2016 (10) TMI 1194 - AT - Income Tax

Penalty levied u/s 271CA - default on account of non collection of TCS u/s 206C - reasonable cause for non timely compliance - Held that - Reasonable cause for non timely compliance has been attributed to the ignorance of applicable law. To demonstrate the ignorance, the assessee has submitted documentary evidence before the learned CIT(Appeals) who has found the same to be cogent The failure on the part of the assessee was a technical and venial breach which did not result into any loss to the Revenue as the TCS was paid along with interest - thus the order passed u/s 271CA imposing penalty is hereby cancelled - Decided in favor of assessee.

Summary

Issues:

1. Justification for deleting penalty under section 271CA of the Income Tax Act for the assessment year 2011-12.
2. Compliance with TCS provisions under section 206C of the Income Tax Act.
3. Determination of reasonable cause for default in collecting TCS.

Issue 1: Justification for deleting penalty under section 271CA:

The Appellate Tribunal ITAT Nagpur considered an appeal by the Revenue against the order of the CIT(Appeals)-II, Nagpur regarding the deletion of a penalty under section 271CA of the Income Tax Act for the assessment year 2011-12. The Assessing Officer (AO) noted that the assessee failed to collect tax at source within the prescribed dates, leading to the imposition of a penalty. The assessee attributed the delay to the Loksabha Election period, causing a delay in compliance. The AO imposed a penalty as the assessee did not provide a valid explanation or establish a reasonable cause for the default.

Issue 2: Compliance with TCS provisions under section 206C:

Before the CIT(Appeals), the assessee argued that the non-compliance was due to ignorance of the applicable clause. The CIT(Appeals) observed that the assessee only became aware of the TCS provisions after an Income Tax Department workshop in July 2011. The assessee then issued clear instructions for TCS compliance. The CIT(Appeals) noted a lack of clarity in the assessee's understanding of TCS provisions before the workshop. The CIT(Appeals) concluded that there was no malafide intention on the part of the assessee, and a reasonable cause existed for the delay in collecting TCS, leading to the cancellation of the penalty under section 271CA.

Issue 3: Determination of reasonable cause for default in collecting TCS:

The CIT(Appeals) referenced the decision in Jaihind Project Ltd. vs. Addl. Commissioner of Income Tax TDS and Sub Divisional Engineer vs. Addl. CIT, TDS to support the conclusion that the assessee's failure to collect TCS was a technical breach without causing any loss to the Revenue. The CIT(Appeals) emphasized that the TCS was paid along with interest, further justifying the cancellation of the penalty. The ITAT upheld the CIT(Appeals) order, considering the ignorance of applicable law, subsequent compliance by the assessee, and absence of revenue loss as valid reasons for not imposing the penalty under section 271CA.

In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(Appeals) decision to cancel the penalty under section 271CA for the assessment year 2011-12 based on the reasonable cause for the default in collecting TCS and the absence of revenue loss.