2013 (10) TMI 1511 - AT - Income Tax

Summary

Issues involved: Penalty levied u/s. 271C for multiple assessment years due to failure to deduct TDS on payment made to State Bank of India as MICR charges.

Summary:
The appeals were filed by the assessee against the penalty levied u/s. 271C for various assessment years based on the non-deduction of TDS on payments to State Bank of India as MICR charges. The AO imposed the penalty citing non-compliance with u/s. 194J of the IT Act, considering the payment as "fees for technical charges." The assessee argued before the CIT(A) that there was a reasonable cause for the failure to deduct TDS, referring to Section 273B of the IT Act. However, the CIT(A) upheld the penalty, stating that the provisions of the Act were not followed. The issue in contention was whether the assessee acted on a bona fide belief. The assessee contended that they were unaware of the relevant decision during the assessment years in question and had not faced any repercussions for non-deduction in the past. The ITAT held that the term "reasonable cause" should be interpreted in light of ordinary prudence, considering that taxpayers may not be aware of all legal developments. Therefore, the ITAT concluded that the assessee, being unaware of the legal position at the time, had a reasonable cause for non-deduction of TDS. Consequently, the penalty was deleted for all the years under appeal, and the assessee's appeals were allowed.