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TMI Blog2016 (5) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ent : Manjit Singh ORDER Annapurna Mehrotra (Accountant Member) 1. These four appeals have been filed by the assessee against the order of the Commissioner of Income-tax (Appeals), Shimla, Himachal Pradesh, dated October 29, 2014, in each case, for the assessment year 2007-08 to 2010-11 upholding the levy of penalty under section 271C of the Income-tax Act, 1961. 2. The brief facts of the case are that the assessee is a company incorporated under the Electricity Act and engaged in generation, transmission and distribution of power in the State of Himachal Pradesh. The assessee is engaged in purchasing/selling power from Power Grid Corporation of India Ltd. and is also selling power to consumers. Power is transmitted through transmission network of PGCIL and the assessee makes payment on account of wheeling charges, SLDC, transmission charges to the payee company, i.e., PGCIL. 3. TDS inspection/survey under section 133A of the Income-tax Act was conducted at the business premises of the assessee on February 11, 2009, during the course of which it was noticed that the assessee had made payments of transmission charges to PGCIL without deducting tax at source. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the case of Hindustan Coca Cola Beverage P. Ltd. v. CIT [2007] 293 ITR 226 (SC) holding that the assessee may not be liable under section 201(1) and section 201(1A). However complete reading of judgment reveals that the hon'ble apex court in this case has endorsed the provisions of section 271C with a view that section 201 deals with the tax demand on behalf of deductee whereas the failure to deduct is liable to be penalised under section 271C independently. 5.3 The assessee placed reliance on Asst. CIT v. Good Health Plan Ltd. (I.T.A. No. 155/Hyd/2013) of the Income-tax Appellate Tribunal, Hyderabad, in this respect the judgment is not from jurisdictional Tribunal and the facts of the case are different from the facts of the assessee's case. Moreover, it is pointed out that Chapter XVII-B starts from section 192 to section 206CA. Mere non-violation of section 201 does not exonerate the assessee as deductor to deduct tax within the specific provisions of sections 192, 194, 194A, etc. Failure to deduct tax invokes two types of sections one section like 201, where the assessee-deductor is treated as assessee-in-default on behalf of tax liability of deductee and seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, since the assessee was not an assessee-in-default as per section 201(1) of the Act, the penalty under section 271C could not be imposed. The learned authorised representative placed reliance in the case of Asst. CIT v. Good Health Plan Ltd. (I. T. A. No. 155/Hyd/2013). 8. The learned authorised representative further stated that the assessee had not deducted tax at source under a bona fide belief. The learned authorised representative stated that as per the agreement entered into with PGCIL, the tariff was to be decided by the Central Electricity Regulatory Commission (CERC), and as per clause 7 of the regulation of the CERC, tax on incomes of generating companies or transmission licences was to be computed as an expense and recovered from beneficiary. The learned authorised representative stated that in view of the same PGCIL had collected all due taxes from the assessee in the various bills raised on it for the relevant assessment years. Therefore, the learned authorised representative stated that the assessee was under the bona fide belief that since it has already paid taxes to PGCIL any further tax deduction at source would only amount to double taxation, and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 15. A bare perusal of the provision reveals that penalty under section 271C is levied for failure to deduct tax as required by the provisions of Chapter XVII-B of the Income-tax Act, 1961, and the same is quantified as being equal to the amount of tax which such person fails to deduct or pay as stated in the provision. 16. Chapter XVII-B which deals with the provisions relating to tax deduction at source, outlines the incomes on which the provision applies and other procedural aspects of TDS. Section 201, which is part of Chapter XVII-B, states that in case of default in deduction of tax at source or payment of the same, the person responsible shall be treated as an assessee-in-default. The first proviso to section 201 states that if returns have been filed by the recipient of income and he has computed tax liability and has paid the tax, the payer referred to under section 201 of the Act shall not be treated as assessee-in-default, meaning thereby that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied in the present case. 19. Moreover, the fact that the tax on the impugned sums had been reimbursed to PGCIL has not been controverted by the Revenue. In such circumstances, the belief harboured by the assessee that by deducting further TDS, it would tantamount to double taxation, appears to be a reasonable and bona fide belief. The hon'ble Delhi High Court in the case of Woodward Governor India P. Ltd. v. CIT [2002] 253 ITR 745 (Delhi) has explained the term reasonable cause as follows (page 748) : 'Reasonable cause' as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man placed in the position of the person concerned to come to the conclusion that 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 consequences follow. 20. In view of the same we find no meri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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