ORDER
B.L. Chhibber, A.M.
1. In ITA Nos. 907 to 909/Pn/1998, the common grievance projected by the Revenue is that the learned CIT(A) is not justified in reducing the tax demand on default under Section 201 and in reducing proportionate interest levied under Section 201(A) of the IT Act, when the AO had rightly raised the demand under Section 201 as the assessee had completely failed to deduct tax at source.
2. The assessee-company had paid to M/s Praja Associates. Kolhapur, an amount of Rs. 15,03,414 towards construction of factory building being contract payment. The said payments fell in financial year 1991-92, 1992-93 and 1993-94. While paying the contract sums, the company failed to deduct tax at source as contemplated in Section 194C. The AO accordingly held the company deemed to be an assessee in default by virtue of Section 201 and 201(1A) of the Act. Accordingly the AO initiated proceedings under Section 201 and 201(1A) of the Act and after giving an opportunity of being heard to the assessee, raised a demand for the failure to deduct tax at source and also charged interest upto 31st Dec., 1996, in respect of the short deduction as per Section 201(1A). The details are as per the chart enclosed with the AO’s order.
3. The assessee appealed to the CIT(A) who noted the fact that there is no dispute that tax was not deducted at source and there is a failure, but relying on certain decisions gone into the fact as to how the recipient M/s Praja Associates had accounted for these receipts and how far Revenue is deprived and in analysis as per para 6 of his order came to the conclusion that there is only a shortfall of receipts and consequent TDS as noted below :
Asst. yrs.
Amounts admittedly paid by the assesses
Amount(s) shown by the payee as its receipt in annexures
to its return of income
Shortfall/understatement in receipts of Praja Associates
Shortfall of TDS (inclusive of surcharge)
1992-93
6,15,000
6,00,000
16,000
324
1993-94
6,15,000
5,76,000
40,000
864
1994-95
2,73,414
2,41,414
32,000
691
Accordingly, the CIT(A) vide para 11 of his order directed that the demand may be quantified as noted above and interest under Section 201(1) reworked on this amount only. The CIT(A) relied upon the judgment of the Madhya Pradesh High Court (Indore Bench) in the case of CIT v. Life Insurance Corporation (1987) 166 ITR 191 (MP).
4. K. Srinivasan, the learned Departmental Representative submitted that the CIT(A) erred in allowing relief to the extent of tax on receipts declared by the payee in its return against the provisions of Section 201 of the Act, relying on the decision of the Madhya Pradesh High Court (Indore Bench) in the case of Life Insurance Corporation (supra), which was rendered on relying upon the facts in the case earlier decided by the same Hon’ble High Court CIT v. Manager M.P. Co-operative Devp. Bank Ltd. (1982) 137ITR 230 (MP), in which case the tax deductor had actually deducted the tax, but it was short deducted and the High Court had taken the view that it was not the case that the tax deductor had not deducted the tax at source, but a case where the ITO (TDS) was not satisfied with the various deductions which were taken into consideration at the time of computing the tax payable at source and had raised the demand for the remaining tax. He further submitted that on the facts and in the circumstances of the case and in law, the CIT(A) failed to appreciate that the action of tax deductee, whatsoever, cannot obliterate the assessee from his statutory obligation as per the Act in general and Section 194C in particular.
5. S.P. Joshi, the learned counsel for the assessee, relied upon the order of the CIT(A).
6. I have considered the rival submissions and perused the facts on record. In my opinion, the action of the CIT(A) has no basis in law and the determination of the receipt in the hands of M/s Praja Associates has no relevance whatsoever while determining liability to deduct tax at source in the hands of the assessee. The provisions of law on the amount payable, tax deductible and the interest chargeable, all of which are very clearly defined and, therefore, the CIT(A)’s decision drawing analogy from the decision of the Hon’ble Madhya Pradesh High Court which was dealing with a case of salary payment has no relevance. Insofar as provisions of Section 192 are concerned, tax is required to be deducted on estimated salary income and, therefore, there is ample scope for difference on the amount of tax deductible and the Hon’ble Madhya Pradesh High Court has considered what is equitable and have given their decision in the above case. This analogy has no application in respect of payments under Section 194C because here all the terms are very clear and the liability of the tax deductor is clearly defined and cannot be extended further or reduced. In my opinion, the CIT(A)
has travelled beyond the scope of provisions of Sections 194C and 201(1A) and, therefore, his orders have no legs to stand. Accordingly, I reverse the findings of the CIT(A) and restore those of the AO.
