2014 (1) TMI 1838 - AT - Income Tax

Penalty u/s 271C - order for levying the penalty passed by the Additional CIT which is barred by limitation - Held that - In the instant case, the proceedings for levying the penalty under section 271C was initiated vide order dated 19/03/2009 which falls in the financial year 2008-09 and ends on 31/03/2009 and the action for imposition of the penalty was initiated on 24/12/2009 when a reference was made by the AO to the Addl. CIT (TDS), Udaipur, accordingly 6 months expired on 30/06/2010. Therefore, the order for imposing of penalty under section 271C could have been passed on or before 30/06/2010, but the order for levying the penalty u/s. 271C has been passed by the Additional CIT on 18/08/2010, which is barred by limitation. Therefore, the penalty levied under section 271C of the Act vide order dated 18/08/2010 was clearly hit by the barred by limitation which deserves to be set aside. The penalty under section 271C levied in the present case was not justified. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty order under section 271C of the Income Tax Act.
2. Jurisdiction and limitation of penalty imposition.
3. Interpretation of provisions under section 194C of the Act regarding TDS deduction.
4. Justifiability of penalty imposition based on reasonable cause.

Detailed Analysis:
1. The appeals were directed against separate orders of the Ld. CIT(A), Ajmer, dated 20/06/2011, regarding penalty under section 271C of the Act. The common issues were disposed of together. The appellant contended that the penalty order was bad in law and jurisdiction, and also barred by limitation. The penalty was imposed for not making TDS on mobilization advance paid to a corporation. The AO upheld the penalty despite the appellant's arguments based on section 196 of the Act and relevant case law.

2. The Ld. CIT(A) confirmed the penalty, stating that the appellant was liable to deduct tax under section 194C(1) for payments made without TDS. The appellant's argument that TDS was not required on mobilization advance was rejected. The Ld. CIT(A) held that there was no reasonable cause for not deducting tax at source, justifying the penalty under section 271C. The appellant challenged this decision.

3. The appellant argued that the penalty was barred by limitation under section 275(1)(c) as it was imposed after the prescribed period. Additionally, the appellant contended that no TDS was required under section 194C(1) due to the nature of the advance. The appellant cited relevant case law to support their position. The Ld. D.R. supported the lower authorities' orders.

4. The ITAT considered the timelines for penalty imposition and found that the penalty order was indeed barred by limitation. Citing relevant provisions, the ITAT set aside the penalty imposed under section 271C. Referring to a similar case, the ITAT highlighted that in situations where there was a reasonable cause for not deducting TDS, the penalty under section 271C was not justified. Consequently, the penalty order was deleted for the assessment year in question.

In conclusion, the ITAT ruled in favor of the appellant, allowing the appeals and deleting the penalty under section 271C for both assessment years. The judgment emphasized the importance of adherence to statutory timelines and the presence of reasonable causes in tax deduction matters.