2011 (2) TMI 1124 - AT - Income Tax

Condonation of delay - delay of 5 years - Held that - Application for condonation of delay supported by the affidavit filed by assessee s employee Mr. Shiv Charan Regar, executive engineer, it can be safely believed that the order of the CIT(A) received by the assessee on 24th March, 2008 and after receiving the order assessee has filed appeal on 21st May, 2008. Therefore, it is a fit case to condone the delay. Penalty u/s 271C - assessee failed to deduct the surcharge - Held that - As TDS was deducted from the payments made to the contractors by the assessee and due to mistake of the assessee s employees who are in-charge of the section to deduct the tax were not fully aware of the income-tax procedures the surcharge was not deducted. When the mistake came to the notice of the assessee he paid the surcharge along with the interest therefore, penalty cannot be imposed under s. 271C - Decided in favor of the assessee

Summary

Issues: Delay in filing appeal, Merits of the case regarding penalty under section 271C

Delay in filing appeal:
The appeal was filed against an order passed by the CIT(A) relating to the assessment year 2000-01. The Registry of Tribunal raised an objection regarding a delay of 5 years in filing the appeal. The assessee claimed that the order was received on 24th March, 2008, and there was no delay. The CIT(A) stated that the records were not available for verification. An affidavit by an employee of the assessee confirmed that the order was received on 24th March, 2008, and the appeal was filed on 21st May, 2008. The Tribunal, after reviewing the delay condonation application and the affidavit, decided to condone the delay, allowing the appeal to proceed.

Merits of the case regarding penalty under section 271C:
The penalty was imposed under section 271C for failure to deduct surcharge despite deducting TDS on payments to contractors. The assessee explained that due to heavy workload and lack of awareness among staff, the surcharge was not deducted. Upon noticing the mistake, the full amount along with interest was paid before penalty proceedings. The authorities upheld the penalty citing lack of evidence regarding the workload issue. The assessee argued that the penalty should not apply as the surcharge was paid upon discovery of the error. After considering both sides and the explanations provided, the Tribunal found the assessee's reasons for non-deduction of surcharge reasonable. The Tribunal set aside the order imposing the penalty under section 271C, allowing the appeal in favor of the assessee.

In conclusion, the Tribunal decided to condone the delay in filing the appeal and allowed the appeal filed by the assessee regarding the penalty under section 271C. The Tribunal found the reasons provided by the assessee for non-deduction of surcharge to be valid and set aside the penalty imposed by the lower authorities.