IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "A" : DELHI
BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI L.P. SAHU, A.M.
ITA.No.1691/Del./2015
Assessment Year 2011-2012
The JCIT (TDS), Uttaranchal Health &
Family Welfare Society,
13-A, Subhash Road, SCOVA (NRHM),
vs. Sahastradhara Road,
Dehradun. Near I.T. Park, Dehradun.
TAN MRTU00659B
(Appellant) (Respondent)
For Revenue : Shri Amit Katoch, Sr. D.R.
For Assessee : -None-
Date of Hearing : 05.02.2019
Date of Pronouncement : 06.02.2019
ORDER
PER BHAVNESH SAINI, J.M.
This appeal by Revenue has been directed against
the Order of the Ld. CIT(A), Dehradun, Dated 30.12.2014,
for the A.Y. 2011-2012, challenging the cancellation of
penalty under section 271C of the I.T. Act, 1961.
2. Briefly the facts of the case are that verification
proceedings were carried-out under section 133A of the
Income Tax Act, 1961 on 20th December, 2011. The
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
assessee was found in default for not deducting tax at
source on various payments made by it. Show cause notice
under section 271C was issued as to why it should not be
penalized for failure to deduct TDS during the year under
appeal. The assessee filed written submissions in which it
was explained that assessee-society was a unit of
Uttarakhand Government formed by the Health Department
of Uttarakhand for implementation of various schemes
under the National Rural Health Mission Programme
initiated by the Government of India in the States. All funds
were received from the Government of India on the specific
directions for expenditure oN health related object. During
the year under question, it made payment to various NGOs
for implementation of various objects of the schemes on
behalf of the State Government. All the organisation to
whom payments were made were registered under the
Societies Registration Act, 1860 and have exemption under
section 12A/80G of the Income Tax Act, 1961. Income of
these institutions were exempt from tax. It was submitted
that the funds were provided by the Uttarakhand
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
Government as Grant-in-Aid for reimbursement of capital
and actual operational expenditure on no profit no loss
basis as per the MOU entered. Expenses were claimed by
the NGOs on the basis of audit utilization certificates
submitted by the Department. The fixed assets and
infrastructure development from the Grant-in-Aid for capital
expenses remained property of the Government of
Uttarakhand. It was submitted that the services rendered by
the NGOs did not fall under the professional category and
did not come within the ambit of Section-194J. Even
Section 194C was not attracted as all the funds were given
against reimbursement of expenses on no profit no loss
basis. It was submitted that on the basis of professional
advise, the assessee was under strong bonafide belief that
all the NGOs to whom Grant-in-Aid was given were claiming
exemption under sections 12A and 80G of the Income Tax
Act and were filing their return of income tax return with
NIL tax and also since Grant-in-Aid was given for
reimbursement of capital and actual operational
expenditure on no profit no loss basis, no TDS was required
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
to be deducted. Thus, it was submitted that the assessee
had a reasonable cause for non-deducting tax and there
were no defiance of Law. The assessee relied upon several
decisions in support of the contention.
3. The JCIT, however, did not accept the arguments
advanced by the assessee on account of the fact that EMRI
was providing technical and professional services and EMRI
was taxable. Further, it was held that the payer, the payee
and the payments are all covered within the scope of TDS
provision. It was submitted that with regard to the NGOs
even though they may not be taxable, there is no automatic
exemption from TDS in respect of the payments to entities
which may be registered under section 12A of the Income-
Tax Act. The A.O. accordingly levied the penalty under
section 271C of the Income Tax Act, 1961.
4. The penalty Order was challenged before the Ld.
CIT(A) and same facts were reiterated. It was also submitted
that the Ld. CIT(A) had allowed substantial relief to the
assessee in appeal and this supported the plea of the
assessee that it was not required to deduct tax at source.
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
The Ld. CIT(A) considered the explanation of assessee and
concluded that there is a reasonable ground to hold that
provisions of Sections 194J and 194C may not apply in the
case of the assessee. Therefore, assessee has a reasonable
cause and penalty was accordingly cancelled.
5. We have heard the Ld. D.R. and perused the
findings of the authorities below. The Ld. D.R. filed the
service report on record, according to which, notice for the
date of hearing have been served by the Department on the
assessee. The Ld. D.R. contended that the Ld. CIT(A) on
quantum, decided the appeal of assessee under sections
201(1)/201(1A) of the Income Tax Act vide Order Dated
28.02.2013, copy of which is on record whereby the Order of
TDS under section 201 have been confirmed by the Ld.
