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TMI Blog2016 (8) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... t is of the view that the above question requires to be reframed. Background facts 4. The background facts require to be narrated. The Appellant is engaged in the business of manufacture and sale of soft drinks. On 11th November 1998 it entered into an agreement with M/s Pradeep Oil Corporation ('POC') for warehousing services. In terms of the said agreement, a copy of which has been placed on record, POC was described as 'warehouser' i.e. a licensee in respect of the railway land of 96750 sq. ft at 13 km, Rohtak Road, Shakur Basti, Delhi on which POC had constructed a warehouse of constructed area of 47000 sq. ft. The agreement was for a period of three years with a renewal clause at the option of the Appellant. 5. In terms of the agreement, the POC agreed to warehouse the products of the Appellant either owned by the Appellant or its authorized representatives/dealers. During the period of agreement the Appellant's trucks not less than 300 trucks per day were to be handled by POC, for which the Appellant was to pay warehousing service charges to POC at a minimum rate of Rs. 37,000 per day irrespective of the actual number of trucks carrying the products for handling p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to have deducted TDS under Section 194-I of the Act and that there was no bona fide plea/reasonable cause for the Appellant to deduct TDS under Section 194-C of the Act. 11. The above order of the ITAT dated 12th July 2002 was affirmed by this Court by order dated 21st May 2004 in ITA No. 282 of 2002. The Court was of the view that no substantial question of law arose from the impugned order dated 12th July 2002 of the ITAT. However, the Court clarified that the ITAT was not required to give findings on the issue relating to bonafide belief/reasonable cause and therefore the said observations were of no consequence. 12. With the above order of this Court dated 21st May 2004, the litigation concerning the quantum proceedings came to an end. Appellant 's application under Section 254 (2) 13. On 17th August 2004, the Appellant filed an application, being Misc. A No. 287/Del/2004, under Section 254(2) of the Act before the ITAT. The application was purportedly for "rectification of mistake apparent from the record" in the ITAT's order dated 12th July 2002. The Appellant contended that the ITAT had in its order failed to consider its alternative plea that POC had already pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that "the conclusion reached by the subsequent Bench of the Tribunal, different from the one that passed the first order, to the effect that the Tribunal had failed to deal with this aspect is, in our view, based on an incorrect reading of the first order. Certainly, this cannot be characterised as a mistake, much less a mistake apparent from the record justifying a 'rectification' of the first order." The order dated 13th September 2004 passed by the ITAT was set aside. 17. Aggrieved by the above order of this Court, the Appellant went in appeal to the Supreme Court by filing Civil Appeal No. 3765 of 2007. 18. In the meanwhile, on 18th January 2005, the ITAT modified its order dated 12th July 2002, as regards Ground No.7 and held that since POC had already paid taxes on the amounts received from the Appellant, no tax could be recovered from the Appellant under Section 201(1) of the Act. Supreme Court's order 19. Civil Appeal No. 3765 of 2007 filed by the Appellant against the order dated 11th October 2006 passed by this Court was allowed by the Supreme Court in Hindustan Coco Cola Beverage (P) Ltd. v. Commissioner of Income Tax (2007) 293 ITR 226 (SC). The Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum proceedings as regards the Appellant's obligation to deduct TDS under Section 194-I, as against Section 194-C of the Act, it was not open to the Appellant to re-agitate that issue in the penalty proceedings. However, the question framed by the Court gives the Appellant a second shot at the same question with reference to Clauses 11 and 12 of the warehousing agreement entered into between the Appellant and POC. This was perhaps premised on the decision of the Supreme Court in CIT v. Anwar Ali (1970) 76 ITR 696 (SC), where it was held that the finding given in the assessment proceedings for determining or computing tax could not said to be conclusive as far as the penalty proceedings were concerned. However, it was good evidence. It was observed that before penalty could be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. Why the question in this appeal needs to be re-framed 23. However, as far as the present case is concerned, the question whether the Appellant was ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penalty for failure to deduct tax at source - (1) If any person fails to- (a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or (b) pay the whole or any part of the tax as required by or under- (i) sub-section (2) of section 115-O; or (ii) the second proviso to section 194B, then, such person shall 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." 25. The order passed under Section 201 (1) is not an assessment order. The order is directed against a person who fails to deduct TDS and is deemed to be an 'Assessee in default'. Correspondingly, the penalty under Section 271C of the Act is attracted where the person has failed to deduct the whole or any part of the TDS "as required by or under the provisions of Chapter XVII-B". It is like a no-fault liability. The AO is not in such event required to examine, as he would under Section 271(1)(c) of the Act, whether the Assessee had concealed the particulars of income or furnished inaccurate parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cause for the failure to deduct TDS under Section 194-I of the Act. Accordingly, the question framed by this Court by its order dated 5th September 2005 is re-framed as under: "Whether in the facts and circumstances of the case, the Appellant has been able to show, for the purposes of Section 271C read with Section 273B of the Act that there was reasonable cause for the failure to deduct TDS under Section 194-I of the Act?" Submissions of counsel 31. Mr. Vohra submitted that the issue whether the TDS had to be deducted from the warehouse charges under Section 194-C or Section 194-I of the Act was a debatable one. He referred to Circular No. 736 dated 13th February 1996 issued by the CBDT clarifying that Section 194-I would not be attracted to the sharing of the proceedings of a film between a film distributor and a film exhibitor owning a cinema theatre. It was clarified that the distributor did not take the building on lease, sub-tenancy or under any agreement of similar nature. Mr. Vohra also referred to Circular No. 1/2008 dated 10th January 2008 regarding applicability of Section 194-I to payments made by the customers on account of cooling charges to the cold stor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Mitsui & Co. Ltd. (2005) 272 ITR 545 (Del) and Azadi Bachao Andolan v. Union of India (2001) 252 ITR 471 (Del). Discussion and Reasons 33. Under Section 273-B of the Act, no penalty under Section 271-C of the Act "shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for the said failure." A perusal of the impugned orders of the CIT(A) and the ITAT in the penalty proceedings reveals that neither of the said authorities considered the issue whether in fact there was reasonable cause for the Appellant to not have deducted TDS under Section 194-I of the Act. The ITAT on its part appears to have relied on the order passed by it on 12th July 2002 in the quantum proceedings, where it commented on the lack of bona fide plea/reasonable cause for the Appellant to deduct TDS under Section 194-C of the Act. This part of the order of the ITAT was in fact commented upon by this Court in its order dated 21st May 2004 while declining to frame a question of law in the appeal filed by the Assessee. The Court, however, clarified that the observations of the ITAT relating to bona fide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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