2015 (3) TMI 1369 - AT - Income Tax

Levying penalty u/s. 271C - assessee had not deducted TDS from the payments made to the State Bank of India as MICR charges during the relevant year u/s.194J - HELD THAT - Since tax has already been paid by the payee, no penalty could be levied on assessee-payer for failure to deduct tax at source as held by the ITAT Bangalore Bench rendered in the case of Wipro GE Medical Systems Ltd. vs. ITO 2005 (1) TMI 609 - ITAT BANGALORE . In view of the above, penalties levied by the authorities below u/s.271C are directed to be deleted in all the four years as these pertain to same issue.- Decided in favour of assessee.

Summary

Issues:
Appeal against penalty orders under section 271C of the Income Tax Act for Assessment Years 2003-04, 2004-05, 2005-06, and 2006-07.

Analysis:
1. Delay in Filing Appeals:
The appellant raised a plea for condonation of a 2-day delay in filing the appeals, attributing it to inadvertence and providing a detailed explanation. After considering the submissions, the delay was condoned by the Tribunal.

2. Merits of Penalty in AY 2003-04:
The Assessing Officer imposed a penalty under section 271C for non-deduction of TDS on MICR charges paid to the State Bank of India. The appellant contended that no penalty should be levied if the payee has already paid the tax, citing relevant case law. The Tribunal observed that the appellant, a cooperative bank, acted in good faith based on specific instructions and was not in default. The bank had paid interest for delayed TDS payments and provided evidence that the charges were accounted for by SBI. The Tribunal held that no penalty could be imposed in such circumstances, in line with the decision in Wipro GE Medical Systems Ltd. vs. ITO.

3. Show-Cause Notice and Assessee's Response:
The appellant received show-cause notices for penalty for various assessment years. In response, the appellant reiterated its bona fide belief in deducting TDS at the prescribed rate and highlighted that the charges were accounted for by SBI. The appellant also cited legal precedents supporting its position.

4. Tribunal's Decision:
Considering the facts presented and the legal arguments, the Tribunal found that the penalties imposed by the lower authorities were not justified. As the tax had already been paid by the payee, no penalty could be levied on the appellant for non-deduction of TDS. Therefore, the Tribunal directed the deletion of penalties for all four assessment years.

In conclusion, the Tribunal allowed all four appeals of the Assessee, emphasizing that the penalties under section 271C were not applicable due to the specific circumstances and legal principles involved.