2014 (1) TMI 1732 - HC - Income Tax

Penalty u/s. 271 (1)(c) - non deduction of tds u/s 194C - ITAT deleted the penalty - Held that - The Tribunal applied the decision of the apex Court in case of Reliance Petroproducts Private Limited, reported in (2010 (3) TMI 80 - SUPREME COURT) and observed that merely on account of disallowance of certain claim, penalty cannot be imposed. The Tribunal also recorded that the question of disallowance under section 40 a (ia) of the Act in respect of transporters had given rise to diversified opinion. CIT A has further recorded that the department did not question genuineness of the expenditure but disallowed the same merely on the ground that TDS was not deducted. Such being the factual position, no question of law arises. - Decided in favour of assessee

Summary

Issues:
Appeal against the judgment of the Income Tax Appellate Tribunal regarding the penalty imposed on the respondent assessee under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal in question arises from penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. The respondent assessee, a transporter, failed to deduct tax at source on certain payments covered under section 194C of the Act. Consequently, during the assessment proceedings, these payments were disallowed under section 40(a)(ia) of the Act, and penalty proceedings were initiated against the assessee.

The Assessing Officer imposed a penalty under section 271(1)(c) of the Act, which was subsequently deleted by the CIT [A]. The Tribunal upheld the decision of the CIT [A], citing reasons slightly different from those of the CIT [A]. Upon examination of the case, the High Court found no grounds for interference. The Tribunal relied on the Supreme Court's decision in the case of Reliance Petroproducts Private Limited, emphasizing that the mere disallowance of a claim does not warrant the imposition of a penalty. Additionally, the Tribunal noted the divergent opinions regarding disallowances under section 40(a)(ia) of the Act concerning transporters.

The CIT [A] further clarified that the department did not question the genuineness of the expenditure but disallowed it solely due to the non-deduction of TDS. Given these factual circumstances, the High Court concluded that no legal question arose for consideration. Consequently, the Tax Appeal was dismissed, affirming the Tribunal's decision and upholding the deletion of the penalty imposed on the respondent assessee under section 271(1)(c) of the Income Tax Act, 1961.