CIT(A), however, on the alternate contention of assessee, the
matter has been restored to the A.O. with a direction to the
assessee to furnish documentary evidences in support of the
contention that the recipients have paid the taxes. It was
directed that A.O. will satisfy himself about the correctness
of the same and modify the tax payment as required. The
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
interest would be charged accordingly for default on the part
of the assessee. The Ld. D.R. submitted that violation of
TDS provision is on account of non-deduction of TDS on a
sum i.e., "the payments" and not "on the income".
Therefore, the findings of the Ld. CIT(A) are incorrect.
6. None appeared on behalf of the assessee, despite
service of the notice.
7. We have heard the submissions of the Ld. D.R.
Vide Order Dated 22.11.2018, one of the Department
Appeal in ITA.No.1690/Del./2015 was heard and the
present appeal was adjourned to 05.02.2019. The record
reveals that the appeal of the Department in
ITA.No.1690/Del./2015 for the A.Y. 2010-2011 have been
dismissed by the Tribunal because of the low tax effect. In
the present case, the A.O. passed the Order on account of
default on the part of the assessee for non-deduction of the
TDS vide order dated 9th January 2013 under section 201
vide Order Dated 09.11.2013 under sections 201(1)/201(1A)
of the Income Tax Act. Copies of the Orders are available on
record. The Ld. CIT(A) considered the issue of payment
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
made to EMRI and held that assessee was required to
deduct tax at source on payments made to a EMRI. Similar
view have been taken by the Ld. CIT(A) with regard to the
payments made to other NGOs/Charitable Institutions and
business entities. The action of the A.O. was thus confirmed
in principle.
8. The alternative argument of the assessee was that
the payees concerned had duly accounted for the impugned
receipts in their return of income and paid the taxes as per
Law. The alternative contention of assessee was accepted
and assessee was directed to furnish documentary
evidences in support of its contention before A.O. with a
direction to A.O. to satisfy himself about the correctness of
the claim of assessee and modify the tax demand
accordingly. Interest was however chargeable for the default
and it should be reviewed as per verification of the taxes
paid by the recipients. The appeal of assessee was thus
partly allowed. The Ld. D.R, therefore, rightly contended
that there were no justification for the Ld. CIT(A) in the
penalty matter to hold that assessee is not in default of
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
deduction of tax. Since the assessee is ex-parte, therefore,
it is not clear whether any appeal has been filed by assessee
against the Order of Ld. CIT(A) Dated 28.02.2013. Since Ld.
CIT(A) vide Order Dated 28.02.2013, in principle, has
confirmed the Order of the A.O. that assessee is liable to
deduct TDS on the payments in question, therefore, Ld.
CIT(A) should not have taken a contrary view in the penalty
matter. Since the matter of quantum is restored to the A.O.
for verifying the above claim of assessee, therefore, it would
be reasonable and proper to restore the penalty matter also
to the file of A.O. to pass the fresh Order in accordance with
Law, after passing the Order under sections 201(1)/201(1A)
of the Income Tax Act, 1961, as per the directions of the Ld.
CIT(A). Whether assessee would have a reasonable cause
shall be re-determined by the A.O, after giving reasonable,
sufficient opportunity of being heard to the assessee. We,
accordingly, set-aside the impugned Orders and restore the
matter in issue to the file of A.O. with a direction to re-
decide the penalty matter, after passing the Order under
sections 201(1)/201(1A) of the Income Tax Act, 1961, as per
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ITA.No.1691/Del./2015 Uttarakhand Health & Family
Welfare Society, SCOVA (NRHM), Dehradun.
the directions of the Ld. CIT(A), Dated 28.02.2013. The A.O.
shall give reasonable and sufficient opportunity of being
heard to the assessee.
9. In the result, appeal of the Department is allowed
for statistical purposes.
Order pronounced in the open Court.
Sd/- Sd/-
(L.P. SAHU) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 06th February, 2019
VBP/-
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT `A' Bench, Delhi
6. Guard File.
// BY Order //
Assistant Registrar : ITAT Delhi Benches :
Delhi
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