2015 (3) TMI 1069 - AT - Income Tax

Penalty u/s.271(1)(c) - deduction of interest expenses without deducting TDS - Held that - In this case, the penalty has been levied for disallowance of expenditure u/s.40(a)(ia) of the Act. It is not a case of furnishing of inaccurate particulars of income or concealment of income. The failure to deduct the TDS on the part of the assessee has resulted in disallowance of expenditure. The assessee had not furnished any inaccurate particulars of income or expenditure. The assessee has already faced the consequences by way of disallowance of expenditure for non-deduction of TDS as per the provisions of section 194C of the Act. It is not the case of the Revenue that the assessee had not incurred the expenditure claimed or that the claim of expenditure was bogus or incorrect. The disallowance of expenditure was attracted due to non-deduction of TDS and it cannot be said to be a case of concealment of income or furnishing of inaccurate particulars of income. The levy of penalty u/s.271(1)(c) of the Act is not attracted in this case and the same is accordingly ordered to be deleted. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for non-deduction of TDS on interest expenses claimed by the assessee.

Analysis:
The appeal was filed by the assessee against the order of the ld. CIT(A)-26 dated 13.08.2012, challenging the sustaining of the penalty of Rs. 3,83,890 imposed for not deducting TDS on claimed interest expenses of Rs. 11,40,492. The Assessing Officer (A.O.) disallowed the expenditure under section 40(a)(ia) of the Act due to non-deduction of TDS and initiated penalty proceedings under section 271(1)(c) of the Act. The assessee contended that the non-production of Forms No. 15G was a technical lapse, and payments made to HUFs were believed not to require TDS deduction. However, the A.O. disagreed, alleging concealment of income and levied the penalty.

During the first appeal, the ld. CIT(A) upheld the penalty imposed by the A.O., leading to the assessee's appeal before the Appellate Tribunal. The Tribunal noted that the penalty was imposed for the disallowance of expenditure under section 40(a)(ia) and not for furnishing inaccurate particulars of income or concealment of income. The failure to deduct TDS resulted in the disallowance, but there was no indication of inaccurate particulars or concealment. The Tribunal observed that the disallowance was due to non-deduction of TDS as per section 194C, and there was no allegation of the expenditure being bogus. Consequently, the Tribunal ruled that the penalty under section 271(1)(c) was not applicable in this scenario and ordered its deletion.

In conclusion, the Tribunal allowed the assessee's appeal, emphasizing that the penalty was not justified as it was not a case of concealment or furnishing inaccurate particulars of income. The order was pronounced in the open court on March 4, 2015.