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TMI Blog2017 (9) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 of the Income Tax Act, 1961, which only permits rectification of error apparent on the fact of the record?" 3. The background facts are that the Respondent-Assessee was incorporated under the Companies Act, 1956. It has a manufacturing unit at Greater Noida (Uttar Pradesh). It is an admitted position that M/s. Denso Corporation, Japan had, during the period under consideration, deputed technicians to work for the Assessee at its manufacturing unit. These, expatriate technicians are paid salary in rupees by the Assessee apart from the rent free accommodation. The salary paid was debited in the books of the Assessee after deducting tax. 4. A survey was conducted in the premises of the Assessee on 14th November 1998. According to the Department, the Assessee had paid substantial part of the salary and allowances etc. to its expatriate employees in Japan and had kept this amount out of the pale of taxation in India. It was therefore alleged that the Assessee did not comply with Section 192 of the Act under which there was an obligation to deduct tax at source. According to the Department, a sum of Rs. 5,74,10,405 had been failed to be deducted by the Assessee for the aforementione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled from the files inter alia to the effect that the Assessee had not disclosed its tax liability under VDIS fully and correctly; grossing up of tax was not correctly done and the statement of the Managing Director recorded on 10th December 1998 was totally 'evasive'. In para 12 of its order, the CIT (A) set out in a tabular form the obvious mistakes that had occurred when the earlier order dated 29th January 2003 was passed by the CIT (A). Inter alia it was noted that the case of the Assessee was not similar to Marubeni Corporation or Mitusi & Co. The CIT (A) therefore, felt it necessary to rectify the mistakes apparent from the record. It was observed by the CIT (A) as under: "16. The findings given earlier would undergo complete change because the facts mentioned above show that this case did not qualify the first three tests laid down by the Delhi High Court in the case of Azadi Bachao Andolan (mentioned in para 5 above) and the facts of this case are not similar to the facts of the cases cited by the Appellant. These are two important points on which I had decided that the Appellant had a reasonable cause and imposition of penalty was not justified. Another important point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 2nd September 2004 of the ITAT, the Revenue filed these appeals which came up for hearing first on 8th July 2005. Interestingly, on 20th October 2005 Mr. C.S. Aggarwal, learned Senior counsel appearing for the Assessee/Respondent in these appeals and informed the Court that: 'The Revenue has preferred an appeal against the original order passed by the Commissioner deleting the penalty levied upon the Assessee." The said appeal, according to Mr. Aggarwal, was coming up for hearing before the ITAT on 3rd January 2006. In those circumstances, the Court considered it appropriate to adjourn the hearing of these appeals till such time the said appeal was disposed of by the ITAT. 14. What was perhaps not informed to this Court was that those appeals were in fact disposed of by the ITAT on 13th May 2005 itself. By the said order, the ITAT noted that after the survey was conducted, the Assessee voluntarily filed revised its computation of tax and interest on 13th January 1999 without raising any dispute and without waiting for any demand or penalty notice. The ITAT held that in view of the decisions of this Court in Azadi Bachao Andolan (2001) 252 ITR 471 (Del)), and the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the appeal concerning the present Assessee was CA No. 1634 of 2006. The case status available on the website of the Supreme Court shows that the said appeal was disposed of on 25th March 2009. 19. The Supreme Court noted the issue involved in para 8 of its judgment as under: "8. To complete the chronology of events, we may state that in some of the cases herein the Department has levied penalty under Section 271C of the 1961 Act for failure to deduct tax under Section 192(1) from out of Home Salary paid outside India by the Head Office ("HO") to the expatriates deputed to the Branch Office(s) in India which penalty was set aside on the ground that the expatriates exercised dual employment and that there was no obligation on the Branch Office to deduct tax under Section 192(1) on the Home Salary paid by the HO outside India. It was further held that the said Home Salary paid by the HO was not on account of or on behalf of the Branch Office since no deduction was claimed for the salaries paid outside India in computing the income of the Employer and accordingly it was held that no penalty was leviable under Section 271C of the 1961 Act. Against deletion of penalty under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bank of Tokyo Mitsubishi Ltd). In some of the cases, it is undisputed that each of the expatriate employees have paid directly the taxes due on the foreign salary by way of advance tax/self-assessment tax. The tax-deductor Assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the view that in none of the 104 cases penalty was leviable under Section 271C as the respondent in each case has discharged its burden of showing reasonable cause for failure to deduct tax at source." 21. The conclusions reached by the Supreme Court as regards the above issue is to be found in para 39 of the said judgment, which reads as under: "39. For the reasons mentioned hereinabove, however, no penalty proceedings under Section 271C shall be taken in any of these cases as the issue involved was a nascent issue. Accordingly, we quash the penalty proceedings under Section 271C." 22. Specific to 104 cases which were before it, including that of the Respondent-Assessee, the Supreme Court was of the view that in "none of the 104 cases penalty was leviable under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When the Assessee's appeals were taken up for hearing, the Department should have pointed out to the ITAT that its appeals against the order dated 29th January 2003 were pending. 27. Again, when this Court was on 24th March 2006 hearing the Department's appeals against the order dated 13th May 2005 of the ITAT, it was not informed that the present appeals against the ITAT's order dated 2nd September 2004 which had been filed by the Department on 31st January 2005 itself. The Department ought to have requested this Court to hear both sets of appeals together. 28. In light of the fact that the Supreme Court has by its judgment dated 25th March 2009 held on merits that the Respondent-Assessee had discharged the burden of showing reasonable cause for the failure to deduct TDS, the Court is not persuaded to entertain the present appeals. The question that has been framed does not require to be answered for the simple reason that the decision of this Court cannot possibly be contrary to what has been held by the Supreme Court on merits on the question of the liability of the Assessee to pay penalty under Section 271C of the Act. 29. For the aforesaid reasons, the Court declines to ans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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