2017 (2) TMI 555 - HC - Income Tax

Penalty under Section 271C - non deduction of tds - assessee in default - Held that - It is not in dispute that Assessee did not deduct interest and the reason given by Assessee was that in respect to Sahara premises, there was a revenue sharing agreement for the premises and services. Therefore, Assessee believed that tax at source was not deductible in such case. Commissioner of Income Tax (Appeals) (hereinafter referred to as CIT(A) ) accepted aforesaid explanation given by Assessee holding it to be a bonafide belief, though erroneous, and held that in view of fact that default was for bonafide belief, penalty under Section 271C of Act 1961 was not justified. It is not disputed before us that under Section 201(1A) interest for delayed payment of tax deducted at source has already been paid by Assessee. Since concurrent findings in respect of bonafide belief by Assessee in committing default have been recorded by authorities below and nothing has been shown to us that said findings are perverse, incorrect or otherwise illegal, we therefore, find no reason to interfere. - Decided in favour of Assessee.

Summary

Issues:
Appeals under Section 260-A of Income Tax Act, 1961; Justification of ITAT's decision; Reasonable cause for failure to deduct tax at source; Penalty under Section 271-C of the Act; Bonafide belief of the Assessee; Interest for delayed payment; Confirmation of findings by lower authorities.

Analysis:
The appeals were filed by the Revenue under Section 260-A of the Income Tax Act, 1961, challenging the judgment and order passed by the Income Tax Appellate Tribunal, Lucknow Bench. The substantial questions of law raised in the appeals pertained to the justification of the ITAT's decision in confirming the CIT (A)'s order without deciding the revenue's ground of appeal regarding the failure to deduct tax at source under Section 194-I of the Act. Additionally, the issue of whether there was a reasonable cause for the failure to deduct tax at source and the cancellation of penalty orders under Section 271-C of the Act were also raised.

The Assessee did not deduct interest, citing a revenue sharing agreement for the premises and services at Sahara. The CIT (A) accepted the Assessee's explanation as a bonafide belief, albeit erroneous, and held that the penalty under Section 271C was not justified due to the bonafide belief. The Tribunal upheld these findings, emphasizing the bonafide belief of the Assessee in not deducting tax at source for the Sahara premises.

It was established that the Assessee had paid interest for delayed payment of tax deducted at source under Section 201(1A). The lower authorities had concurrently found the Assessee's belief to be bonafide in committing the default, and no evidence was presented to challenge the correctness of these findings. Consequently, the High Court upheld the decisions of the lower authorities, ruling against the Revenue and in favor of the Assessee.

In conclusion, the High Court dismissed the appeals, maintaining that the penalty under Section 271C was not justified in the case due to the Assessee's bonafide belief, as accepted by the CIT (A) and the Tribunal. The Court found no grounds to interfere with the concurrent findings of the lower authorities regarding the Assessee's belief, ultimately ruling in favor of the Assessee.