IN INCOME TAX APPELLATE TRIBUNAL, B BENCH, KOLKATA Before Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member I.T.A. No. 2191/Kol/2013 A.Y: 2008-09 (1 s t Qtr) I.T.A. No. 2192/Kol/2013 A.Y: 2008-09 (3 r d Qtr) I.T.A. No. 2193/Kol/2013 A.Y: 2008-09 (4 t h Qtr) Advance Multisystem Vs. I.T.O (TDS), Broadband Communications Hooghly Pvt. Ltd PAN: AAECA 6502C (Appellant) (Respondent) Appearances by: Shri Soumitra Choudhury, Advocate, ld.AR for assessee Shri P.K. Chakraborty, JCIT, ld.Sr.DR Date of hearing : 28-07- 2016 Date of pronouncement : 19-10-2016 O R D E R Shri S.S. Viswanethra Ravi, JM :- These three appeals by Assessee are directed against separate orders of Commissioner of Income Tax (Appeals), Kolkata all dated 17-05-2013 for assessment year 2008-09 (1 s t qtr, 3 r d qtr & 4 t h qtr), wherein he confirmed penalty order passed by AO u/s. 221/201(1A) r.w.s. 194A and 194C of Act. 2. Since issues involved in all appeals are common, therefore, they are heard together and consolidated order is being passed for sake of convenience. ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 1 3. In these appeals, Assessee has raised following common grounds of appeal for assessment year (1 s t qtr/ 3 r d qtr and 4 t h qtr) under consideration:- 4. Brief facts of this case are that assessee is private limited company and engaged in business of cable operator and broadband services. During proceedings u/s. 221/201(1A) AO found that assessee deducted TDS amount to extent of Rs.1,78,368/- u/s. 194A/194C of Act and deposited same beyond due date. AO ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 2 further found that assessee deposited interest thereon, which also paid u/s. 201(1A) of Act beyond due date. Thereby AO initiated penalty proceedings u/s. 221/201(1A). Against which, assessee submitted its written submissions on 08-03-2010 stating that delay was occurred due to mistake of account clerk of assessee company in depositing TDS was in respect of various amounts on different dates and urged before AO to drop penalty proceedings u/s. 221 by not treating assessee in default in terms of provisions of section 201. However, AO initiated penalty proceedings u/s. 221/201(1A) r.w.s 194A/194C and imposed penalty of Rs.35,000, Rs.40,000/- and Rs.40,000/- for first quarter, third quarter and fourth quarter of AY 2008-09 respectively. 5. Aggrieved by such order of AO in imposing impugned penalty assessee challenged same before CIT-A and contended same submissions as made before AO. CIT-A found that penalty imposed @ 20% by AO is reasonable being assessee in default for depositing TDS. Accordingly, he confirmed same. 6. Aggrieved by such order of CIT-A, now assessee is in appeal before us by raising above mentioned common grounds of appeal in all three appeals. 7. Before us Ld.AR submits that AO did not issue notice as required u/s. 201(1A) of Act stating that assessee was in default for non payment of TDS in time. He further submits that delay was occurred due to clerical ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 3 mistake of account clerk of assessee. In support of his contentions relied on order of Tribunal Kolkata in case of Royal Calcutta Turf Club Vs. DCIT reported in (2001) 76 ITD 237 (Cal). ld.AR further submits that assessee paid interest for non depositing TDS in time, which is penal in nature and again imposing penalty u/s 221 of Act is bad in law and liable to be cancelled. 8. In reply, Ld.DR submits that assessee having deducted TDS and deposited same beyond due date. AO considered same by treating assessee is in default for TDS payment in time. He further argued that it is gross violation of provisions of I.T Act. assessee defeated purpose of legislature to which provisions are incorporated to deter and penalise default. 9. We have heard rival submissions and perused material available on record. It is observed that assessee has deposited interest u/s. 201(1A) and urged before AO not to initiate any proceedings u/s. 221 of Act. It is clear that assessee has deposited TDS amounts after due date and paid interest thereon. Section 221 of Act empowers AO to impose penalty for any continuing default. assessee should be in continuing default in making payment of tax, in addition to amount of arrears and amount of interest payable under sub-section (2) of section 220. In instant case, assessee had deposited TDS amount and interest thereon for such default before initiation of penalty proceedings. When assessee had deposited TDS and interest thereon, then assessee was not in default for such TDS payment and no penalty can be imposed u/s. 221 of Act. We find that support from order of Co-ordinate ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 4 Bench of Tribunal in case of supra held that penalty can be imposed u/s. 221 when assessee remains to be in default after passing order u/s. 201(1) of Act. relevant portion of which is reproduced hereunder for sake clarity:- 17. We find that assessee has been treated to be in default in respect of same items over and again and penalty under section 221 has also been levied in respect of same default in addition to penalty under section 271C. Firstly, basis for levy of penalty in respect of first two items already stands quashed away by our decision as above. Secondly, we fail to understand how assessee can be considered to be in default in respect of making payment of tax deducted at source like this, so far as provisions of section 221 are concerned. ITO as well as CIT(A) has stated in this connection that there is nothing in Income-tax Act to show that provisions of sections 271C and 221 are mutually exclusive. It is required to be stated in this connection that section 221 will apply to such cases only where default is in respect of making payment of tax. In instant case, default is in respect of deduction of tax at source and deposit of same. In our view, provisions of section 221 would apply only when tax is levied on assessee and thereafter he remains in default in paying tax. So far as instant case is concerned, once order under section 201 (1) was passed by ITO and if thereafter also assessee continued to remain in default, in such cases alone, question of levying penalty under section 221 could have arisen. Hence, we feel that levy of penalty under section 221, in instant case, has been totally illegal. From this angle also, we cancel penalty order passed under section 221. 10. In view of our above discussion, we are of view that order u/s. 221 of Act passed by AO is misconceived and liable to be held as invalid and penalty imposed for 1 s t Qtr for 2008-09, 3 r d Qtr 2008-09 and 4 t h Qtr 2008-09 of Rs.35,000/-, Rs.40,000/- and Rs.40,000/- respectively are hereby cancelled. Therefore, grounds raised by assessee in all appeals for 1 s t qtr, 3 r d qtr and 4 t h qtr of AY 2008-09 are allowed. ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 5 11. In result, all appeals filed by assessee are allowed. Order Pronounced in Open Court on 19 t h October,2016. Sd/- Sd/- WASEEM AHMEED S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19 /10/2016 Copy of order forwarded to:- 1. Appellant/Assessee : M/s. Advance Multisystem Broadband Communications Pvt. Ltd, Bankim Kanan, Chinsurah Station Road, Chinsurah, Hooghly. 2. Respondent/Department: Income Tax Officer (TDS), G.T Road, Chinsurah-712101. 3. CIT 4. CIT(A) 5. Departmental Representative 6. Guard File True Copy By order Assistant Registrar ** PRADIP SPS Income Tax Appellate Tribunal Kolkata benches, Kolkata ITA Nos. 2191 to 2193/Kol/13 Advance Multisystem Broadband Commns.P.Ltd 6 Advance Multisystem Broadband Communications Pvt. Ltd v. I.T.O (TDS), Hooghly