1 ITA Nos.354 & 355/Nag/2015 IN INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. Nos. 354 & 355/Nag/2015 Assessment Years : 2013-14 & 2014-15. Income-tax Officer, Shri Sanmatikumar J. Jain, (TDS), Ward-2(3), Nagpur. Vs. Nagpur. PAN AASPJ3968L. Appellant. Respondent. Appellant by : Shri A.R. Ninawe. Respondent by : Shri Mahavir Atal. Date of Hearing : 10-10-2016 Date of Pronouncement : 13th Oct., 2016 O R D E R. These appeals by Revenue are directed against common order of learned CIT(Appeals)-II, Nagpur dated 21-10-2015 and pertain to assessment years 2013-14 and 2014-15. common grounds of appeal read as under: 1. On facts and in circumstances of case Ld. CIT(A) erred in deleting penalty u/s 272(2)(j) of IT Act of Rs.34,10,500/- and Rs.3,61,900/- levied for A.Y. 2013-14 & 2014-15 respectively. 2. On facts and in circumstances of case Ld. CIT(A) erred in considering unsubstantiated claims of assessee that he was ignorant of law without appreciating that assessee made voluminous representations on various legal issues in appellate proceedings thereby rendering such claim incorrect. 3. On facts and in circumstances of case Ld. CIT(A) erred in holding that there is reasonable cause for default whereas assessee could not make out reasonable cause for said default by substantiating claims with any cogent evidence/. 4. On facts and in circumstances of case Ld CIT(A) erred in not appreciating that eventhough assessee collected form no. 2 ITA Nos.354 & 355/Nag/2015 27C as per provisions of law, through negligence he did not deposit same with prescribed authority which is default of acting in conscious disregard of his legal obligations as held by Hon ble Supreme Court in case of Hindustan Steel Ltd. (1972) 83 ITR. 2. Brief facts of case are that it was noted by AO that spot verification was conducted at business premises of assessee on 29-08- 2013 and during said spot verification it was noticed that assessee deductor was not collecting tax on sale of coal in view of him having collected Form No. 27C. AO further noted that assessee deductor had not submitted said Form No. 27C to CCIT / CIT as per provision of Rule 37C of I.T. Rules, 1962. AO came to conclusion that penalty u/s 272A(2)(i) of I.T. Act was imposable on assessee in view of facts of case and he therefore imposed penalty of Rs.34,10,500/- and Rs.3,61,900/- for assessment years 2013-14 and 2014-15. 3. Upon assessee s appeal, learned CIT(Appeals) observed as under : 8. I have considered facts of case and submission of appellant. I find substantial force in submissions made. spot verification was conducted by TDS Wing of Department at business premises of appellant on 29-08-2013 and during course of same it was noted that appellant on 29-08-2013 and during course of same it was noted that appellant had not made any TCS in view of fact that buyer of goods had furnished declarations in Form No. 27C. penalty has been imposed in view of fact that appellant has not submitted said Form No. 27C certificates received from buyers to CCIT / CIT within stipulated time. There is merit in argument of appellant that provision of collecting Tax at Source on sale of coal was new provision which came into effect on 01-07-2012 and assessment year under consideration [viz. AYs 2013- 14 and 2014-15] were assessment years immediately succeeding new enactment. Before said amendment in Finance Act, 2012 there was no provision in I.T. Act requiring appellant to collect Tax at Source while selling coal. Thus there is merit in contention of appellant that since said insertion of new provision came into effect on 01-07-2012, appellant did not immediately become aware of all aspects of new provision and consequently said certificates ncould not be submitted before specified authority within stipulated time. 3 ITA Nos.354 & 355/Nag/2015 It cannot be ignored that appellant that is resident of Chandrapur district which is backward area and immediately availability of information/knowledge and related practices in respect of new provisions does not become immediately available. Thus is is evident that there did exist reasonable cause when appellant states that Chandrapur is s small town and that he was not aware of statutory requirement of submission of said Form No. 27C to CCIT / CIT within stipulated time. 9. It is also important to note that once spot verification was conducted at business premises of appellant and it was brought to notice of appellant that certificates should have been submitted to CIT, appellant soon thereafter submitted all Form Nos. 27C to O/c. CIT(TDS) on 21st October, 2013. It is accepted fact that all Form Nos. 27C were in possession of appellant at time of survey. It is also fact that said forms were duly submitted by appellant before various authorities when he came to know of statutory requirement that said forms should be submitted to Income Tax Authorities. Perusal of records shows that appellant submitted said Form Nos. 27C to O/c. CIT(TDS) on 21st October, 2013 and twice before ITO, TDS Ward 2(3), Chandrapur on 25th Nov ember, 2013 and 18th December, 2013. Thus appellant, before imposition of this penalty order, had submitted said Forms Nos. 27C to tax authorities. 10. Also, from facts of case i is evident that said default of appellant is neither deliberate nor intentional. No malafide intention is contained therein as appellant did not derive any benefit whatsoever by collecting said Form No. 27 and not filing same before Competent Authority before stipulated date. There is adequate judicial authority wherein it has been held that, in such circumstances, penalty is not imposable. 