The ACIT, TDS Range-2,, Visakhapatnam v. M/s Vaibhav Empire P Ltd,, Visakhapatnam

ITA 78/VIZ/2007 | 2005-2006
Pronouncement Date: 04-03-2010 | Result: Dismissed

Appeal Details

RSA Number 7825314 RSA 2007
Assessee PAN AABCV8928J
Bench Visakhapatnam
Appeal Number ITA 78/VIZ/2007
Duration Of Justice 2 year(s) 11 month(s) 6 day(s)
Appellant The ACIT, TDS Range-2,, Visakhapatnam
Respondent M/s Vaibhav Empire P Ltd,, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 04-03-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 04-03-2010
Assessment Year 2005-2006
Appeal Filed On 29-03-2007
Judgment Text
PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.78 & &9/VIZAG/2007 FINANCIAL YEARS: 2004-05 & 2005-06 ACIT(TDS) RANGE-2 VISAKHAPATNAM VS. VAIBHAV EMPIRE (P) LTD. VISAKHAPATNAM (APPELLANT) (RESPONDENT) . PAN NO: AABCV 8928 J APPELLANT BY: SHRI G.S.S. GOPINATH DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI B R BASKARAN ACCOUNTANT MEMBER : THESE TWO APPEALS FILED AT THE INSTANCE OF THE REV ENUE ARE DIRECTED AGAINST THE COMMON ORDER DATED 16-01-2007 PASSED BY THE LD CIT (A)-II VISAKHAPATNAM AND THEY RELATE TO THE FINANCIAL YEAR S 2004-05 AND 2005-06. SINCE THE ISSUES AGITATED IN THESE TWO APPEALS ARE IDENTICAL IN NATURE WE FIND IT CONVENIENT TO DISPOSE THEM OFF BY THIS COMMON ORDER . 2. THE PENALTY OF RS.2 79 053/- AND RS.6 80 750/- L EVIED FOR THE FINANCIAL YEARS 2004-05 AND 2005-06 RESPECTIVELY U/S 271C OF THE ACT HAVING BEEN DELETED BY THE LD CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 3. THE FACTS OF THE CASE ARE STATED IN BRIEF. DURIN G THE FINANCIAL YEAR 2004-05 THE ASSESSEE COMPANY TOOK OVER A PROPRIETARY CONCER N NAMED M/S VAIBHAV JEWELLERS ALONG WITH THE EXISTING STAFFS OF THE PRO PRIETARY CONCERN. THE DEPARTMENT CONDUCTED A TDS INSPECTION AT THE BUSINE SS PREMISES OF THE ASSESSEE ON 03-10-2005. AT THE TIME OF THE INSPECTI ON IT WAS NOTICED THAT THE ASSESSEE HAS MADE CERTAIN PAYMENTS WHICH ARE LIABLE FOR DEDUCTION FOR TAX AT PAGE 2 OF 4 SOURCE U/S 194C AND U/S 194J OF THE ACT. SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX THE TDS OFFICER TREATED THE ASSESSEE AS AN ASS ESSEE IN DEFAULT AND PASSED ORDER U/S 201(1)/201(1A) OF THE ACT. SUBSEQUENTLY P ENALTY PROCEEDINGS WERE INITIATED AND THE JCIT LEVIED PENALTY U/S 271C OF T HE ACT FOR BOTH THE FINANCIAL YEARS STATED ABOVE. THE PENALTY SO LEVIED FOR BOTH THE YEARS WAS DELETED BY THE LD CIT (A) AND HENCE THE REVENUE IS IN APPEAL BEFOR E US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. AS PER SEC.273B OF THE ACT NO PENALTY IS IMPOSSIBLE U/S 2 71C OF THE ACT IF THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR HIS FA ILURE TO ADHERE THE PROVISIONS. THE LD CIT (A) HAS INTERPRETED THE WORDS REASONABL E CAUSE ON THE BASIS OF THE JUDICIAL RULINGS AND HIS OBSERVATIONS ARE EXTRACTED BELOW: 3.1 LEVY OF PENALTY U/S 271C IS NOT AUTOMATIC. BEF ORE LEVYING THE PENALTY THE CONCERNED OFFICER IS REQUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAILURE REFERRED TO IN THE CONCERNED PROVISION; THE SAME WAS WITHOUT REASONABLE CAUSE. THE INITIAL BURD EN IS ON THE ASSESSEE TO SHOW THAT THERE EXISTED REASONABLE CAUS E FOR THE FAILURE. THEREAFTER THE OFFICER DEALING WITH THE M ATTER HAS TO CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASS ESSEE AS REGARDS THE REASON FOR FAILURE WAS ON ACCOUNT OF RE ASONABLE CAUSE. REASONABLE CAUSE AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGE NCE AND ORDINARY PRUDENCE. IT CAN BE DESCRIBED AS PROBABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED UPON REASONABLE GROU NDS OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES WHICH ASSUMI NG THEM TO BE TRUE WOULD REASONABLY LEAD ANY ORDINARILY PRUDENT AND CAUTIOUS MAN PLACED IN THE POSITION OF THE PERSON CONCERNED TO COME TO THE CONCLUSION THAT THE SAME WAS THE RIGHT THING TO DO. THE CAUSE SHOWN HAS TO BE CONSIDERED AND ONLY IF IT IS FOUND TO BE FRIVOLOUS WITHOUT SUBSTANCE OR FOUNDATION THE PRESCRIBED CON SEQUENCES FOLLOW. THIS IS A FAIRLY WELL SETTLED PROPOSITION O F LAW ACCEPTED IN SEVERAL DECISIONS OF VARIOUS COURTS OF WHICH THE AS SESSEE HAS DRAWN SUPPORT FROM THE CASE OF WOODWARD GOVERNOR INDIA PV T. LTD. V CIT & ORS 253 ITR 745 (DEL). 