R.P Tolani, J.M:— This is revenue's appeal against CIT(A)'s order dated 7-1-2011, challenging the deletion of penalty of Rs. 23,10,689/- levied u/s. 271C of the I.T Act, relating to A. Yr. 2005-2006
2. Brief facts are: During the course survey conducted on 9-12-2004, u/s. 133A of the I.T Act, at the premises of assessee, it was found to have made certain payments on account of purchase of printed packaging material on which TDS was not deducted u/s. 194C of the I.T Act. Assessing Officer raised a TDS liability of Rs. 71,74,722/- and thereafter initiated penalty proceedings u/s. 271C of the I.T Act. In these proceedings assessee argued that during several assessment years it had purchased packing material from various suppliers in form of ice cream cups, cartons, plastic packaging etc. Assessee placed correspondence with the suppliers, which reflected that the raw material for manufacture of packaging material was purchased by the suppliers themselves and not supplied by the assessee. The purchase from suppliers are made for the purpose of packaging and printing over the packing material, which is incidental for the supplies of the packing material. The AO has treated such contracts with suppliers as contract for work under section 194C and not a contract for sale of goods.
2.1 Assessing Officer, however, without appreciating the material on record imposed the penalty. Aggrieved, assessee preferred first appeal, where CIT(A) deleted the penalty by following observations:
“I have considered the arguments taken by the appellant and the order of the Assessing Officer as well as the order of my predecessor passed in appeal No. 24/08-09 dated 9-10-09. In appellant's own case the Hon'ble ITAT in his order nos. ITA no. 385.Del. 2010, 3468.Del/2008 and 4831.Del/2009 has stated that,
“the printing material purchased by the assessee can be treated as work of any special skill or secrecy, the transaction between the assessee and printing material suppliers being one of sale and purchase of goods under Sale of Goods Act, the same is not liable for reduction u/s. 194C. Our view is fortified by Hon'ble Delhi High Court judgment in the case of Dabur India Ltd. (supra). Respectfully following the same, we hold that the assessee is not liable for TDS in respect of printing material purchased by it and this ground of assessee for A. Ys. 2004-2005 and 2005-2006 is allowed.”
Respectfully following the order of the Hon'ble ITAT the penalty under section 271C levied by the Addl. CIT amounting to Rs. 23,10,689/- is hereby deleted.”
2.2 Aggrieved, revenue is before us. Ld. DR relied on the order of Assessing Officer.
3. Learned counsel for the assessee reiterated the facts and arguments and contends that in quantum appeal, in assessee's own case for A.Y 2004-05 & 2005-2006, the ITAT Delhi Bench ‘E” vide consolidated order dated 10-5-2010 rendered in ITA no. 4831.Del/09 & others, has held that assessee is not liable for TDS in respect of printing material purchased by, inter alia, observing as under:
“11. Apropos the issue about section 194C, it has not been contended by learned DR that the printing material purchased by the assessee can be treated as work of any special skill or secrecy, the transaction between the assessee and printing material supplies being one of sale and purchase of goods under Sale of Goods Act, the same is not liable for deduction u/s. 194C. Our view is fortified by Hon'ble Delhi High Court judgment in the case of Dabur India Limited (supra). Respectfully following the same, we hold that the assessee is not liable for TDS in respect of printing material purchased by it and this ground of assessee for assessment years 2004-2005 and 2005-2006 is allowed.
3.1 Ld. counsel submitted that in view of the fact that there remains no TDS liability, the levy of penalty u/s. 271C has been rightly deleted by CIT(A) and revenue's appeal should be dismissed as such.
5. We have heard rival contentions and gone through the relevant material available on record. In quantum appeal, since the ITAT has held that assessee was not liable for TDS in respect of printing material purchased by it, therefore, the very basis for levy of penalty has gone. In view of above, we find no force in revenue's appeal and the same is liable to be dismissed.
6. In the result, revenue's appeal is dismissed. Order pronounced in open court on 13-07-2012.