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TMI Blog2023 (10) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine and bona fide decision of the assessee not to deduct tax u/s 194H. Hence there was a reasonable cause as provided u/s 273B of the Act to have not deducted TDS on these transactions. No doubt assessee has not specifically submitted before the Tax Authorities that non-deduction of tax at source was based on it's understanding of provisions of section 194H of the Act, which in turn constitutes a 'reasonable cause'. But the fact remains that by the time the assessee was under obligation to deduct tax at source for the AYS under consideration, there were judgments in favour of assessee and even after the decisions of Hon'ble Delhi High Court and Kerala High Court, Hon'ble Karnataka High Court had taken a different view of the matter which implies that non- deduction of tax was based on such understanding of relevant provisions of the Act in which event penalty is not imposable u/s 271C of the Act. We therefore set aside the order passed by AO as well as Ld CIT (A) on this aspect and hold that penalty u/s 271C is not imposable, in the circumstances of the case. Decided in favour of assessee. - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Indore tribunal deleted levy of penalty since substantial question of law in context of the subject issue was pending before the High Court. 3.1 The Ld. CIT(A) erred in not following the decision of jurisdictional ITAT in the case of Shri Yugal Kishore Jajoo (ITA No. 272/Ind/2011) wherein the Hon'ble bench relying upon the decision of Hon'ble Delhi High Court in matter of CIT vs Liquid Investment and Trading Co., deleted the penalty levied since substantial question of law is pending before the High Court. 4. Without prejudice, the penalty levied by the Ld. JCIT for FY 2006- 07 is barred by limitation within the provisions of section 275(1)(a). 5. Without prejudice, the penalty levied by the Ld. JCIT for F.Y. 2006- 07 is bad in law as no penalty was initiated in the original assessment order passed by the Assessing Officer. 2. The assessee is a telecom service provider engaged in providing services in Madhya Pradesh and Chhattisgarh. During the course of its business the assessee appoints the distributors for issuing and sale of pre-paid SIM card and recharge vouchers. The department initiated the proceedings u/s 201 201(A) of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of section 194H has been considered and decided by this tribunal as well as Hon ble High Courts in a series of the decisions. There are differences of opinion on this issue by the Hon ble High Courts wherein some of the High Courts have decided this issue in favour of the assessee and some other High Courts have decided against the assessee. This is highly debatable issue and now pending adjudication before the Hon ble Supreme Court in the SLP filed by the assessee as well as department. Since this is a debatable issue and assessee was under the bona fide belief that there was no obligation to deduct tax on this transaction u/s 194H of the Act. Ld. Sr. Counsel for the assessee has relied upon the judgment of Hon ble Supreme Court in case of Singapore Airlines Ltd. Vs. CIT, New Delhi 449 ITR 203 (SC) and submitted that the liability of levy of penalty can be fastened only on the person who do not have good and sufficient reason for not deducting tax at source. The Ld. Sr. counsel for the assessee has submitted that since the assessee was having a bona fide belief that it is not required to deduct tax on these transactions u/s 194H of the Act and it is only because of differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission to the distributors by the assessee as well as other telecom service providers for sale of SIM Card and pre- paid Recharge Vouchers would fall in the ambit of section 194H or not is a highly debatable issue as there are a series of decisions of this tribunal, as well as various High Courts on this point. Some of the judgment of Hon ble High courts are in favour of the assessee and some are in favour of the revenue upholding that the transactions of sale of SIM Card and Recharge vouchers are in the nature of sale and discount allowed by the assessee to the distributors is in the nature of commission attracting the provision of section 194H and consequently, the assessee was rightly held as deemed to be an assessee is in default as per the provision of section 201 of the Act. Similarly, a good number of other decisions have held that transaction in question does not fall in the ambit of section 194H and thereby the assessee was not liable to deduct TDS at source on these transactions. Apart from a series of decisions of this Tribunal there are divergent views of Hon ble High courts on this issue of liability of the assessee to deduct tax u/s 194H, some of those decisions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions in Chapter XVIIB, which includes Section 194H. This provision must be read with Section 273B which excuses an otherwise defaulting Assessee from levy of penalties under certain circumstances. The twin provisions read as follows: Section 271C: 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 XVIIB; or (b) Pay the whole or any part of the tax as required by or under, (i) Subsection (2) of Section 115O; or (ii) 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 Subsection (1) shall be imposed by the Joint Commissioner. xxx Section 273B: Penalty not to be imposed in Certain Cases: Notwithstanding anything contained in the provisions of clause (b) of Subsection (1) of Section 271, Section 271A, Section 271AA, Section 271B, Section 271BA, Section 271BB, Section 271C, Section 271CA, Section 271D, Section 271E, Section 271F, Section 271FA, Section 271FB, Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct TDS on Supplementary Commission had admittedly not been adjudicated upon by this Court when the controversy first arose in AY 2001-02. While learned Counsel for the Revenue, Mr. Kumar, has notified us that various airlines were deducting TDS under Section 194H at that time, this does not necessarily mean that the position of law was settled. Rather, it appears to us that while one set of air carriers acted under the assumption that the Supplementary Commission would come within the ambit of the provisions of the IT Act, another set held the opposite view. The Assessees before us belong to the latter category. Furthermore, as we have highlighted earlier, there were contradictory pronouncements by different High Courts in the ensuing years which clearly highlights the genuine and bona fide legal conundrum that was raised by the prospect of Section 194H being applied to the Supplementary Commission. 62. Hence, there is nothing on record to show that the Assessees have not fulfilled the criteria under Section 273B of the IT Act. Though we are not inclined to accept their contentions, there was clearly an arguable and nascent legal issue that required resolution by this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has been sustained by the Tribunal. In fact, it must be emphasised that the Tribunal has not laid down the proposition that ignorance of law can furnish an excuse for non-deduction of tax at source and the learned counsel is right in saying that this proposition would be unsustainable. However, this is a case where, on a review of facts, it was found that a reasonable cause had been shown under Section 273B. Hence, the imposition of penalty which was deleted by the CIT(A) has been affirmed by the Tribunal 6. The appeal filed by the revenue, in these circumstances, will not give rise to any substantial question of law. It is, accordingly, dismissed. 13. Delhi Bench of the Tribunal in case of Vodafone Idea Ltd. New Delhi vs. ACIT-TDS (supra) while considering this issue of levy of penalty u/s 271C has held in para 10 as under: 10. We have heard both the parties and perused all the relevant material available on record. The issue on which the penalty u/s 271C is imposed is debatable as different courts have taken diverse views. Therefore, the fact remains that the assessee has reasonable cause for non deduction of tax at source on the discount allowed to the prepaid di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the case of Pradeep Agencies Joint Venture (supra), observed that when a later judgment is in favour of the assessee, which matches the line of thinking of the assessee it can be considered as a 'reasonable cause'. 99. No doubt assessee has not specifically submitted before the Tax Authorities that non-deduction of tax at source was based on it's understanding of provisions of section 194H of the Act, which in turn constitutes a 'reasonable cause'. But the fact remains that by the time the assessee was under obligation to deduct tax at source for the AYS under consideration, there were judgments in favour of assessee and even after the decisions of Hon'ble Delhi High Court and Kerala High Court, Hon'ble Karnataka High Court had taken a different view of the matter which implies that non- deduction of tax was based on such understanding of relevant provisions of the Act in which event penalty is not imposable u/s 271C of the Act. We therefore set aside the order passed by AO as well as Ld CIT (A) on this aspect and hold that penalty u/s 271C is not imposable, in the circumstances of the case. 15. In view of the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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