2012 (11) TMI 424 - AT - Income Tax

Penalty u/s 271(1)(c) - Whether penalty can be levied in case of disallowance of expense towards payment to contractors and procession fee for violation of provisions of section 40(a)(ia) of the Act - Held that - when the disallowance is made by the A.O. due to non payment of TDS in time, the addition is technical in nature and hence, the same does not amount to concealment of income or furnishing of inaccurate particulars of income - Penalty u/s 271(1)(c) is not justified in these circumstances. In the present case, the facts are similar and even better because in the present case, TDS was deducted and paid also although belatedly. Hence, by respectfully following the tribunal decision, issue in the present case is decided in favour of the assessee and decline to interfere in the order of Ld. CIT(A) - In the result, the appeal of the revenue is dismissed.

Summary

Issues:
Penalty deletion on disallowance of expenses under section 40(a)(ia) for late TDS payment.

Analysis:
The appeal before the Appellate Tribunal ITAT, Ahmedabad was regarding the revenue's challenge against the deletion of a penalty by the ld CIT(A) for the assessment year 2005-06. The revenue contended that the penalty deletion was erroneous as it related to the disallowance of expenses due to late payment of TDS, violating section 40(a)(ia) of the Act. The revenue raised concerns about the failure to deposit the Income Declaration Scheme (IDS) within the prescribed time, despite assistance from a qualified Chartered Accountant. The Tribunal noted that the tax was deducted and paid to the government albeit belatedly. The revenue argued that recent decisions, including one from the Hon'ble Calcutta High Court, supported the retrospective nature of amendments in section 40(a)(ia), suggesting that if TDS was paid before the due date of filing the return of income, no disallowance could be made. The Tribunal referred to a previous case and held that when TDS is deducted and disallowance is made due to late payment, it does not amount to concealment of income or furnishing inaccurate particulars of income. Consequently, the Tribunal found that penalty under section 271(1)(c) was not justified in the present circumstances, as TDS was deducted and paid, albeit late.

In conclusion, the Appellate Tribunal upheld the order of the ld CIT(A) and dismissed the revenue's appeal, ruling in favor of the assessee. The Tribunal's decision was based on the premise that the disallowance due to late TDS payment did not constitute concealment of income or inaccuracies in income particulars, as established by previous judgments and legal interpretations.