2011 (8) TMI 1163 - HC - Income Tax

Penalty u/s 271(1)(c) - TDS default - Held that - Tribunal was of the opinion that due to ignorance of the provision containing in Section 40(a)(ia) of the Act, the assessee did not deduct TDS from the payment made to labour, transport and carting expenses. Tribunal was also actuated by the fact that the C.A. who audited the accounts of the assessee under Section 44AB did not point out any infirmity on account of non-deduction of TDS otherwise, all the relevant accounts were adduced before the Assessing Officer. Thus, when the Tax audit report also did not point out the TDS default to the assessee, the Tribunal concluded that the mistake made by assessee was bonafide and the explanation was found genuine. The Tribunal drew support from the order of CIT(A) that there was no concealment nor was this is a case of furnishing of inaccurate particulars. The reasonings given by both the adjudicating authorities concurrently cannot be held as perverse nor are there any grounds made out by the Revenue to dislodge the findings. Resultantly, when there is no concealment nor any occasion of furnishing inaccurate particulars to bonafide mistake, Tribunal rightly uphold the order of CIT(A), deleting the penalty, therefore, this Tax Appeal merits no consideration as question of law is to be determined. Hence, same is dismissed.

Summary

Issues:
1. Cancelation of penalty under Section 271(1)(c) of the Income Tax Act.
2. Interpretation of Section 40(a)(ia) regarding TDS deduction.
3. Bonafide mistake and genuine explanation by the assessee.
4. Assessment of concealment or inaccurate particulars.

Analysis:

1. The Tax Appeal was filed against the ITAT's decision to cancel the penalty of Rs. 7,42,707 levied under Section 271(1)(c) of the Income Tax Act. The primary question before the Court was whether the Appellate Tribunal was correct in law and on facts in canceling the penalty.

2. For the Assessment Year 2006-07, the Assessing Officer disallowed Rs. 22,06,498 under Section 40(a)(ia) as tax at source was not deducted by the assessee from certain payments made to labor and transporters as required under Section 194C of the Act. Penalty proceedings under Section 271(1)(c) were initiated, but the CIT(A) deleted the penalty, which was upheld by the ITAT upon Revenue's challenge.

3. The Tribunal and the CIT(A) found that the assessee's failure to deduct TDS was due to ignorance of the provision in Section 40(a)(ia) and that the mistake was bonafide. The Tribunal noted that the Chartered Accountant who audited the accounts did not point out any issues regarding TDS deduction, and the Tax audit report also did not highlight the default. Therefore, the Tribunal concluded that the mistake was genuine and bonafide.

4. Both adjudicating authorities concurred that there was no concealment or furnishing of inaccurate particulars by the assessee. The Tribunal upheld the CIT(A)'s decision, emphasizing that there was no concealment or inaccurate particulars furnished by the assessee. The Court found that the reasoning of the authorities was not perverse, and the Revenue failed to establish grounds to challenge the findings.

5. As a result, since there was no concealment or furnishing of inaccurate particulars, and the mistake was deemed bonafide, the Tribunal's decision to delete the penalty was upheld. The Court dismissed the Tax Appeal as the question of law did not merit consideration, given the genuine explanation provided by the assessee and the absence of concealment or inaccurate particulars.

This detailed analysis highlights the key issues addressed in the judgment, including the interpretation of relevant tax provisions, the assessment of the assessee's conduct, and the reasoning behind the decision to cancel the penalty.