Issues Involved: Application u/s 226 and 227 of the Constitution of India questioning penalty imposed u/s 271C of the Income-tax Act, 1961.
Factual Aspect: Petitioner's TDS return found improper deduction for an expatriate employee leading to penalty u/s 271C. Petitioner argued against deeming provision in section 9(1)(ii) and non-resident company payment.
Legal Standpoints: Petitioner argued Commissioner failed to consider reasonable cause u/r 273B. Revenue contended penalty warranted if conditions not met, reasonable cause linked to liability to deduct tax at source.
Analysis of Legal Provisions: Sections 271C and 273B discussed. Section 273B provides for no penalty if reasonable cause proven, emphasizing the importance of reasonable cause in penalty imposition.
Judgment: Court found petitioner's stand on reasonable cause valid. Commissioner's failure to consider reasonable cause vitiated the order. Commissioner's conclusion on liability u/s 192 to deduct tax at source to be re-examined. Impugned order set aside, writ petition allowed without costs.
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