2018 (5) TMI 1252 - AT - Income Tax

Penalty u/s 271C - failure to collect TCS - reasonable cause - assessee in default in respect of sale only within the meaning of section 201(1) and has not treated the assessee as assessee in default for collection of TCS in respect of sale - Held that - The assessee has satisfied the Assessing Officer that tax have been paid by the deducted / assessee in respect of sale of 12, 40, 93, 199. It is only in respect of balance amount of sale of 54, 83, 410 the assessee could not satisfy the Assessing Officer and the assessee has been treated as assessee in default under section 201(1) of the Act. In these circumstances we agree with the learned Commissioner (Appeals) that once the assessee has been held to be not an assessee in default with reference to sale amount of 12, 40, 93, 199 there is no justification of levying penalty in respect of sale amounting to 12, 40, 93, 199 and only the levy of penalty in respect of an amount of 54, 83, 410 remains. The assessee has submitted the extant legal opinion of an Advocate of Hon ble Supreme Court who had opined that the assessee was not liable to collect the TCS on the items it dealt with. Similarly the assessee has referred to the correspondence with the Assessing Officer seeking clarification from time to time. Hence it can be reasonably construed that the assessee s case falls under the ambit of section 273B of the Act which is attributable for non collection of TCS by the assessee due to his bonafide belief that the cut to size planks of timber logs are not liable to TCS. Furthermore we find that the decision referred to by the learned Counsel for assessee in support of his case are germane and support the case of the assessee - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of penalty under section 271CA of the Income Tax Act for assessment years 2010-11, 2011-12, and 2012-13.
2. Determination of reasonable cause for the default in non-collection of TCS.
3. Applicability of section 201(1) and section 273B of the Income Tax Act.

Detailed Analysis:

1. Deletion of Penalty under Section 271CA:
The Revenue raised concerns that the learned CIT(A) erred in deleting the penalty under section 271CA for the assessment years 2010-11, 2011-12, and 2012-13. The penalty amounts were ?16,97,450, ?23,24,297, and ?32,39,415 respectively. The Revenue argued that the penalty is mandatory unless the assessee proves a reasonable cause for the default. The assessee, engaged in the timber business, failed to collect TCS from buyers as required under section 206C. The Assessing Officer (AO) had accepted the assessee's contention for part of the sales based on confirmations and ITR acknowledgments from deductees but treated the assessee in default for the remaining sales.

2. Reasonable Cause for Default:
The CIT(A) deleted the penalty by observing that the AO had accepted the assessee's explanation for a substantial portion of the sales, treating the assessee as not in default for ?12,40,93,199 based on the Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd. The AO treated the assessee as in default only for the remaining ?54,83,410. The CIT(A) noted that the penalty under section 271CA is not mandatory and depends on the facts and circumstances of each case. The CIT(A) found that the assessee had a bona fide belief, based on a Ministry of Finance notification and legal opinion, that TCS was not applicable on processed timber planks. The assessee relied on CBDT Circular No. 660 and sought clarifications from the Department, which were not provided. The CIT(A) concluded that the bona fide belief constituted a reasonable cause under section 273B, justifying the deletion of the penalty.

3. Applicability of Section 201(1) and Section 273B:
The Tribunal found that the AO had treated the assessee as in default only for ?54,83,410 and not for ?12,40,93,199, based on confirmations from the TAN holder. The Tribunal agreed with the CIT(A) that the penalty could only be considered for the amount for which the assessee was treated as in default. The Tribunal noted that the assessee had a reasonable cause for non-compliance, supported by legal opinion and correspondence with the AO. The Tribunal referred to several judicial decisions supporting the assessee's case, including the Supreme Court's decision in Hindustan Steel Ltd., which held that penalty should not be imposed if the assessee's conduct is not contumacious. The Tribunal affirmed the CIT(A)'s order deleting the penalty for all assessment years under consideration.

Conclusion:
The Tribunal dismissed the Revenue's appeals for assessment years 2010-11, 2011-12, and 2012-13, affirming the CIT(A)'s order deleting the penalty under section 271CA. The Tribunal found that the assessee had a reasonable cause for non-collection of TCS and that the penalty was not justified for the substantial portion of sales where the assessee was not treated as in default.