M/s. Classic Concepts Home India Pvt. Ltd. v. The Commissioner of Income-tax, Ernakulam, Kochi
[Citation -2015-LL-0521-4]

Citation 2015-LL-0521-4
Appellant Name M/s. Classic Concepts Home India Pvt. Ltd.
Respondent Name The Commissioner of Income-tax, Ernakulam, Kochi
Court HIGH COURT OF KERALA AT ERNAKULAM
Relevant Act Income-tax
Date of Order 21/05/2015
Judgment View Judgment
Keyword Tags imposition of penalty • deduct tax at source • barred by limitation • financial hardship • working capital • demand notice • cash flow
Bot Summary: Ii) in the facts and circumstances of the case, should not the Statutory Authorities and the Appellate Tribunal has found that there was reasonable cause for the delay in remitting the tax and that no penalty was exigible u/S 271C since the entire tax along with interest was remitted long before the initiation of penalty proceedings iii) is not the order Annexure A barred by limitation on account of inordinate delay iv) should not the Appellate Tribunal have found that the judgment in the case of M/S U.S.Technologies International Ltd.'s case no penalty is exigible u/s 271C when the entire I.T.A.Nos. 89, 90, 91 92 of 2015 : 2 : TDS amount and interest was remitted before initiation of penalty proceedings v) did not the Appellate Tribunal err in law in failing to consider the financial hardship urged before the Statutory Authority and the Appellate Tribunal and consider the reasonable cause urged before it vi) did not the Appellate Tribunal err in law in failing to appreciate that mere delay in remittance of TDS amount resulted in warranting levy of penalty when there was reasonable cause for the delay vii) is not the order Annexure A erroneous and unsustainable in law for failure to apply the correct principles of law in regard to the levy of penalty 2. Counsel for the appellant referred to Section 273B of the Act authorising the officer to waive or reduce the penalty if the defaulted assessee proves that there was reasonable cause for such failure which attracts penalty. 89, 90, 91 92 of 2015 : 4 : Tribunal has not considered challenge against quantum of penalty in so much details probably because in the penalty order it is stated that only minimum penalty is levied. Further, if full amount of tax with interest was paid before levy of penalty, we feel quantum reduction is called for by the AO. Therefore, we direct the AO to reconsider the quantum of penalty by giving one more opportunity to the assessee to furnish facts in the light of our observations above. The appeal is accordingly disposed of upholding the order of the Tribunal on the levy of penalty, but with direction to the AO to grant further reduction in penalty, if any new fact or circumstance is brought to the notice of the AO based on observations above or otherwise in terms of Section 273B of the Act. In so far as paragraph 16.5 of the Circular 551 relied on by the learned counsel for the appellant is concerned, the relevant paragraph reads thus: 16.5 Insertion of a new Section 271C to provide for levy of penalty for failure to deduct tax at source-Under the old provisions of Chapter XXI of the Income Tax Act no penalty was provided for failure to deduct tax at source.


IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT: HONOURABLE MR.JUSTICE ANTONY DOMINIC & HONOURABLE MR. JUSTICE SHAJI P.CHALY THURSDAY, 21ST DAY OF MAY 2015/31ST VAISAKHA, 1937 I.T.A.No. 90 of 2015 AGAINST ORDER IN ITA 470/2014 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 09-01-2015 APPELLANT/APPELLANT/ASSESSEE: M/S.CLASSIC CONCEPTS HOME INDIA PVT. LTD VI/565, IDA, EDAYAR BINANIPURAM P.O, EDAYAR ALUVA-683 502 REPRESENTED BY ITS MANAGEER (HR) SHRI VINOD KUMAR SINGH BY ADVS.SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN RESPONDENT/REVENUE: COMMISSIONER OF INCOME TAX ERNAKULAM CENTRAL REVENUE BUILDING, I.S PRESS ROAD KOCHI 682 018 R BY P.K.R.MENON (SR.) R BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 21-05-2015, ALONG WITH ITA 89/15 AND CONNECTED CASES COURT ON SAME DAY DELIVERED FOLLOWING: I.T.A.No. 90 of 2015 APPENDIX PETITIONER'S ANNEXURES: ANNEXURE A: TRUE COPY OF ORDER DATED 15.11.2013 ISSUED BY ADDL. COMMISSIONER OF INCOME TAX (TDS), ERNAKULAM ALONG WITH DEMAND NOTICE FOR AY 2010-2011. ANNEXURE B: TRUE COPY OF APPELLATE ORDER DATED 28.8.2014 IN ITA NO.18/TDS/EKM/CIT(A)-III/13-14 OF CIT(A), KOCHI FOR AY 2010-11. ANNEXURE C: TRUE COPY OF COMMON ORDER IN I.T.A.NO.470/COCH/2014 AND CONNECTED APPEALS DATED 9.1.2015 OF ITAT,COCHIN BENCH FOR AY 2010-11. // True Copy // P.A. To Judge ANTONY DOMINIC & SHAJI P. CHALY, JJ. -------- -------------------------- I.T.A.Nos.89, 90, 91 & 92 of 2015 -------- -------------------------- Dated this 21st day of May, 2015 JUDGMENT Antony Dominic, J. These appeals are filed by appellant challenging orders concurrently passed by authorities under Income Tax Act including Tribunal upholding levy of penalty under Section 271C of Income Tax Act. In this background, appellant has raised following questions of law under Section 260A of Income Tax Act, 1961 for consideration of this Court: i) did not Appellate Tribunal err in law in proceeding on assumption that there was continuous delay of four years and belated deposit of deducted amount every year showed assessee as willful defaulter. ii) in facts and circumstances of case, should not Statutory Authorities and Appellate Tribunal has found that there was reasonable cause for delay in remitting tax and that no penalty was exigible u/S 271C since entire tax along with interest was remitted long before initiation of penalty proceedings? iii) is not order Annexure barred by limitation on account of inordinate delay? iv) should not Appellate Tribunal have found that judgment in case of M/S U.S.Technologies International (P) Ltd.'s case no penalty is exigible u/s 271C when entire I.T.A.Nos.89, 90, 91 & 92 of 2015 : 2 : TDS amount and interest was remitted before initiation of penalty proceedings? v) did not Appellate Tribunal err in law in failing to consider financial hardship urged before Statutory Authority and Appellate Tribunal and consider reasonable cause urged before it? vi) did not Appellate Tribunal err in law in failing to appreciate that mere delay in remittance of TDS amount resulted in warranting levy of penalty when there was reasonable cause for delay? vii) is not order Annexure erroneous and unsustainable in law for failure to apply correct principles of law in regard to levy of penalty? 