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2016 (6) TMI 421 - AT - Income TaxLevy of penalty u/s 271C - non deduction of tds - assessee treated as assessee in default - Held that - We find that it is an undisputed fact that order u/s 201(1A) was passed vide order dated 07.03.2011 and no order u/s 201(1) has been passed as the order pointed out by learned DR was passed u/s 201(1A) and not u/s 201(1). The learned DR was not able to point out any order passed u/s 201(1) of the Act. The amended provisions of section 201 of the act also states that if the person to whom any amount has been paid without deduction of tax and such person had taken such income in their income tax returns and had paid taxes on such income the assessee cannot be said to be an assessee in default. The authorities below has not disputed this fact that payees of incomes had declared the payments in their income tax return and that is why order u/s 201(1) has not been passed and if the order u/s 201(1) has not been passed the assessee cannot be said to be assessee in default. The Hon ble Chandigarh Bench of ITAT, in 2016 (5) TMI 69 - ITAT CHANDIGARH under similar circumstances has deleted the penalty u/s 271 (1)(c) wherein held the assessee being not in default in respect of the amount of tax itself, there cannot be any levy of penalty u/s 271C, more so, where there was a reasonable cause for not deducting the TDS on the payment made by the assessee - Decided in favour of assessee.
Issues:
- Appeal against levy of penalty u/s 271C - Additional ground of appeal based on legal issues raised - Dispute regarding declaration of assessee as default under section 201(1) Analysis: 1. The judgment involves a bunch of three appeals filed by the assessee against separate orders of the learned CIT(A), all dated 28.10.2015, concerning the common issue of the levy of penalty u/s 271C. The appeals were heard together, leading to a consolidated order for convenience. 2. The primary grievance revolved around the confirmation of penalties imposed by the Assessing Officer u/s 271(C) of the Act. An additional ground of appeal was raised by the assessee, challenging the legality of the penalty since the assessee was not declared as default under section 201(1) of the Act. The legal ground was admitted for adjudication based on the Hon'ble Supreme Court Judgment in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income Tax 229 ITR 383. 3. The assessee contended that the penalty imposed under section 271C was illegal as the Assessing Officer did not declare the assessee as default under section 201(1) of the Act. The argument was supported by the fact that the payees of interest had declared their income in their tax returns, absolving the assessee from default under section 201(1) post the amendment in 2012. 4. The Assessing Officer's stance was that the penalty was rightly upheld based on the order passed under section 201(1). However, the learned AR pointed out that the order was actually passed under section 201(1A), making the penalty imposition questionable. 5. Upon examination, it was found that no order under section 201(1) was passed, and the amended provisions of section 201 supported the assessee's position that no default occurred. Referring to a similar case decided by the Chandigarh Tribunal, the penalties were deleted as the assessee was not held as default under section 201, aligning with the interpretation of section 271C. 6. The Tribunal held that since the order pertained to years before the 2012 amendment to section 201, the contention that the amended provisions did not apply to the assessee was unfounded. Following the precedent set by co-ordinate Benches, the penalties confirmed by the CIT(A) were deleted, and the appeals filed by the assessee were allowed. In conclusion, the judgment addressed the issue of penalty imposition under section 271C, emphasizing the importance of declaring an assessee as default under section 201(1) before penalizing for non-deduction of tax. The decision was based on legal interpretations and precedents, ultimately ruling in favor of the assessee and setting aside the penalties imposed.
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