHR AVAN KUMAR. O R D E R PER RAJENDRA SINGH AM : THESE APPEALS ARE DIRECTED THE ORDERS DATED 26-02- 2008 AND 27-08- 2009 OF CIT(A) FOR THE ASSTT. YEARS 2006-07 AND 200 7-08 RESPECTIVELY IN RESPECT OF PENALTY U/S.272A(2)(C) & (K) OF THE I.T. ACT. AS THE DISPUTE RAISED IN BOTH THE APPEALS IS IDENTICAL THESE APPEALS ARE BE ING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE AO ON EXAMINATION OF RECORDS NOTED THAT THE ASSESSEE HAD NOT FILED THE TDS RETURNS WHICH WERE REQUIRED TO BE FILED AT THE END OF EVERY QUARTER. U NDER THE PROVISIONS OF SEC. 200(3) READ WITH RULE 31A A QUARTERLY STATEMENT O F TDS IN FORM NO.26Q IS REQUIRED TO BE FILED BY THE ASSESSEE BY 15 TH JULY 15 TH OCTOBER 15 TH JANUARY AND 2 15 TH JUNE (FOR LAST QUARTER) OF THE YEAR. THE DELAYS IN SUBMISSION OF TDS RETURNS FOR THE ASSTT. YEAR 2006-07 QUARTERLYWISE WERE COMP ILED BY THE AO AS UNDER : TYPE OF RETURN PERIODICITY TAX DEDUCTED DUE DATE DATE OF FILING DELAY BY DAYS PENALTY (IN RS.) 26Q Q I 59635 31-8-05 14-9-07 744 59635 26Q Q II 56417 15-10-05 14-9-07 699 56417 26Q Q III 89272 16-01-06 14-9-07 606 60600 26Q Q IV 63843 15-06-06 14-9-07 456 45600 TOTAL 2505 2 22 252 2.1 SIMILARLY IN ASSTT. YEAR 2007-08 ALSO THERE W ERE SIMILAR DELAYS IN FILING OF THE TDS RETURNS AS MENTIONED IN THE TABLE BELOW : TYPE OF RETURN PERIODICITY TAX DEDUCTED DUE DATE DATE OF FILING DELAY BY DAYS PENALTY (IN RS.) 26Q Q I 45810 15-7-06 14-09-06 426 42600 26Q Q II 47906 15-10-06 14-09-06 334 33400 26Q Q III 53930 15-1-07 14-09-07 242 24200 26Q Q IV 42654 15-06-07 14-09-07 91 9100 TOTAL 1093 109300 2.2 THE AO THEREFORE ISSUED SHOW NOTICE FOR BOTH THE YEARS TO THE ASSESSEE ASKING IT TO EXPLAIN AS TO WHY PENALTY U/S. 272A(2) (C) & (K) SHOULD NOT BE LEVIED. THE ASSESSEE BY LETTER DATED 14-09-2007 FO R BOTH THE YEARS EXPLAINED THAT THE ASSESSEE HAD ALREADY FILED THE QUARTERLY R ETURNS AND ALSO ENCLOSED THE ACKNOWLEDGEMENT SLIPS FOR FILING THE RETURNS. IT WA S ACCORDINGLY SUBMITTED THAT PENALTY SHOULD BE DROPPED. 3 2.3 THE AO HOWEVER ON EXAMINATION OF THE QUARTERL Y RETURNS NOTED THAT THERE WERE SUBSTANTIAL DELAYS AS MENTIONED IN THE T ABLES ABOVE FOR WHICH THERE WERE NO VALID REASONS. HE THEREFORE IMPOSED PENAL TY @ RS.100/- PER DAY OF DELAY AMOUNTING TO RS.2 22 252/- AND RS.1 09 300/- FOR THE ASSTT. YEARS 2006- 07 & 2007-08 RESPECTIVELY. 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUB MITTED BEFORE THE CIT(A) THAT THE ASSESSEE HAD INCURRED CERTAIN EXPEN SES SUCH AS PROFESSIONAL FEES RENT CONTRACT LABOUR AND COMMISSION WHICH AT TRACTED TDS. THE ASSESSEE WAS INCURRING LOSSES AND THERE WAS FINANCIAL CRISIS AND THEREFORE DUE TO NON- AVAILABILITY OF FUNDS THERE WERE DELAYS IN MAKING T HE PAYMENTS AND FILING THE RETURNS. IT WAS ACCORDINGLY SUBMITTED THAT THERE WA S REASONABLE CAUSE AND PENALTY SHOULD BE DELETED. RELIANCE WAS PLACED ON T HE JUDGMENT OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT V. SHRIR AM MEMORIAL EDUCATION SOCIETY (287 ITR 155) AND THE DECISION OF MUMBAI BE