COMMISSIONER OF INCOME TAX-XVIIAAYAKAR BHAWAN, DISTRICT CENTRE Vs. CADBURY INDIA LIMITED, NORTHERN REGION OFFICE

JUDGEMENT

(1.) THESE three appeals are directed against a common order dated 31st January, 2008 of the Income Tax Appellate Tribunal (hereinafter, in short referred to as ITAT?). Since the facts and issues involved in all these appeals are identical, therefore, we propose to dispose these vide a common order.

(2.) THESE appeals arise out of the assessment years 2002-03 (ITA No. 429/2009), 2003-04 (ITA No. 1397/2008) and 2004-05 (ITA No. 1398/2008). The assessee herein is engaged in the business of manufacture and sale of Chocolates, Bournvita, etc. A spot verification under Section 133A of the Income Tax Act (hereinafter, in short referred to as the Act?) on the premises of the assessee was conducted, which revealed that the assessee had engaged ten Clearing & Forwarding Agents (hereinafter, in short referred to as CFA?) and was paying rent for the usage of space in warehouse and deducting tax at source under Section 194C of the Act. The assessee was also deducting TDS @2% under Section 194C of the Act on remuneration and reimbursement of expenses and was not deducting any TDS on the payments being made for supply of pilots to the manpower supplying agencies. The Assessing Officer during the course of assessment proceedings in the assessment years held that the assessee was wrongly deducting tax at source under Section 194C of the Act on payment of rent and CFAs remuneration, whereas deduction was to be made under Section 194I and 194J of the Act, respectively. The Assessing Officer further held that payments made to outside agencies supplying manpower was liable for tax deduction at source @ 2% especially when the assessee itself was deducting the same in this manner with effect from 1st April, 2003. The Assessing Officer held the assessee to be in default under Section 201(1) and 201 (1A) of the Act. A consolidated order in this regard was passed by the Assessing Officer for all the three assessment years whereby the Assessing Officer raised a demand of Rs.26,25,828/-. Penalty proceedings were initiated under Section 271C of the Act and consequently penalty of Rs.19,72,384/- was levied. The assessee preferred second appeal before the CIT(A) which came to be dismissed. The CIT(A) while dismissing the appeals recorded as under:-

(3.) AGAINST the order of the CIT(A), assessee preferred second appeal before the ITAT which came to be allowed. The present appeals are filed by the revenue in the penalty proceedings wherein the impugned order came to be passed by the Tribunal as noted above. So far as the facts of the case are concerned, there is no dispute that the composite agreement was made by the assessee with CFAs for storage, leading, unloading, clearing, forwarding and supply of manpower for the jobs as per requirement of the assessee. There is also no dispute that the assessee had been consistently following the practice of deducting TDS under Section 194C. There is also no dispute that the deductions were required to be made by the assessee under Section 194I and 194J for the payments being made by the assessee under different heads to the CFAs. The learned counsel for the assessee submitted that deductions were being made by the assessee in a consolidated form under Section 194C on the professional advice of the Chartered Accountant etc. On this premise it was submitted that it was under the misconceived professional advice and due to bona fide belief thereon by the employees of the assessee that the TDS was being deducted under Section 194C for all counts from the payments being made to the CFAs. On the other hand, leaned counsel for the Revenue submitted that in the quantum proceedings the assessments have been accepted by the assessee for all these years and the same having become final, the assessee was liable to pay the penalty imposed by the Assessing Officer.