2017 (11) TMI 907 - AT - Income Tax

Penalty u/s 271C - non deduction of tds u/s 194J / 194C by assessee charitable organization - CIT(A) reversed the order of AO by observing that the assessee has deposited the amount of TDS in the account of Government Exchequer with the delay of few months, therefore there was no default on the part of the assessee under the provisions of TDS - Held that - From the above discussion, it is clear that the assessee has deposited the amount of TDS with the delay of few months. Therefore, it cannot be concluded that the assessee has defaulted the provisions of TDS. Thus, in our considered view the penalty u/s 271C of the Act cannot be levied for the delayed deduction of TDS amount. Thus, we find no reason to interfere with the findings arrived by the Ld. CIT(A). We hold accordingly. Consequently, Revenue s appeal is dismissed.

Summary

Issues:
- Penalty imposed under section 271C of the Income Tax Act for delayed deduction of TDS.

Analysis:
The appeal was against the penalty imposed by the Assessing Officer (AO) under section 271C of the Income Tax Act for delayed deduction of Tax Deducted at Source (TDS). The appellant, a charitable organization, had expenses subject to TDS provisions under sections 194J and 194C of the Act but failed to comply. The AO initiated penalty proceedings, leading to the imposition of a penalty of ?26,52,615. The appellant argued that it later deducted and deposited the TDS amount to the Government but faced delays due to negligence and unawareness of the law. The Commissioner of Income Tax (Appeals) deleted the penalty, emphasizing that the delay in payment did not constitute a default in deduction. The Revenue appealed the decision.

The key contention was whether the penalty under section 271C could be imposed solely for non-deduction or also for delayed payment of TDS. The appellate tribunal noted that the penalty could be levied for non-deduction under specific sections, but in this case, the AO objected to the late payment of deductions, not non-deduction. As the appellant had eventually deposited the TDS amount with a delay, the tribunal concluded that there was no default in TDS compliance. Therefore, the penalty under section 271C could not be sustained for delayed deduction, and the appeal was dismissed.

In summary, the tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the penalty imposed by the AO under section 271C. The tribunal reasoned that the delayed payment of TDS, due to negligence and unawareness, did not amount to a default in TDS compliance. As the appellant eventually deposited the TDS amount, albeit with a delay, the tribunal found no grounds to levy the penalty for delayed deduction. Consequently, the Revenue's appeal was dismissed, affirming the deletion of the penalty.