Commissioner Of Income Tax-Ii, ... vs Sahara Airlines Ltd.

ORDER

1. This is a Bench of four appeals filed under section 260A of the Income Tax Act with respect to the different assessment years, namely, 1998-99, 1999-2000, 2000-01 and 2001-02.

2. The substantial question of law which arose for consideration is to the effect, whether the assessee, who has not deducted the tax at source, can still be levied penalty under section 272A(2)(g) of the Income Tax Act for not issuing the certificates of tax deducted, as per the requirement of section 203.

3. The assessing officer as well as the Commissioner (Appeals) levied the penalty under the aforesaid provision whereas the Income Tax Appellate Tribunal has condoned the said penalty after holding that since the tax was not deducted at source, the penalty could not have been imposed for not issuing the certificates.

4. The Tribunal has further found that there is no dispute to the fact that that the assessee deposited the TDS with the Central Government on 17-2-2003 for the assessment year 1998-99 to assessment year 2000-01 and on 12-4-2003 for the assessment year 2001-02 and that there was also no dispute that assessee issued the TDS certificates on 21-2-2003 for the assessment year 2001-02, i.e., within a period of 3 days from the date of deposit of TDS with the Central Government.

5. The Tribunal took the view that the penalty for not deducting the tax at source is imposable under a separate provision and if there is a consequential default, the same would be linked with the first default committed by the assessee and the assessee could not be penalised for the consequential default as the offence stands completed at the first stage itself.

6. We have been informed by the learned counsel for the assessee, Sri Wasiquddin that the penalty had also been imposed upon the assessee for the aforesaid assessment years under section 271C for not deducting the tax at source within the time provided.

7. In this regard the provisions of sections 203 and 206 of the Act are relevant.

Section 203 which requires issuance of certificate to the person deducting tax in accordance with the provisions, reads as under :

"203. Certificate for tax(1) Every person deducting tax in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H, section 194I, section 194J, section 194K, section 194L, section 195, section 196A, section 196B, section 196C and section 196D shall, within such period as may be prescribed from the time of credit or payment of the sum, or, as the case may be, from the time of issue of a cheque or warrant for payment of any dividend to a shareholder, furnish to the person to whose account such credit is given or to whom such payment is made or the cheque or warrant is issued, a certificate to the effect that tax has been deducted, and specifying the amount so deducted, the rate at which the tax has been deducted, and such other particulars as may be prescribed.

(2) Every person, being an employer, referred to in sub-section (1A) of section 192 shall, within such period, as may be prescribed, furnish to the person in respect of whose income such payment of tax has been made a certificate to the effect that tax has been paid to the Central Government and specify the amount so paid, the rate at which the tax has been paid and such other particulars as may be prescribed."

Whereas, section 206 casts a duty upon the person deducting tax to furnish prescribed returns to the prescribed income-tax authority in such form and verified in such manner, as may be prescribed, and setting forth aforesaid particulars. Relevant extract of section 206 is being quoted below :

"206. Persons deducting tax to furnish prescribed returns.(1) The prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax under the foregoing provisions of this Chapter shall within the prescribed time after the end of each financial year prepare and deliver or cause to be delivered to the prescribed income-tax authority, such returns in such form and verified in such manner and setting forth such particulars as may be prescribed."

Section 203 prescribes for issuance of a certificate of tax within a prescribed time to the person on whose income such payment of tax has been made to the effect that tax has been deducted, specifying the amount so deducted and giving other particulars, as have been given therein.

Similarly section 206 provides that a person responsible for deducting the tax at source shall, within a prescribed period, furnish returns in such form verified in such manner and setting forth such particulars as may be prescribed to the prescribed income-tax authority.

8. Failure to comply with the aforesaid provision would attract the provisions of imposition of penalty as aforesaid. The Commissioner (Appeals) as well as the Tribunal have taken a view that sections 203 and 206 would only be attracted if the assessee has deducted the tax at source but in case the assessee has not deducted the tax at source, there can be no violation of the provisions of sections 203 and 206 of the Act.

