2015 (10) TMI 1591 - AT - Income Tax

Disallowance u/s 40(a)(ia) - non deduction of tds under section 194C for printing work - penalty u/s 271C - Held that - Prima-facie, according to the provisions of section 194C r.w. definition given of work under the explanation to section 194C, the case of the assessee has to be accepted that assessee could be under bonafide belief for non-deduction of tax from the type of payments upon which it has been held that assessee is liable to deduct tax at source. Mere acceptance by the assessee of the addition does not make entitle the department to levy concealment penalty. In this case, is no allegation can be imposed upon the assessee to say that did not furnish all the particulars or it has disclosed inaccurate particulars so as to say that assessee is liable for concealment penalty. Keeping in view the entirety of facts and also reasonable belief of the assessee that it is not entitled for deduction of tax on the payments made to him by it as the same were excluded from the definition of work by the Explanation to section 194C, we are of the opinion that levy of concealment penalty in the present case is not justified and deserves to be deleted. Accordingly, the penalty is deleted and appeal filed by the assessee is allowed. - Decided in favour of assessee.

Summary

Issues:
Levy of concealment penalty under section 40(a)(ia) of the Income Tax Act, 1961.

Analysis:
The case involved an appeal against the order passed by Ld. CIT(A)-9, Mumbai for the assessment year 2009-10. The dispute centered around the imposition of a concealment penalty of Rs. 1,87,525 on a disallowance of Rs. 6,06,879 made under section 40(a)(ia) of the Act. The Revenue contended that the assessee failed to deduct tax under section 194C on payments made to two firms for various services. The AO added the sum to the assessee's income, which the assessee did not contest. However, the assessee argued that the payments made were for work done according to specific requirements, and as per the definition of "work" in the Explanation to section 194C, no tax deduction was required. The assessee also claimed a bona fide belief in not deducting tax and cited relevant case law to support their position.

The Tribunal considered the provisions of section 194C and the definition of "work" under the Act. It acknowledged that the assessee may have had a genuine belief in not deducting tax on the payments in question. The Tribunal emphasized that the mere acceptance of the addition to income does not automatically warrant a concealment penalty. It found no evidence of the assessee concealing or submitting inaccurate particulars to justify the penalty. Given the assessee's reasonable belief that tax deduction was not required based on the statutory provisions, the Tribunal concluded that the concealment penalty was unwarranted. Consequently, the Tribunal ruled in favor of the assessee, deleting the penalty and allowing the appeal.

In conclusion, the Tribunal held that the levy of concealment penalty under section 40(a)(ia) was not justified in this case. The decision was based on the assessee's genuine belief regarding tax deduction requirements and the absence of any concealment or submission of inaccurate particulars. The Tribunal emphasized the importance of considering the entirety of facts and the assessee's reasonable belief in determining the applicability of concealment penalties.