2017 (4) TMI 1306 - AT - Income Tax

Penalty u/s. 271C - reasonable cause for late deposit of TDS to the credit of the Govt - Held that - CIT(A) has mentioned in his order that the appellant is fairly covered within the provisions of the Section 273B as it had a reasonable cause for late deposit of TDS to the credit of the Govt. and further that the actual payment of tax with interest and that too before due date u/s. 139(1) also in my considered view shows bona fides on the part of the appellant. - Decided in favour of assessee

Summary

Issues:
- Appeal against order of Commissioner of Income Tax(Appeals) for AY 2014-15.
- Imposition of penalty under Section 271C for failure to deduct TDS.
- Consideration of reasonable cause for default in TDS deduction.
- Interpretation of relevant case laws on penalty under Section 271C.

Analysis:
1. The appeal was filed by the Department against the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2014-15.
2. The Department raised grounds of appeal challenging the CIT(A)'s decision regarding the imposition of a penalty under Section 271C for the default in deducting TDS.
3. The facts revealed that the assessee company failed to deduct tax at source and pay TDS to the Government account during the financial year 2013-14, leading to a default under Section 271C of the Income-tax Act.
4. Show cause notices were issued to the assessee, who explained the delay in TDS deduction due to a dispute, which caused a delay in projects and potential losses, but the Department found the explanation unsatisfactory.
5. The Department imposed a penalty of ?83,10,083 equal to the amount of tax not deducted or paid by the assessee, based on the provisions of Section 271C.
6. The CIT(A) allowed the appeal of the assessee, citing reasonable cause for the delay in TDS deposit and the payment of tax with interest before the due date under Section 139(1).
7. The Tribunal considered relevant case laws, including CIT vs Bank of Nova Scotia, Indo Nissin Foods Ltd. vs JCIT, and CIT vs Itochu Corporation, emphasizing the need to establish contumacious conduct for penalty under Section 271C.
8. Relying on the judgments, the Tribunal upheld the CIT(A)'s decision, stating that the assessee had a reasonable cause for the delay in TDS deposit and had cooperated with the Department in TDS matters.
9. Consequently, the Tribunal dismissed the Department's appeal, affirming the CIT(A)'s order, and held that no penalty under Section 271C was exigible due to the reasonable cause shown by the assessee.

This detailed analysis covers the issues involved in the legal judgment, the facts of the case, the imposition of penalty under Section 271C, consideration of reasonable cause, and the interpretation of relevant case laws, leading to the final decision of the Tribunal to dismiss the Department's appeal.