NCH OF TRIBUNAL IN THE CASE OF CREST COMMUNICATION LTD. (11 SOT 47). THE CIT(A) WAS HOWEVER NOT SATISFIED. IT WAS OBSERVED BY HIM THAT THE DELAY WA S ADMITTED. THE ASSESSEE HAD NOT ONLY FAILED TO PAY THE TAXES BUT ALSO DELAY ED THE FILING OF THE RETURNS. THEREFORE THE EXPLANATION OF THE ASSESSEE BASED ON FINANCIAL CRISIS COULD NOT BE ACCEPTED. THE CIT(A) ACCORDINGLY CONFIRMED THE PENA LTY LEVIED FOR BOTH THE YEARS AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE YEARS. 4. BEFORE US THE LD. A.R. FOR THE ASSESSEE SUBMITT ED THAT PENALTY HAD BEEN IMPOSED U/S.272A(2)(C)(K). IT WAS POINTED OUT THAT CLAUSE (C) OF SEC. 272A(2) RELATED TO RETURN/STATEMENT U/S. 133 206 AND 206C. IT WAS POINTED OUT THAT 4 SEC. 206 WAS NOT APPLICABLE AS THE SAME WAS IN FORC E ONLY UPTO 31-03-2005. SEC. 206 RELATED TO COLLECTION OF TAX AND NOT TDS WHEREAS SEC. 133 RELATED TO OTHER PROVISIONS AND NOT TDS. THEREFORE CLAUSE (C) OF SECTION 272A(2) WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT CLAUSE (K) WHICH REQUIRES A PERSON TO DELIVER OR CAUSE TO BE D ELIVERED COPY OF THE STATEMENT WITHIN TIME SPECIFIED U/S. 200(3) WAS AP PLICABLE IN THE CASE OF THE ASSESSEE. UNDER THE PROVISIONS OF SEC. 200(3) READ WITH RULE 31A A PERSON DEDUCTING TAX AT SOURCES IS REQUIRED TO PREPARE A S TATEMENT IN THE PRESCRIBED FORM AND DELIVER THE SAME TO THE PRESCRIBED INCOME- TAX AUTHORITY AFTER PAYING THE TAX DEDUCTED TO THE CREDIT OF THE CENTRAL GOVE RNMENT. IT WAS POINTED OUT THAT RETURN U/S.200(3) COULD BE FILED ONLY AFTER PA YING THE TAXES. THEREFORE PENALTY IF ANY COULD BE LEVIED ONLY IN RESPECT OF DELAY AFTER PAYMENT OF TAX. AS REGARDS THE DELAY IN PAYMENT OF TAX IT WAS SUBMITT ED THAT THE ASSESSEE HAD SEVERE FINANCIAL DIFFICULTIES. HE REFERRED TO THE P & L A/C. AND BALANCE-SHEET FOR THE YEAR ENDED 31-03-2010 TO POINT OUT THAT THE ASS ESSEE WAS INCURRING LOSSES AND THERE WERE SUBSTANTIAL LIABILITIES ON ACCOUNT O F SUNDRY CREDITORS. THE ASSESSEE HAD DEDUCTED TAX AT THE TIME OF CREDIT OF THE AMOUNT IN THE BOOKS OF ACCOUNT AND PAYMENT COULD NOT BE MADE DUE TO FINANC IAL DIFFICULTIES. THE ASSESSEE HAD HOWEVER SUBSEQUENTLY PAID THE AMOUNT AND ALSO FILED TDS RETURNS. IT WAS THEREFORE REQUESTED THAT PENALTY SHOULD NOT BE LEVIED. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPO RT OF THIS PLEA : (1) 106 ITD 558 (MUM.) IN THE CASE OF CREST COMMUNI CATION LTD. VS. ADDL. DIT. (2) 11 TTJ 386 (BOM.) IN THE CASE OF 3 RD ITO VS. BOMBAY CABLE CO. P. LTD. AND (3) 9 TTJ 442 (MADRAS) IN THE CASE OF R. KARUPPASWA MY VS. 2 ND ITO. 5 4.1 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THESE ORDERS. