2022 (3) TMI 1445 - AT - Income Tax

Penalty u/s 271C - LTC/LFC involving enroute foreign travel - HELD THAT - As in assessee s own case 2021 (2) TMI 28 - ITAT MUMBAI estimation of income in the hands of the employees under the head income from salaries by the employer was bonafide and reasonable the very foundation of impugned demands raised under section 201 r.w.s 192 ceases to hold good in law. We must therefore vacate these demands. Bearing in mind entirety of the case we cancel the impugned demands under section 201 r.w.s. 192 as unsustainable in law thus delete the delete the penalty. Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing appeals.
2. Legitimacy of penalty levied under section 271C of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay in Filing Appeals:

The appeals filed by the assessee were delayed by 150, 144, and 174 days respectively. The assessee's representative argued that the delay was due to the requirement of obtaining approval from higher authorities within the State Bank of India, which involved a procedural delay. The Revenue opposed this request, stating that procedural delays should not justify the condonation of delay.

Upon hearing both parties, the Tribunal noted that the delay was due to the internal control system of the public sector bank, which required multiple levels of approval. The Tribunal emphasized the need to balance substantial justice against technical considerations, citing the Supreme Court's observation in the case of Collector, Land Acquisition vs Mst. Katiji and others, which favored substantial justice over technicalities. The Tribunal found the reasons provided in the affidavit convincing and sufficient to constitute a reasonable cause for the delay. Consequently, the delay in filing the appeals was condoned, and the appeals were admitted for hearing.

2. Legitimacy of Penalty Levied under Section 271C:

The core issue in these appeals was whether the penalty of Rs. 64,260/- levied under section 271C of the Income Tax Act was justified. The assessee's counsel referred to a previous order by the ITAT Mumbai in the assessee’s own case, which dealt with the issue of Leave Travel Concession (LTC) involving enroute foreign travel. The Tribunal in that case had ruled in favor of the assessee, stating that the employer's estimation of income for tax deduction purposes was bona fide and reasonable.

The Tribunal reiterated the legal position that the employer's obligation under section 192 is to deduct tax on the "estimated income" of the employee and not necessarily on the "taxable income." The Tribunal emphasized that as long as the employer's estimation is bona fide, they cannot be faulted for any discrepancy between the estimated and actual taxable income of the employee. The Tribunal found that the employer had acted reasonably and bona fide in estimating the income related to LTC, even if it involved a sector of overseas travel.

The Tribunal cited the provisions of section 10(5) and Rule 2B, which allow for exemptions on travel concessions, and noted that there was no specific bar on travel involving a foreign sector. The Tribunal concluded that the employer's actions were in line with the statutory provisions and that the penalty under section 271C was not justified.

Given that the facts and issues in the fourteen appeals were identical, the Tribunal followed the binding decision of the ITAT Mumbai in the assessee’s own case and deleted the penalties levied by the Assessing Officer under section 271C of the Act.

Conclusion:

The Tribunal allowed all fourteen appeals, condoning the delay in filing and deleting the penalties levied under section 271C. The decision emphasized the importance of bona fide actions by employers in estimating taxable income and the need for substantial justice over technicalities. The order was pronounced on 25/03/2022.