2016 (5) TMI 96 - AT - Income Tax

Stay - Penalty under section 271C - tds u/s 194H - whether the assessee is required to make any TDS under section 194H is pending adjudication before the Hon ble Supreme Court of India as divergent views have been expressed by various High Courts in India? - Held that - The appeals on merits are coming up for hearing before the Hon ble Supreme Court in the month of April, 2016 and taking due note of the same, this Tribunal has already granted stay of collection of the outstanding tax demand under section 201(1) and the interest thereon under section 201(1A) of the I.T. Act after also taking note of the fact that the assessee has already paid 40% of the demand as directed by the jurisdictional High Court. We find that these stay petitions are against the collection of the demand of penalty under section 271C of the I.T. Act which are consequent to the orders under section 201(1) and 201(1A) of the I.T. Act. As the assessee has already paid 20% of the demand of penalty under section 271C of the I.T. Act, we are satisfied that balance of convenience is in favour of the assessee. Therefore, we deem it fit and proper to stay the balance of the demand for a period of 180 days from today or till the disposal of the appeals whichever is earlier. The Registry is directed to post the appeals for hearing on 8th June, 2016. Since the date is announced in the open Court before both the parties, no fresh notice is need be given. Accordingly, stay petitions of the assessee are allowed.

Summary

Issues:
Stay applications for outstanding demand of penalty under section 271C of the I.T. Act for A.Ys. 2010-2011 to 2014-2015.

Detailed Analysis:
The stay applications were filed by the assessee seeking a stay of the outstanding demand of penalty levied under section 271C of the I.T. Act for multiple assessment years. The total demand of penalty for all relevant assessment years amounted to Rs. 11,95,84,931 after payment of Rs. 2,98,98,234, being 20% of the total demand. The assessee contended that it transfers its 'right to pre-paid services' to distributors on a principal-to-principal basis, and since there is no requirement to withhold any tax under Section 194H of the I.T. Act, the penalty should not be levied. The matter involved a survey under section 133A of the Act and subsequent penalty proceedings initiated by the Assessing Officer (A.O.) under section 271C of the Act. The CIT(A) upheld the penalty orders, leading the assessee to file appeals before the ITAT. The Tribunal considered the divergent views of various High Courts on the issue and noted that the appeals on merits were pending before the Hon'ble Supreme Court. Given these circumstances, the Tribunal granted a stay of the balance of the demand for 180 days or till the disposal of the appeals, whichever is earlier.

The main issue revolved around whether the assessee was required to make any Tax Deducted at Source (TDS) under section 194H of the I.T. Act. The Tribunal observed that this issue was pending adjudication before the Hon'ble Supreme Court of India, with different High Courts expressing conflicting views. The Tribunal had already granted a stay of the outstanding tax demand under section 201(1) and the interest under section 201(1A) of the I.T. Act, considering the pending appeals on merits and the fact that the assessee had paid 40% of the demand as directed by the jurisdictional High Court. As the assessee had paid 20% of the demand of penalty under section 271C of the I.T. Act, the Tribunal found the balance of convenience in favor of the assessee and decided to stay the remaining demand for a specified period or until the disposal of the appeals. The Tribunal directed the Registry to schedule the appeals for hearing on a specific date without the need for fresh notices, and consequently, allowed the stay petitions of the assessee.

In conclusion, the Tribunal allowed the stay petitions of the assessee concerning the outstanding demand of penalty under section 271C of the I.T. Act, considering the pending appeals on the main issue of TDS under section 194H before the Hon'ble Supreme Court and the partial payment made by the assessee towards the demand. The Tribunal granted a stay for a specified period or till the disposal of the appeals, whichever is earlier, and directed the scheduling of the appeals for a hearing on a specific date.