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TMI Blog2019 (3) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the bills, the assessee is making the payments to the contractor duly deducting the tax at source and remitting to the Govt. account and no default is committed. From verification of the account copy of M/s S.V.Constructions, we observe that the assessee has continuously supplied and material and there was no payment made by the assessee to the contractor till 31.12.2013. However, on 31.12.2013, the assessee passed a journal entry for a sum of ₹ 3,21,77,600/- against which the material supplied was ₹ 5,96,72,210/-. Since the assessee had duly deducted the tax at source u/s 194C as at the end of the year and remitted to the Govt. account, the assessee’s case is squarely covered by the decision in the case of CIT-XVIII, De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee) has passed the entries for supply of materials/payments from time to time without making TDS as required u/s 194C of the Act. The AO observed that the assessee debited the account of S.V.Constructions for ₹ 5,96,72,209/- during the period from 01.04.2013 to 31.12.2013 but not deducted the TDS as required u/s 194C of the Act. It is also found that the M/s S.V.Constructions (Sub contractor) executed the works to the extent of ₹ 3,21,77,612/- and raised the bills which was credited in the sub-contractors account 31.12.2013. It is observed that the deductee has executed the works to the extent of ₹ 3,21,77,612/-which was adjusted against the materials supply. The AO asked the assessee to explain as to why the deductor( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) found that the AO had arrived at the liability of ₹ 11.93 lakhs for the assessee s default u/s 201(1) of the Act @2% on the payments made till 31.03.2013 at 5.97 crores, where as the Addl.CIT(TDS) levied the penalty of ₹ 20,28,670/- which is inconsistent with the payments made without deduction of TDS. As per the provisions of section 271C, the penalty to be levied should not exceed the amount of tax which the person failed to deduct or paid, thus the penalty should not exceed ₹ 11.93 lakhs (i.e. the amount of TDS for which the assessee was in default. Against the TDS default of ₹ 5.97 crores, the liability works out to ₹ 11.93 lakhs against which the penalty levied was ₹ 20.28 lakhs). The discrepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of ₹ 5,96,72,210/- which is to be excluded from the payments made to the deductee to arrive at the TDS liability as per section 194C(1)(3) of the Act. After reducing the material supply from the payments made the TDS liability has worked out to Rs.Nil and the assessee did not make the TDS. The AO treated the material supply also as contract works and accordingly treated the assessee as the assessee in default for the payments made to the contractor to the extent of ₹ 5,96,72,710/- and raised the demand u/s 201(1) of the Act for a sum of ₹ 11,93,443/-. The Addl.CIT while levying the penalty u/s 271C considered the total payment of ₹ 10,14,59,577/- for the period from 01.04.2013 to 31.03.2014 and accordingly levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is unjustified and in violation of the provisions of section 271C of the Act. The Ld.AR also relied on the decision of Hon ble Supreme Court in the case of CIT-XVIII, Delhi Vs. Bank of Nova Scotia and argued that on similar facts, the appeal of the revenue was dismissed by the ITAT Delhi and held that having paid the tax u/s 201(1) and the compensatory interest u/s 201(1A), the assessee should not be treated as assessee in default for levying penalty u/s 271-C and Hon ble Supreme Court has upheld the order of the Hon ble Delhi High Court holding that there is no substantive question of law. In the instant case, on going through the paper book page No.7, the show cause notice issued by the Addl.CIT, it is observed that the Addl.CIT spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed a journal entry for a sum of ₹ 3,21,77,600/- against which the material supplied was ₹ 5,96,72,210/-. Since the assessee had duly deducted the tax at source u/s 194C as at the end of the year and remitted to the Govt. account, the assessee s case is squarely covered by the decision in the case of CIT-XVIII, Delhi Vs. Bank of Nova Scotia in Civil Appeal No.1704 of 2008 of Hon ble Apex court. Relevant part of the order of the Hon ble Supreme Court with reference to the above appeal is as under : 2. The matter was pursued by the Revenue before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 31.03.2006 entered the following findings: 11..We have carefully considered the rival su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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