4. Learned CIT(Appeals) further placed reliance upon several case laws and concluded as under : Taking into consideration facts of case as well as above legal pronouncements it is evident that delay in filing said Form No. 27C certificates before due date, even if categorised as negligence on part of appellant, it can only be considered as technical or venial breach of law fo which penalty cannot be levied automatically. In case under consideration it is important to note that appellant is operating out of small town of Chandrapur which is backward area of 4 ITA Nos.354 & 355/Nag/2015 Maharashtra and appellant cannot be subject to penalty because he was not immediately aware of new provisions of law which has been inserted into statute from 01-07-2012 only. requirement of submitting said Form No. 27C certificates to CCIT/CIT was new one for appellant and this being first year of submitting said Forms, appellant cannot be visited with said huge penalty for said default which is basically technical in nature duly supported by reasonable cause. It is important to note that ld. AO has not been able to make out case that there was malafide intention at end of appellant for not submitting said Forms and it can be safely concluded that default is neither deliberate nor intentional as appellant could not have derived any benefit whatsoever by not filing said Form No. 27C in time [though same were in his possession]. In order to determine existence or absence of any guilty intention on part of assessee, one will have to consider all surrounding facts and circumstances. It will have to be examined as to whether by committing any default of non- compliance with statutory provision of law, assessee has derived any benefit, gain or advantage or whether by such default or non- compliance assessee has defrauded revenue or has caused any loss to revenue. These are some of factors which will have to be seriously considered before considering fact as to whether ignorance on part of assessee can constitute valid excuse or reasonable cause for purposes of section 273B in relation to alleged default specified in section 272A(2)(i). In present case, assessee has not derived any gain, benefit or advantage by delayed submission of said Forms. revenue has also not suffered any loss. ld. AO has brought no material on record to prove that assessee had delayed furnishing of copy of Forms with any ulterior motive. In such circumstances, I am of view that delay of submitting said Form No. 27C is supported by reasosnable cause and hence penalty imposed by Ld. AO of Rs.34,10,500/- and Rs.3,61,900/- for A.Yrs. 2013-14 and 2014-15 are hereby cancelled. 5. Against above order, Revenue is in appeal before ITAT. 6. I have heard both counsel and perused records. I find that section 272A(2)(j) provides for penalty, if person fails to deliver or cause to be delivered in due time copy of declaration referred to in sub-section (1A) of section 206C. 7. Section 206C provides for collection of tax at source when assessee 5 ITA Nos.354 & 355/Nag/2015 sales certain specified goods. Section 206C(1A) provides exception to this provision as under : Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in case of buyer, who is resident in India, if such buyer furnishes to person responsible for collecting tax, declaration in writing in duplicate in prescribed form and verified in prescribed manner to effect that goods referred to in column (2) of aforesaid Table are to be utilised for purposes of manufacturing, processing or producing articles or things [or for purposes of generation of power] and not for trading purposes. above declaration has to be in Form No. 27C. 8. Now it is Revenue s case that Forms No. 27C were not submitted in due time. As against above it is assessee s contention that concerned amendment to Act had come during financial year and assessee was ignorant of provision of Act. That assessee had duly obtained Form No. 27C. That assessee had furnished same to ITO before penalty was levied. Now in background of aforesaid submissions I find that it is undisputed fact that Form No. 27C certificates have been duly obtained. No liability for collection of tax at source fastened on assessee in view of Form No. 27C certificates veracity of which has not been disputed by Revenue. It is also undisputed that concerned amendment/provision of Act was introduced during said assessment year. In these circumstances assessee s plea that assessee was ignorant of provisions and when he came to know same before levy of penalty, he has duly submitted Form No. 27C certificates to Income-tax Officer. In such situation, in my considered opinion, default is only technical or venial breach and assessee s conduct cannot be said to contumacious so as to warrant levy of penalty. decision of larger Bench of Hon ble Apex Court comprising of three of their lordships in Hindustan Steel Ltd. 83 ITR 26 fully applies to facts of this case. I may gainfully refer to exposition as under : 6 ITA Nos.354 & 355/Nag/2015 order imposing penalty for failure to carry out statutory obligation is result of quasi-criminal proceeding, and penalty will not ordinarily be imposed unless party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform statutory obligation is matter of discretion of authority to be exercised judicially and on consideration of all relevant circumstances. Even if minimum penalty is prescribed, authority competent to impose penalty will be justified in refusing to impose penalty, when there is technical or venial breach of provisions of Act or where breach flows from bona fide belief that offender is not liable to act in manner prescribed by statute. Accordingly I do not find any infirmity in order of learned CIT(Appeals). Hence I uphold same. 9. In result, these appeals filed by Revenue stand dismissed. Order pronounced in Open Court on this 13th day of Oct., 2016. Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER. Nagpur, Dated: 13th Oct. , 2016. 7 ITA Nos.354 & 355/Nag/2015 Copy forwarded to : 1. Shri Sanmatikumar Jain, 283, Abdeo Lane, Mahal, Nagpur-440002. 2. I.T.O., (TDS), Ward-2(3), Nagpur. 3. C.I.T.- (TDS), Nagpur. 4. CIT(Appeals), -II, Nagpur. 5. D.R., ITAT, Nagpur. 6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Nagpur Bench, Nagpur. Wakode. Income-tax Officer, (TDS), Ward-2(3), Nagpur v. Sanmatikumar J. Jain