2. We heard Senior Counsel for appellant and Standing Counsel appearing for respondent. 3. Admittedly, it is case where tax was deducted at source and was remitted belatedly. It was in such factual background that proceedings were initiated and penalty was levied under Section 271C of Income Tax Act. In order to sustain appeals filed, learned Senior Counsel for appellant referred us to provisions of Section 271C and contented that there was no willful or deliberate delay attracting penalty provisions under Section 271C. He also placed I.T.A.Nos.89, 90, 91 & 92 of 2015 : 3 : reliance on judgment of this Court in U.S. Technologies International (P) Limited v. Commissioner of Income Tax [(2010) 195 TAXMAN 323 (Ker)]. Learned counsel also placed reliance on Section 276B and Circular No.551 dated 23.1.1990. 4. Having considered submissions made, we confess our inability to accept case of appellant. As we have already noticed, it is admitted case of parties that tax was deducted at source and same was remitted belatedly, though with interest. In such case, provisions of Section 271C of Income Tax Act are fully applicable. In so far as judgment of this Court in U.S. Technologies International Private Limited (supra) is concerned, what is relevant is paragraph 4 thereof which reads thus: next question to be considered is quantum of penalty which in this case is above Rs.1.1 crore. Counsel for appellant referred to Section 273B of Act authorising officer to waive or reduce penalty if defaulted assessee proves that there was reasonable cause for such failure which attracts penalty. Standing Counsel has referred to findings on cash flow and application of funds by assessee for other purposes and contended that there was no reasonable cause justifying failure on part of assessee. He has further contended that even for earlier year assessee had remitted recovered tax with delay. In our view, I.T.A.Nos.89, 90, 91 & 92 of 2015 : 4 : Tribunal has not considered challenge against quantum of penalty in so much details probably because in penalty order it is stated that only minimum penalty is levied. So far as failure on part of assessee to remit tax recovered at source is concerned, we do not think there can be any justifying circumstance for delay in remittance because assessee cannot divert tax recovered for Government towards working capital or any other purpose. So much so, in our view, defence available under Section 273B does not cover failure in payment of recovered tax. However, if there is failure to remit on account of failure to recover for any reason whatsoever, then case calls for reduction of penalty, if not waiver. Similarly, we feel recovery and remittance of tax, though with delay but with interest, before detection is certainly mitigating circumstance for waiver or reduction of penalty. Further, if full amount of tax with interest was paid before levy of penalty, we feel quantum reduction is called for by AO. Therefore, we direct AO to reconsider quantum of penalty by giving one more opportunity to assessee to furnish facts in light of our observations above. appeal is accordingly disposed of upholding order of Tribunal on levy of penalty, but with direction to AO to grant further reduction in penalty, if any new fact or circumstance is brought to notice of AO based on observations above or otherwise in terms of Section 273B of Act. 5. Reading of above paragraph shows that even Section 273B, providing for waiver or reduction of penalty is not attracted in case where tax is deducted and not remitted to revenue. Therefore, I.T.A.Nos.89, 90, 91 & 92 of 2015 : 5 : judgment in U.S. Technologies International Private Limited (supra), in our view, does not support case of appellant in any manner. 6. In so far as paragraph 16.5 of Circular 551 relied on by learned counsel for appellant is concerned, relevant paragraph reads thus: 16.5 Insertion of new Section 271C to provide for levy of penalty for failure to deduct tax at source--Under old provisions of Chapter XXI of Income Tax Act no penalty was provided for failure to deduct tax at source. This default, however, attracted prosecution under provisions of Section 276B, which prescribed punishment for failure to deduct tax at source or after deducting, failure to pay same to Govt. It was decided that first part of default, i.e. failure to deduct tax at source should be made liable to liable to levy of penalty, while second part of default, i.e., failure to pay tax deducted at source to Govt. which is more serious offence, should continue to attract prosecution. Amending Act, 1987 has accordingly inserted new section 271C to provide for imposition of penalty on any person who fails to deduct tax at source as required under provisions of Chapter XVIIB of Act. penalty is of sum equal to amount of tax which should have been deducted at source. 7. Reading of this paragraph also shows that provisions thereof have no relevance in so far as case of appellant is concerned. I.T.A.Nos.89, 90, 91 & 92 of 2015 : 6 : 8. In our view, authorities were fully justified in levying penalty under Section 271C and in facts and circumstances of case, we do not find any question of law arising in these appeals to be considered by this Court under Section 260A of Income Tax Act. Appeals are dismissed. Sd/- ANTONY DOMINIC JUDGE Sd/- SHAJI P. CHALY JUDGE jes M/s. Classic Concepts Home India Pvt. Ltd. v. Commissioner of Income-tax, Ernakulam, Kochi
Report Error