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY UNDER SECTION 272A(2)(C)(K). THE PENALTY HAS BEEN LEVIED FOR NOT SUBMITTING THE QUARTERLY RETURNS FOR TAX DEDUCTED AT SOURCE (TDS) WITHIN THE PRESCRIBED TIME LIMIT. WE HAVE GONE THROUGH THE RELEVANT LEGAL PROVISIONS. THE LEARNED AR FOR THE ASSESSEE HAS RIGHTLY POINTED OUT THAT CLAUSE (C) OF SECTION 272A (2) IS NOT APPLICABLE AS THE SAME RELATES TO RETURN/ STATEMENT UNDER SECTION 133 206 AND 206C. THE SECTION 206 WAS IN FORCE ONLY UP TO 31.3.2005 AND T HEREFORE IS NOT APPLICABLE IN CASE OF THE ASSESSEE. THE SECTION 206 RELATED TO CO LLECTION OF TAX AND NOT TDS WHEREAS SECTION 133 WAS ALSO UNRELATED TO TDS AND T HEREFORE THESE SECTIONS ARE NOT APPLICABLE. THE CLAUSE (K) OF SECTION 272A( 2) IS HOWEVER FOUND APPLICABLE IN CASE OF THE ASSESSEE WHICH REQUIRES A PERSON TO DELIVER OR CAUSED TO BE DELIVERED COPY OF THE STATEMENT AS SPECIFIED UNDER SECTION 200(3). UNDER THE PROVISIONS OF SECTION 200(3) R.W.R.31A A PERSON DEDUCTING TAX AT SOURCE IS REQUIRED TO PREPARE A STATEMENT IN THE PRESCRIBED F ORM BEING THE FORM NO.26Q AND DELIVER THE SAME TO THE PRESCRIBED INCOME-TAX A UTHORITIES AFTER PAYING THE TAX DEDUCTED TO THE CREDIT OF CENTRAL GOVERNMENT. T HE SAID SECTION 200(3) IS REPRODUCED BELOW AS A READY REFERENCE. 200(3) ANY PERSON DEDUCTING ANY SUM ON OR AFTER T HE FIRST DAY OF APRIL 2005 IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THIS CHAPTER OR AS THE CASE MAY BE ANY PERSON BEING AN EMPLOYER REFER RED TO IN SUB SECTION (1A) OF SECTION 192 SHALL AFTER PAYING THE TAX DEDUCTED TO THE CREDIT OF THE CENTRAL GOVERNMENT WITHIN THE PRESCRI BED TIME PREPARE 6 SUCH STATEMENT FOR SUCH PERIOD AS MAY BE PRESCRIBED AND DELIVER OR CAUSED TO BE DELIVERED TO THE PRESCRIBED INCOME TAX AUTHORITY OR THE PERSON AUTHORIZED BY SUCH AUTHORITY SUCH STATEMENT IN SUCH FORM AND VERIFIED IN SUCH MANNER AND SETTING FORTH SUCH PART ICULARS AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. 6. THUS UNDER THE PROVISIONS OF SECTION 200(3) AFOR ESAID R.W.R. 31A A QUARTERLY STATEMENT OF TDS IN FORM NO.26Q IS REQUIR ED TO BE FILED BY THE ASSESSEE BY 15 TH JULY 15 TH OCTOBER 15 TH JANUARY AND 15 TH JUNE (LAST QUARTER OF THE YEAR). IN THIS CASE THERE HAS BEEN DELAY IN BOT H THE YEARS AS INDICATED BY THE AO IN THE TABLE REPRODUCED AT PAGE 2 OF THIS OR DER. THE PENALTY HAS THEREFORE BEEN LEVIED @ RS.100/- PER DAY OF DEFAULT IS STARTING FROM THE DUE DATE TO THE DATE OF FILING THE QUARTERLY RETURN. TH E CASE OF THE ASSESSEE IS THAT IT HAD DEDUCTED THE TDS AT THE TIME OF CREDITING AMOUN TS IN THE BOOKS OF ACCOUNT AND THE PAYMENT COULD NOT BE MADE DUE TO FINANCIAL DIFFICULTIES AND SINCE THE PAYMENTS HAD NOT BEEN MADE THE TDS RETURNS COULD NO T BE FILED AS THE SAME REQUIRED DATA RELATING TO PAYMENT OF TDS. THE LEARN ED AR HAS ALSO ARGUED THAT PENALTY UNDER SECTION 272A(2)(K) COULD BE LEVIED ON LY FROM THE DATE OF PAYMENT OF TAX AS THE STATEMENT UNDER SECTION 200(3 ) IS REQUIRED TO BE FILED ONLY AFTER PAYMENT OF TAX TO THE CENTRAL GOVERNMENT . WE FIND FORCE IN THE ARGUMENT ADVANCED BY THE LEARNED AR. SECTION 200(3) WHICH HAS BEEN REPRODUCED EARLIER CLEARLY PROVIDES THAT AFTER PAYI NG THE TAX DEDUCTED TO THE CREDIT OF CENTRAL GOVERNMENT WITHIN THE PRESCRIBED TIME THE ASSESSEE SHALL PREPARE A STATEMENT AS PRESCRIBED AND SUBMIT TO THE AUTHORITY CONCERNED WITHIN THE PRESCRIBED TIME LIMIT. THE ASSESSEE THER EFORE CAN FILE THE RETURN ONLY AFTER PAYING THE TAX TO THE CENTRAL GOVERNMENT. THE QUARTERLY RETURNS OF TDS REQUIRE FILLING OF DATA RELATING TO PAYMENT OF TAXE S AND THEREFORE SUCH RETURNS 7 COULD BE FILED ONLY AFTER PAYING THE TAX TO THE CEN TRAL GOVERNMENT. THEREFORE IN OUR VIEW PENALTY HAS TO BE LEVIED FOR THE DELAY ONL Y FROM THE DATE OF PAYING THE TAX TO THE CENTRAL GOVERNMENT. 