HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR
I.T.T.A.No.411 OF 2014
DATED: 10.07.2014 Between:
Commissioner of Income Tax (TDS), Hyderabad … Appellant And M/s.Good Health Plan Limited … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.411 of 2014
JUDGMENT: (per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta)
This appeal is intended to be preferred against judgment and order, dated 22.01.2014 of the learned Tribunal in relation to the assessment year 2009-10 on the following suggested question of law.
“In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in upholding the deletion of penalty levied under Section 271C of the Income Tax Act 1961?”
It appears from the following summarized fact, which is concerning this matter, that the assessee was under bona fide belief that Section 194J of the Income-tax Act, 1961 (hereinafter referred as ‘the Act’) was not applicable to the facts and circumstances of the case, as such, no deduction was made. By Circular No.8/09, dated 24.11.2009, the Central Board of Direct Taxes clarified that Section 194J of the Act is applicable to the case of Third Party Administrators, which is as follows:
“In view of above all such past transactions between TPAs and hospitals fall within provisions of Section 194J and consequence of failure to deduct tax or after deducting tax, failure to pay on all such transactions would make the deductor (TPAs) deemed to be an assessee in default in respect of such tax charging of interest and also liable for under Section 201(1A) and penalty under Section 271C.”
Number of High Courts set aside the said Board’s Circular to the extent of levying penalty under Section 271C of the Act. The issue before the Tribunal was that whether dropping of penalty proceedings was justified or not. On the backdrop of above fact the Tribunal on fact found tracing finding of Assessing Officer, that there is no failure on part of the assessee as required under Section 271C of the Act. When precondition for taking penal measure is not satisfied, entire proceeding is without jurisdiction. It is legally well settled that penal provision is to be strictly construed more so when above clarificatory Circular of the Board seeking penalty was set aside.
Accordingly, the appeal is dismissed. No order as to costs.
Consequently, miscellaneous petitions, if any pending, shall stand dismissed.
10th JULY, 2014.
K.J. SENGUPTA, CJ SANJAY KUMAR, J kvni/va