2004 (12) TMI 61 - HC - Income Tax

Penalty for Non depositing/deducting the TDS - if we examine the explanation offered by the Board/assessee for not depositing/deducting the tax deducted at source from the particular class of consumers. In our view the explanation was bona fide and deserves to be accepted. In no case was it a case of deliberate concealment or was done with a view to evade payment of tax and putting the Revenue to loss - Tribunal was justified in deleting the penalty levied under section 271C

Summary

Issues:

1. Justification of deleting penalty under section 271C of the Income-tax Act.
2. Determination of the Senior Accounts Officer's role as principal officer for tax deduction.
3. Imposition of penalty on the MPEB or its principal officer for tax deduction.

Issue 1: Justification of deleting penalty under section 271C of the Income-tax Act

The appeal filed by the Revenue under section 260A of the Income-tax Act challenged the Tribunal's order deleting the penalty under section 271C. The dispute revolved around the imposition of penalty on the assessee, M.P. Electricity Board, for deducting a lower amount of tax at source from a specific class of consumers. The Revenue argued that the Board should have deducted 23%, but only deducted 10%. Despite complying with the requirement after notice, penalties were imposed by the Assessing Officer and Commissioner of Income-tax (Appeals). However, the Tribunal set aside the penalties, leading to this appeal. The High Court held that the appeal lacked substance and should be dismissed. It was noted that the Board's explanation was accepted by the Tribunal, emphasizing that there was no deliberate attempt to avoid payment. The Court referenced the principle that penalties should not be imposed for technical breaches or when there is a bona fide belief that the offender is not liable to act as prescribed by the statute. The Court found the Board's explanation to be bona fide and not aimed at evading tax, leading to the dismissal of the appeal.

Issue 2: Determination of the Senior Accounts Officer's role as principal officer for tax deduction

Another substantial question of law was whether the Senior Accounts Officer of M.P. Electricity Board could be considered the principal officer for tax deduction purposes. The argument centered on the interpretation of section 2(35) of the Income-tax Act. The Tribunal had held that the Senior Accounts Officer could not be treated as the principal officer due to a lack of notice, even though falling under clause (a) of section 2(35) as a 'manager' or 'treasurer' in accounts matters. The High Court did not delve deeply into this issue in the judgment provided, but it was considered as part of the overall appeal analysis.

Issue 3: Imposition of penalty on the MPEB or its principal officer for tax deduction

The final issue involved whether penalties could be imposed on the M.P. Electricity Board or its principal officer for the tax deduction discrepancy. The Tribunal's decision to set aside the penalties imposed by the Assessing Officer and Commissioner of Income-tax (Appeals) was based on the explanation offered by the Board. The High Court concurred with the Tribunal's view, emphasizing that the Board's actions were not aimed at deliberate concealment or evading tax payment. The Court highlighted the bona fide nature of the explanation and the absence of intent to cause revenue loss. Therefore, the appeal was dismissed, and the Tribunal's order was upheld, with no costs awarded.

This detailed analysis of the judgment provides insights into the legal reasoning and conclusions reached by the High Court in addressing the various issues raised in the appeal.