9. A bare perusal of the aforesaid provision would reveal that the said sections, namely, sections 203 and 206 would come into operation when the tax is deducted at source by the persons, who are responsible for deducting the tax at source. The very opening words of section 203, viz., "Every person deducting tax in accordance with the provisions of sections 192 to 194. . . ." make it abundantly clear, that the provisions contained therein, would only be attracted, if the tax has been deducted at source. In case the tax is deducted at source, responsibility lies upon the person deducting the tax in accordance with the provisions of the Act to issue a certificate to the effect that tax has been paid in the manner prescribed in section 203 and if there is a violation on the part of the said person in issuing the certificate to the effect that tax has been deducted within the given period or for violation of any other specific conditions prescribed therein, he would render himself open for imposition of penalty for non-compliance of the aforesaid provisions of section 203.

10. Likewise under section 206, if the tax is deducted at source, the prescribed person who is responsible for deducting the tax, has to furnish the prescribed returns to be prescribed income tax authority within the prescribed time and failure in doing so or non-compliance of any other conditions of the provisions of section 206 would attract the penal provisions of imposition of penalty.

11. Section 206 has the heading 'Persons deducting tax to furnish prescribed returns', which means that the provisions contained therein are applicable to the persons making deduction of the tax. The person responsible for deducting tax would consequently mean the person who had actually deducted the tax. The said provision, therefore, cannot be made applicable in a case where the tax has not been deducted at source.

12. The aforesaid two provisions, thus, would become applicable only if the tax is deducted at source by the person concerned and he commits default in complying with any of the provisions of section 203 or section 206 but in case no tax is deducted at source, the aforesaid provisions would not be attracted.

13. For failure of the assessee in deducting the tax at source, penalty can be imposed upon him under section 271C of the Act.

14. Section 271C, which reads as under, prescribes a penalty equal to the amount of tax, which the person concerned failed to deduct or pay :

"271C. Penalty for failure to deduct tax at source.(1) If any person fails to "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 XVII-B; or

(b) pay the whole or any part of the tax as required by or under,

(i) sub-section (2) of section 115-O; or

(ii) the 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 sub-section (1) shall be imposed by the Joint Commissioner."

15. Once a person prescribed or concerned or the assessee has been subjected to a penalty under section 271C, for not deducting the tax at source, there would not arise any occasion for levying a penalty under section 272A(c) and 272A(g) for non-compliance of the provisions of sections 203 and 206. In other words, in case the tax has not been deducted at source, the question of issuing the certificate of tax under section 203 or that of filing of return under section 206 would not arise at all. That being so, the question of imposing penalty for violation of the aforesaid provisions, would also not arise.

16. Considering the impact, meaning applicability and scope of the aforesaid two provisions, a Division Bench of this Court, in which one of us (Pradeep Kant, J.) was a member, in (IT Appeal No. 48 of 2005)-CIT v. Sri Ram Memorial Education Promotion Society, had taken the view on a similar controversy raised, that if the tax has not been deducted at source, there arises no occasion for imposing any penalty under section 272A(g) of the Act for not furnishing the certificates for tax to the person from whose account the tax has been deducted.

17. In the instant case, admittedly no tax was deducted at source and the Tribunal, therefore, relying upon the judgment passed by the Allahabad High Court in the case of CIT v. S.R. Parmanand Chichar (1995) 212 ITR 536, which though related to the matter of penalty being imposed for violation of the provisions of section 44AA, had come to the conclusion that the assessee was not liable for imposition of any penalty under the provisions of section 44AB.

18. In the light of the reasoning given by the Division Bench judgment in the case of Sri Ram Memorial Education Promotion Society (supra), we do not find any illegality or perversity in the order passed by the Tribunal.

19. The matter being squarely covered by the aforesaid judgment, the impugned orders do not call for any interference by this Court.

20. The appeals have no force and are hereby dismissed.