4.1 NOT LET US CONSIDER WHETHER THERE WAS REASONABL E CAUSE FOR THE ASSESSEE FOR NOT COMPLYING WITH THE RELEVANT PROVISIONS. TH E EXPLANATIONS OF THE ASSESSEE WERE THAT THE STAFF OF THE ERSTWHILE PROPRIETARY BU SINESS WERE NOT WELL ACQUAINTED PAGE 3 OF 4 WITH THE PROVISIONS RELATING TO THE TAX DEDUCTION A T SOURCE PARTICULARLY THOSE PROVISIONS WHICH ARE NOT APPLICABLE TO THE INDIVIDU ALS. HENCE THERE WAS OMISSION ON THE PART OF THE ASSESSEE TO DEDUCT THE TAX AT SO URCE U/S 194C AND 194J AS BOTH THE SECTIONS WERE NOT APPLICABLE TO THE PROPRI ETARY CONCERN I.E. INDIVIDUALS. IT WAS FURTHER SUBMITTED THAT THE TAX DEDUCTION WERE MADE U/S 194A 194I AND 192 OF THE ACT AS THE SAID SECTIONS WERE APPLICABL E TO THE INDIVIDUALS. IT WAS FURTHER SUBMITTED THAT ONCE THE LAPSES WERE NOTICED AT THE TIME OF TDS INSPECTION THE COMPANY HAS TAKEN THE CORRECTIVE ST EPS AND APPOINTED A QUALIFIED PERSON TO LOOK AFTER THE INCOME-TAX AND ACCOUNTING MATTERS. ACCORDINGLY THE ASSESSEE HAS SUBMITTED THAT THE DEFAULT WAS NEITHER INTENTIONAL NOR DELIBERATE AND PLEADED FOR DROPPING OF PENALTY PROCEEDINGS. 4.2 THE LD CIT(A) FOUND THE EXPLANATIONS OF THE ASS ESSEE TO BE REASONABLE ONE. THE RELEVANT OBSERVATIONS OF THE LD CIT (A) A RE EXTRACTED AS UNDER: 3.2 IN THE CASE UNDER CONSIDERATION THE APPELLANT C OMPANY EXPLAINED BEFORE THE A.O THAT THE FAILURE TO DEDUCT TAX AT SOURCE IN RESPECT OF PAYMENTS FALLING UNDER A FEW SECTIONS WA S DUE TO LACK OF KNOWLEDGE ON THE PART OF THE STAFF OF THE ERSTWHILE PROPRIETARY CONCERN WHO HAD KNOWLEDGE OF ONLY A FEW PROVISIONS OF THE CHAPTER RELATING TO DEDUCTION OF TAX AT SOURCE. IT IS NOT T HE CASE OF THE JT. CIT THAT THE AFFAIRS OF THE APPELLANT COMPANY WERE NOT MANAGED BY THE SAME STAFF. WHEN THIS FACT IS NOT FOUND TO BE I NCORRECT THERE APPEARS TO BE A REASONABLE CAUSE FOR THE SAID DEFAU LT ON THE PART OF THE APPELLANT. AS THERE WAS A REASONABLE CAUSE IN T HE AFORESAID DEFAULT ON THE PART OF THE APPELLANT IT IS TO BE H ELD THAT THE JT. CIT IS NOT JUSTIFIED IN LEVYING PENALTY U/S 271C OF THE ACT OF RS.2 79 053 AND RS.6 80 750 FOR F.YS 2004-05 AND 2005-06 RESPEC TIVELY. ACCORDINGLY THE ORDERS OF THE JT. CIT LEVYING PENA LTY U/S 271C AS DISCUSSED ABOVE ARE CANCELLED. FURTHER THE ADDL.C IT CONSIDERED THE PROCEEDINGS U/S 272A(2) OF THE ACT WHEREAS THE PENALTY WAS LEVIED FOR BOTH THE YEARS U/S 271C OF THE ACT WHICH EVEN THOUGH NOT FATAL REVEALS NON APPLICATION OF MIND. 5. ON A CAREFUL PERUSAL OF THE FACTS OF THE CASE AN D THE OBSERVATIONS MADE BY THE LD CIT (A) WE NOTICE THAT THE LD CIT (A) HA S CONSIDERED THE EXPLANATIONS FURNISHED BY THE ASSESSEE IN PROPER PERSPECTIVE AND HAS ARRIVED AT THE DECISION PAGE 4 OF 4 THAT THERE WAS A REASONABLE CAUSE FOR THE FAILURE O F THE ASSESSEE TO DEDUCT THE TAX AT SOURCE DURING THE TWO YEARS UNDER CONSIDERAT ION. SINCE THE LD CIT(A) HAS TAKEN A CONSCIOUS DECISION ON THE FACTS AND CIRCUMS TANCES OF THE CASE WE DO NOT FIND ANY INFIRMITY IN HIS DECISION AND ACCORDIN GLY UPHOLD HIS ORDERS. 6. IN THE RESULT BOTH THE APPEALS FILED BY THE REVEN UE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 04-03-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE:4 TH MARCH 2010. COPY TO 1 THE ACIT (TDS) RANGE-2 VISAKHAPATNAM 2 M/S VAIBHAV EMPIRE (P) LTD. A1 PAWN PLAZA DWAR AKANAGAR VISAKHAPATNAM 3 THE CIT - II VISAKHAPATNAM 4 THE CIT(A)-II VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM