2015 (10) TMI 1588 - AT - Income Tax

Penalty u/s. 271C - Non deduction of TDS u/s. 194J on payment of MICR charges as towards fees for technical charges - Held that - In the present case, Revenue has not brought any material on record to demonstrate that the reasons given by Assessee for non deduction of tax was not bona fide or to be false. We further find that CIT(A) by a very cryptic order has upheld the action of A.O. Considering the totality of the facts we are of the view that in the present case the reasons given by Assessee for non deduction of TDS appears to be bona fide and therefore the provisions for penalty u/s. 271C of the Act are not attracted. We accordingly direct its deletion. See case of Prime Co-Op. Bank Ltd. (2015 (10) TMI 1744 - ITAT AHMEDABAD) - Decided in favour of assessee.

Summary

Issues:
- Levy of penalty under section 271C for non-deduction of TDS on MICR charges paid by the Assessee to State Bank of India.

Detailed Analysis:

Issue 1: Levy of penalty under section 271C for non-deduction of TDS on MICR charges paid by the Assessee to State Bank of India.
The Assessee, a Co-operative Bank, failed to deduct TDS on MICR charges paid to State Bank of India. The Assessing Officer (A.O) imposed a penalty under section 271C of the Income Tax Act, 1961. The Assessee contended that it believed MICR charges were not covered under "professional fees" as described in section 194J of the Act and that the payee had already paid the tax. The CIT(A) upheld the penalty, citing the decision of the ITAT, B Bench, Ahmedabad. The Assessee appealed to the ITAT, arguing that the penalty was wrongly confirmed.

The ITAT considered a similar case involving Prime Co-Op. Bank Ltd. where the Tribunal ruled in favor of the Assessee. The ITAT noted that the Assessee had paid MICR charges to SBI, and SBI had accounted for these charges as income. The ITAT emphasized that the burden is on the Assessee to show a reasonable cause for the failure to deduct TDS. The ITAT referred to precedents where penalties were not levied if payments were disclosed in returns and taxes were paid by recipients. The ITAT concluded that the Assessee's reasons for not deducting TDS appeared bona fide, and thus, the penalty under section 271C was not justified. The ITAT directed the deletion of the penalty for all the years under appeal, as the issue was identical to the Prime Co-Op. Bank Ltd. case.

In summary, the ITAT allowed all the appeals of the Assessee, concluding that the penalty under section 271C for non-deduction of TDS on MICR charges was not applicable due to the Assessee's bona fide belief and the absence of any material to prove otherwise. The ITAT emphasized the importance of demonstrating a reasonable cause for failure to deduct TDS and relied on precedents to support its decision.

This detailed analysis highlights the legal proceedings, arguments presented, relevant case laws, and the final decision of the ITAT in resolving the issue of penalty imposition for non-deduction of TDS on MICR charges paid by the Assessee.