2016 (3) TMI 496 - AT - Income Tax

Penalty u/s 271C - non deduction of tds u/s 194LA - Held that - The assessee had paid compensation to the land owners but has not deducted the tax u/s 194LA of the Act from such payments as the assessee was under bona fide belief that he was not under any obligation to deduct the tax u/s 194LA of the Act. The omission on the part of the assessee was inadvertent and there was no mala fide intention. For non-deduction of TDS and delay in filing the TDS, the assessee had paid interest of ₹ 33,480/- and also paid interest of ₹ 54,923/- determined to be payable u/s 201(1A) of the Act by ITO(TDS), Valsad. Thus, there is no loss to the Revenue. Therefore, there is no mala fide intention on assessee s part, in 1st lapse on its part, as it seems that there is no loss to the Revenue. See CIT vs. Cadbury India Limited 2011 (3) TMI 239 - DELHI HIGH COURT wherein the Hon ble High Court held that penalty u/s 271C for non-deduction of TDS not leviable if there was no mala fide intention or deliberate defiance of law . It was also observed by the Hon ble Delhi High Court in the aforesaid judgment that the levy of penalty u/s 271C is not automatic. Therefore, in the present case, there was no mala fide intention on the part of the assessee for non-deduction of TDS since it had recovered the TDS from the concerned as soon as the violation of law was brought into assessee s notice, as discussed above. - Decided in favour of assessee

Summary

Issues Involved:
Appeals against penalty imposed under section 271C of the Income Tax Act for non-deduction of tax at source under section 194LA for payments made against compulsory acquisition of non-agricultural land for Assessment Years 2009-10 & 2012-13.

Analysis:

Issue 1: Penalty Imposed for Non-Deduction of Tax at Source
In the case of Assessment Year 2009-10, the Assessing Officer imposed a penalty of Rs. 1,68,588 under section 271C of the Income Tax Act for failure to deduct tax at source under section 194LA. The penalty was confirmed by the Commissioner of Income Tax (Appeals) (CIT(A)). The Assessing Officer found that the deductor failed to deduct tax on payments made to landowners for compulsory acquisition of non-agricultural land, resulting in a demand raised under sections 201(1) and 201(1A) of the Act. The CIT(A) upheld the penalty, stating that the deductor was required to deduct TDS under section 194LA but failed to do so. The assessee argued that the failure was due to ignorance of the law and that upon becoming aware, they collected the TDS from some deductees and paid the due tax. The assessee contended that there was no mala fide intention and cited precedents to support their case. The CIT(A) accepted the explanation, noting that there was no loss to the Revenue, and deleted the penalty.

Issue 2: Similar Issue in Assessment Year 2012-13
The same issue arose in the appeal for Assessment Year 2012-13, where a penalty of Rs. 52,810 was imposed under section 271C for non-deduction of tax at source under section 194LA. Following the reasoning applied in the earlier case, the penalty was deleted by the CIT(A) for the same reasons of inadvertent omission, lack of mala fide intention, and no loss to the Revenue.

In conclusion, both appeals filed by the assessee against the penalties imposed for non-deduction of tax at source under section 194LA were allowed, with the penalties being deleted for both Assessment Years 2009-10 and 2012-13. The judgments highlight the importance of intent and compliance with tax laws, with penalties being waived in cases of inadvertent errors without mala fide intentions and where there is no loss to the Revenue.