2016 (6) TMI 938 - AT - Income Tax

Penalty under section 271CA - assessee had not deducted TCS @ 1% on the sales and failed to explain any reasonable cause for non deduction of tax at source - Held that - CIT(Appeals) has recorded specific finding of fact that assessee furnished complete details of sales of scrap made to various traders alongwith copies of their Income Tax returns of relevant assessment year proving that payment of due taxes have been made by the respective purchasers. It was also recorded that no demand on account of non-deduction of tax at source has been raised by the Assessing Officer and only interest has been charged. It is, therefore, clearly established that Revenue Department has not treated the assessee as assessee in default as far as TCS is concerned. The ld. CIT(Appeals) was, therefore, justified in following decision of Banglore Bench in the case of Wipro GE Medical Systems Ltd. 2005 (1) TMI 609 - ITAT BANGALORE in which the Tribunal has considered reasonable cause for not levying the penalty when sufficient compliance was made because of the tax demand had already been paid. Since taxes have already been paid by the buyers and there was no tax demand remained. Therefore, ld. CIT(Appeals) correctly held that there was reasonable cause for failure to comply with provisions of law. - Decided against revenue

Summary

Issues:
Appeals challenging the cancellation of penalty under section 271CA of the Income Tax Act for assessment years 2011-12 and 2012-13.

Analysis:

Issue 1: Default on TCS amount and penalty imposition
The Assessing Officer initiated penalty proceedings under section 271CA due to the assessee's failure to collect tax at source on the sale of scrap, amounting to ?7,42,086. The Assessing Officer relied on a CBDT circular and imposed the penalty as the assessee did not deduct TCS on sales and failed to provide a reasonable cause for non-deduction.

Issue 2: Challenge before CIT(Appeals)
The assessee challenged the penalty orders before the CIT(Appeals), arguing that he was not liable to collect TCS as he did not deal in scrap. The assessee provided detailed explanations supported by various legal precedents, emphasizing that buyers had paid taxes on their income, and hence, no penalty should be levied.

Issue 3: CIT(Appeals) decision
The CIT(Appeals) considered the submissions and found that the buyers had paid taxes on their income, and no demand for non-deduction of tax at source was raised. The CIT(Appeals) relied on precedents and concluded that there was a reasonable cause for not levying the penalty, ultimately canceling the penalty imposed by the Assessing Officer.

Conclusion
The appellate tribunal upheld the CIT(Appeals) decision, emphasizing that the buyers had paid taxes, and there was no loss to revenue. The tribunal found no merit in the revenue's appeals and dismissed them, highlighting the importance of establishing a reasonable cause before levying penalties under section 271CA of the Income Tax Act.