7. In the result, the appeals are allowed. FTAs No. 910 to 912/Pn/1998
8. The common grievance projected in these appeals is that the learned CIT(A) is not Justified in cancelling penalties levied by the AO under Section 272A(2)(c) of the Act.
9. The ITO(TDS) Kolhapur noted that the assessee-company had failed to furnish annual returns in Form No. 26C under Section 206 of the Act. He accordingly issued show-cause notice under Section 274 r/w Section 272A(2)(c) of the Act and after giving an opportunity of being heard, levied the following penalties :
Asst. yrs. Penalty 1991-92 13,284 1992-93 13,776 1993-94 6,125 10. On appeal, the CIT(A) deleted the penalties, observing as under:
“5. However, it has to be borne in mind that a TDS return in Form No. 26C, as prescribed by Rule 37, has to incorporate therein such TDS details as amount of tax paid, date of payment into Govt. account, challan number, and the serial number of the TDS certificate.
Accordingly, it is evident that firstly the appellant was required to actually deposit the TDS into the Central Govt. Account. Thereafter, it was required to issue the corresponding TDS certificate. Only then, it would have technically been in a position to furnish a proper return in Form No. 26A. In the present case, the appellant had not even paid the tax into the Govt. account. As such, 1 hold that it was in no position to have furnished the TDS return in Form No. 26C. In the circumstances, the appellant has to be treated as having been prevented from filing the TDS return due to reasonable cause. I therefore hold that in the facts of the case no penalty under Section 272A(2)(c) is leviable. The impugned penalties levied by the Dy. CIT are therefore, cancelled.”
11. K. Srinivasan, the learned Departmental Representative submitted that the above conclusion reached by the CIT(A) is begging the issue and penalty is provided for not complying with provisions of law and assessee cannot take shelter under his own conternnour conduct in not complying with the provisions of law and come to plead that he was prevented by reasonable cause and the Court cannot accept such plea as reasonable cause. According to the learned Departmental Representative, the CIT(A) misdirected himself in deleting the penalties levied by the AO on the ground of reasonable cause and accordingly because one default (failure to deduct tax) cannot be reasonable cause for another default (failure to comply with Section 206 of the Act).
12. S.P. Joshi, the learned counsel for the assessee, relied upon the order of the CIT(A).
13. I have considered the rival submissions and perused the facts on record. In my opinion, the CIT(A) has tried to rewrite the law by holding that when TDS
was not deposited, the annual TDS return could not have been filed because details about the payment of TDS were required to be mentioned in the annual return. In fact, by holding so, the CIT(A) has added premium to the assessee’s another default of holding back Government’s money and by not deducting TDS from contract payments. The provisions of Section 206 cast a specific duty on the assessee/tax deductor to file annual returns within the period prescribed under the Rules and by granting concession to the assessee in not filing returns upto the date of deposit of TDS, the CIT(A) has rewritten the law in breach of Section 206 and such interpretation has to be discarded. Further, as held by the Hon’ble Gujarat High Court in CIT v. J.L. Trivedl & Sons, the doctrine of double jeopardy does not apply to income-tax proceedings and by non-deduction of TDS in time which attracts interest under Section 201(1A) and penalty under Section 271C, the assessee cannot claim concession/benefit in regard to default attracting penalty under Sections 272A(2)(c) and 272A(2)(g). Thus, non-deduction of TDS or delay in depositing TDS to Government account can certainly not be taken as reasonable cause for not filing returns. Accordingly, I reverse the findings of the CIT(A) and restore those of the AO. These appeals are accordingly allowed..
14. In the results, the appeals are allowed. ITAs Nos. 913 to 915/Pn/1998 :
15. These appeals relate to penalties under Section 271C which have been cancelled by the CIT(A) consequent to his own order in appeals Nos. 907 to 909/Pn/1998. These appeals are also allowed for the reasons given in my order relating to ITA Nos. 907 to 909/Pn/1998 (supra).
16. In the result, the appeals are allowed.