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2017 (11) TMI 629 - AT - Income TaxPenalty order u/s 271(1)(c) - wrongly claiming deduction of rental payments in violation of the provisions of section 40(a)(ia) - non deduction of TDS on the rental payments made during the previous year relevant to impugned assessment year - Held that - The only explanation which is now forthcoming before us is that this was the first year of compliance and it was due to oversight that the amount escaped the notice of management. The question is even if we believe the said explanation, the question remains is why it took so many years from AY 2009-10 to AY 2012-13 to deposit such taxes. The oversight could be for one year and cannot be overlooked where the oversight continues for so many years. The reality of the situation is that only when the AO in the instant assessment year noticed this transaction and passed the assessment order on 28.12.2011 disallowing the rental expense then the assessee realised its mistake and deposited the taxes. The same is apparent from the TDS voucher placed at APB 4 where the TDS on rent has been debited and Union Bank has been credited with ₹ 2,52,000 and the narration which has been provided is that Being online TDS paid vide challan no. 92388 dated 14.03.2012 paid for FY 2008-09 as per assessment order dated 28.12.2011. In light of the same, we are unable to accede to the explanation so offered by the assessee and found the same devoid of any bonafide. In the case of Pricewaterhouse Coopers Pvt Ltd (2012 (9) TMI 775 - SUPREME COURT) held that the facts of the case are rather peculiar and somewhat unique. It was further held that the assessee made a bonafide and inadvertent computational error while filing its return of income and the fact that the disallowance was reflected in the tax audit report which was filed along with the return of income shows that it was not a case of furnishing inaccurate particulars of income or concealment of income. The said decision therefore was rendered in the context of its peculiar facts and the bonafide of the assessee was established which apparently is not satisfied in the instant case. - Decided against assessee.
Issues Involved:
1. Validity of penalty order under section 271(1)(c) of the Income Tax Act. 2. Confirmation of penalty imposed under section 271(1)(c) related to disallowance under section 40(a)(ia) of the Act. 3. Definite conclusion and satisfaction recorded for imposing penalty. Detailed Analysis: 1. Validity of Penalty Order under Section 271(1)(c): The assessee challenged the penalty order dated 27.06.2012 under section 271(1)(c) as being "bad in law and on facts of the case, for want of jurisdiction and various other reasons." The Tribunal noted that no specific contentions were raised by the assessee's representative regarding this ground, and it was to be read along with ground no. 2. Therefore, this issue did not require separate adjudication. 2. Confirmation of Penalty Imposed under Section 271(1)(c) Related to Disallowance under Section 40(a)(ia): The facts revealed that the assessee credited ?25,20,000 towards rent to Airen Copper Pvt Ltd without deducting tax at source as required under section 194I. The Assessing Officer (AO) disallowed the amount under section 40(a)(ia) and initiated penalty proceedings under section 271(1)(c) for "concealing particulars of income or furnishing inaccurate particulars of such income." The AO levied a penalty of ?6,05,295, being 100% of the tax sought to be evaded, citing the assessee's failure to deduct TDS and claiming the expenditure in the Profit & Loss account without a basis. The CIT(A) confirmed the penalty, stating that the assessee not only made an unjustified claim but also misled the AO by falsely stating that TDS had been deducted. The assessee deposited the TDS much later, showing intentional furnishing of inaccurate particulars of income. During the hearing, the assessee argued that the amendment to section 40(a)(ia) by the Finance Act, 2010, which allowed for deduction in the subsequent year upon payment of TDS, should apply retrospectively. The Tribunal, however, noted that the amendment did not apply to cases where TDS was not deducted during the previous year. The law mandated that the expenditure would be allowed in the year the TDS was paid, which was AY 2012-13 in this case. The Tribunal held that the penalty was rightly imposed as the assessee's explanation for non-deduction of TDS was not bona fide. The assessee failed to provide a reasonable cause for not deducting TDS and claimed the deduction without basis, which amounted to furnishing inaccurate particulars of income. 3. Definite Conclusion and Satisfaction Recorded for Imposing Penalty: The assessee contended that the AO did not record a definite conclusion or satisfaction regarding the basis for imposing the penalty. The Tribunal referred to the decision of the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, which required clear satisfaction for initiating penalty proceedings. The Tribunal found that the AO had stated in the assessment order that penalty proceedings under section 271(1)(c) were being initiated separately, which constituted sufficient satisfaction. The assessee also argued that the show-cause notice under section 274 was vague as it did not specify whether the penalty was for "concealing particulars of income" or "furnishing inaccurate particulars of income." The Tribunal noted that the assessee was given two opportunities to respond to the show-cause notices but failed to do so. The Tribunal held that the assessee was aware of the penalty proceedings and chose to ignore them, thereby waiving the right to contest the penalty on the grounds of vagueness. The Tribunal concluded that the penalty was validly imposed as the assessee had furnished inaccurate particulars of income by claiming a deduction for rent payments without deducting TDS and providing false explanations during the assessment proceedings. Conclusion: The Tribunal dismissed the appeal of the assessee, confirming the penalty imposed under section 271(1)(c) for furnishing inaccurate particulars of income related to the disallowance under section 40(a)(ia) of the Act. The Tribunal found no infirmity in the CIT(A)'s order and upheld the penalty for the reasons discussed above.
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