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2015 (3) TMI 53 - AT - Income TaxPenalty u/s 271(1)(c) - non deduction of TDS u/s.194C - disallowance u/s 40(a)(ia) - CIT(A) deleted penalty levy - Held that - Mere disallowance by Assessing Officer is not sufficient to reach the conclusion of furnishing inaccurate particulars of income. The disallowance made and upheld on account of deeming provisions of Section 40(a)(ia) of the Act are because of non deposit of TDS so deducted by assessee within due date as prescribed u/s. 200(1) of the Act. But, such deducted TDS was duly paid before filing of return of income for the impugned previous year. As per the amendment in Section 40(a)(ia) of the Act which was held as clarificatory; such deposit now does not require the operation of provision of Section 40(a)(ia) of the Act i.e. issue was debatable at relevant point of time. Further, Assessing Officer on his own through rectification u/s. 154 of the Act allowed the claim of expenditure in subsequent year. Assessee bonafidely made the claim, which cannot be said to be furnishing inaccurate particulars of income. Accordingly, CIT(A) was justified in deleting penalty. - Decided in favour of assessee.
Issues:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act. 2. Interpretation of provisions of Section 40(a)(ia) regarding TDS disallowance. 3. Justification for deleting penalty by the First Appellate Authority. Issue 1: Deletion of Penalty under Section 271(1)(c) of the Income Tax Act: The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-XV, Ahmedabad, challenging the deletion of a penalty of Rs. 7,16,818 levied under Section 271(1)(c) of the Act for the assessment year 2005-06. The Assessing Officer initiated penalty proceedings due to disallowance made under Section 40(a)(ia) of the Act. The assessee submitted explanations, arguing that the disallowance was due to a technical error and that the tax deducted at source (TDS) amount was allowed as a deduction in a subsequent assessment year. The Assessing Officer rejected the explanation, holding that the assessee furnished inaccurate particulars of income. The First Appellate Authority deleted the penalty, stating that the disallowance was due to a debatable issue and the assessee had disclosed all transactions accurately in its books of account. The CIT(A) found that the Assessing Officer failed to show how the assessee submitted inaccurate particulars when the transactions were already disclosed. The CIT(A) upheld the deletion of the penalty, emphasizing that the disallowance was due to a technicality and the subsequent allowance of the claim by the Assessing Officer. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. Issue 2: Interpretation of Provisions of Section 40(a)(ia) Regarding TDS Disallowance: The Assessing Officer disallowed payments made to various labor contractors under Section 40(a)(ia) of the Act due to non-deposit of TDS into the government account before the prescribed date. The Assessing Officer imposed a penalty under Section 271(1)(c) based on this disallowance. The CIT(A) observed that the disallowance was due to a debatable issue as the TDS was paid before filing the return of income. The CIT(A) noted that the amendment in Section 40(a)(ia) clarified the deposit requirement, making the issue debatable at the relevant time. The CIT(A) found that the assessee's claim was made in good faith and did not amount to furnishing inaccurate particulars of income. Consequently, the CIT(A) justified deleting the penalty imposed by the Assessing Officer. Issue 3: Justification for Deleting Penalty by the First Appellate Authority: The First Appellate Authority deleted the penalty after considering the assessee's explanations and the circumstances surrounding the disallowance under Section 40(a)(ia) of the Act. The CIT(A) found that the Assessing Officer did not adequately demonstrate how the assessee furnished inaccurate particulars of income when all transactions were accurately recorded in the books of account. The CIT(A) highlighted that the disallowance was due to a technicality and a subsequent allowance by the Assessing Officer, indicating a lack of intentional misrepresentation by the assessee. The CIT(A) concluded that the penalty deletion was justified based on the debatable nature of the issue and the good faith actions of the assessee. The Tribunal upheld the CIT(A)'s decision, emphasizing that the penalty was rightly deleted based on the facts and circumstances of the case. This detailed analysis of the judgment provides insights into the issues surrounding the deletion of the penalty under Section 271(1)(c) of the Income Tax Act, the interpretation of provisions related to TDS disallowance under Section 40(a)(ia), and the justification for the penalty deletion by the First Appellate Authority.
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