2017 (11) TMI 1652 - AT - Income Tax

Penalty u/s 271C - assessee made payments of Lease rent and Interest to Yamuna Expressway Industrial Development Authority (YEIDA) without deduction of tax at source u/s 194I and 194A respectively - Held that - Liability of the assessee for deduction of tax at source in respect of Interest payment has been waived by the Tribunal there remains no question of imposing any penalty u/s 271C in that respect. We therefore uphold the impugned order to this extent. As regards TDS on payment of Lease rent the assessee entertained a bona fide belief that no tax withholding was required on lease rent pay no deduction of tax at source made prior to the year of survey on 24.02.2014; no other order against the assessee requiring deduction of tax at source at that time when the assessee made payment of lease rental; and the judgment of the Hon ble Delhi High Court delivered 2017 (2) TMI 1109 - DELHI HIGH COURT casting obligation for making deduction of tax at source It becomes abundantly clear that the assessee entertained a bona fide belief that no tax withholding was required on lease rent payments. This belief being a reasonable cause for non deduction of tax at source in respect of lease rent payment magnetizes the provisions of section 273B. Considering the provisions of section 271C read with section 273B we hold that the penalty imposed u/s 271C is not sustainable. - Decided in favour of assessee

Summary

Issues:
Confirmation/reduction of penalty u/s 271C of the Income-tax Act, 1961 for Jaypee Sports International Ltd. and Jaypee Infratech Ltd. for assessment years 2011-12 to 2013-14.

Jaypee Sports International Ltd.:
The appeals involved a single issue of confirmation/reduction of penalty u/s 271C. A survey revealed non-deduction of tax at source on Lease rent and Interest payments. The Tribunal held the assessee liable for Lease rent but not for Interest payment. The penalty was imposed, and the CIT(A) waived it for Interest but upheld it for Lease rent. The Tribunal upheld the order regarding Interest payment but decided against the assessee for Lease rent based on a Delhi High Court judgment. The Tribunal considered the factual matrix, including the lease terms and previous tax deduction practices. It was found that the assessee had a reasonable cause for non-deduction of tax at source on Lease rent payments, invoking section 273B, making the penalty under section 271C unsustainable. The penalty was deleted for both Interest and Lease rent for subsequent assessment years as well.

Jaypee Infratech Ltd.:
The Revenue's appeals challenged the deletion of penalty u/s 271C for Interest payment. The facts were similar to Jaypee Sports International Ltd. cases. The Tribunal upheld the deletion of penalty for Interest payment under section 271C. Consequently, the assessee's appeals were allowed, and the Revenue's appeals were dismissed.

In conclusion, the Tribunal ruled in favor of the assessees, deleting the penalty u/s 271C for both Interest and Lease rent payments based on the specific circumstances and legal interpretations presented in the cases.