6.1 AS REGARDS THE DEFAULT IN NOT PAYING THE TAX T O THE CENTRAL GOVERNMENT IN TIME OR FOR NON DEDUCTING THE TAX AT SOURCE THE RE ARE OTHER PROVISIONS FOR ENSURING COMPLIANCE. IN CASE THE ASSESSEE FAILS TO DEDUCT THE TAX AT SOURCE OR AFTER DEDUCTING FAILS TO PAY THE SAME TO THE CENTRA L GOVERNMENT THE ASSESSEE IS DEEMED TO BE IN DEFAULT UNDER SECTION 201(1) AND IS LIABLE FOR PENALTY. THE ASSESSEE IS ALSO LIABLE TO PAY INTEREST FOR THE PER IOD OF DEFAULT TILL THE PAYMENT OF TAX UNDER SECTION 201(1A). THEREFORE IN OUR VIEW THE PERIOD FOR LEVYING THE PENALTY HAS TO BE COUNTED FROM THE DATE OF PAYMENT OF TAX BECAUSE THE DELAY IN FILING THE RETURN TILL THE DATE OF PAYMENT OF TAX I S ALREADY EXPLAINED ON THE GROUND THAT THE ASSESSEE COULD NOT PAY THE TAXES FO R WHICH SEPARATE PENAL PROVISIONS EXIST. THE ASSESSEE HAS ALSO EXPLAINED T HE REASONS FOR NOT PAYING THE TAX TO THE CENTRAL GOVERNMENT IN TIME WHICH WAS BECAUSE OF FINANCIAL DIFFICULTIES. THE ASSESSEE HAS FILED THE COPIES OF P & L ACCOUNT AND BALANCE SHEET TO SUBSTANTIATE THE CLAIM THAT IT WAS INCURRI NG LOSSES AND THERE WERE SUBSTANTIAL LIABILITIES ON ACCOUNT OF CREDITORS. TH E ASSESSEE HAS PLACED RELIANCE ON SOME DECISIONS OF THE TRIBUNAL IN WHICH FINANCIA L DIFFICULTIES HAVE BEEN ACCEPTED AS REASONABLE CAUSE FOR DEFAULT IN PAYMENT OF TAX. THE MADRAS BENCH OF THE TRIBUNAL IN CASE OF R.KARUPPASWAMY VS 2 ND ITO (9 TTJ 442) HAD CANCELLED THE PENALTY LEVIED FOR DEFAULT IN PAYMENT OF SELF A SSESSMENT TAX ON THE GROUND PAUCITY OF FUNDS. SIMILARLY THE BOMBAY BENCH OF THE TRIBUNAL IN CASE OF 3 RD ITO VS BOMBAY CABLE CO. PVT.LTD. (11 TTJ 386) HAD UPHEL D THE DROPPING OF PENALTY PROCEEDING AND DELETION OF INTEREST LEVIED UNDER SE CTION 201(1A) FOR FAILURE TO DEPOSIT THE TDS WITH CENTRAL GOVERNMENT ON THE GROU ND OF FINANCIAL DIFFICULTIES. 8 ONCE THE DELAY IN PAYMENT OF TAX IS EXPLAINED SATIS FACTORILY PENALTY UNDER SECTION 272A(2)(K) FOR THE PERIOD TILL PAYMENT OF T AXES CANNOT BE LEVIED IN OUR OPINION. 7. IN VIEW OF THE FOREGOING DISCUSSION WE HOLD THAT PENALTY UNDER SECTION 272A(2)(K) SHALL BE LEVIED ONLY FOR THE DELAY FROM THE DATE OF PAYMENT OF TAXES BY THE ASSESSEE. THE ORDER OF CIT(A) IS MODIFIED AC CORDINGLY. 8. IN THE RESULT APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED IN TERMS OF THE ORDER ABOVE. 9. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 18.03.2011. SD/- SD/- ( N.V.VASUDEVAN ) (RAJENDR A SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 18.03.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR C BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK