2018 (2) TMI 671 - HC - Income Tax

Penalty u/s.271C - proof of existence of reasonable cause - assessee company had failed to deduct tax at source and also failed to pay the amount of TDS to the credit of the Government account within the specified time - Held that - Both, the Commissioner (Appeals) as well as the Tribunal have concurrently found that the assessee had submitted an explanation for the delay in deduction of tax at source and in late deposit of such tax, which explanation was found to be reasonable. Section 273B of the Act, inter alia, provides that notwithstanding anything contained in the provisions of section 271C of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if it is proved that there was reasonable cause for the said failure. In the facts of the present case, the Tribunal having recorded a concurrent finding of fact to the effect that the assessee has proved that there was reasonable cause for failure in deducting tax at source and delay in making payment to the Government account, was wholly justified upholding the action of the Commissioner (Appeals) of invoking the provisions of section 273B of the Act and deleting the penalty. - Decided in favour of assessee

Summary

Issues:
- Challenge to order imposing penalty under section 271C of the Income Tax Act, 1961 for failure to deduct tax at source.
- Consideration of existence of reasonable cause for the default in deducting tax at source.

Analysis:
1. The appellant challenged the order of the Income Tax Appellate Tribunal imposing a penalty under section 271C of the Income Tax Act, 1961 for the assessment year 2014-15. The main question raised was whether the Tribunal erred in not considering the existence of a reasonable cause for the default in deducting tax at source.

2. The Assessing Officer found that the assessee company had failed to deduct tax at source and pay the TDS amount to the Government account during the financial year 2013-14, leading to a default under section 271C of the Act.

3. Show cause notices were issued to the assessee for the penalty under section 271C. The Joint Commissioner of Income-tax imposed a penalty of &8377; 83,10,083/-, equal to the amount of tax not deducted or paid. The assessee's explanation was not accepted.

4. The Commissioner (Appeals) later deleted the penalty, a decision upheld by the Tribunal on appeal by the revenue.

5. The appellant contended that the penalty was justified as the assessee failed to deduct tax without any reasonable cause, urging the court to consider the question of law proposed.

6. The assessee explained during penalty proceedings that the delay in tax deposit was due to a dispute with a contractor causing financial crisis. The Commissioner (Appeals) found this explanation valid under section 273B, deleting the penalty.

7. The Commissioner (Appeals) noted the reasons for the delay in tax deposit and found them reasonable, invoking section 273B to delete the penalty.

8. The Tribunal agreed with the Commissioner (Appeals) that the assessee had a reasonable cause for the delay in tax deposit and had paid the tax with interest before the due date, hence upholding the penalty deletion.

9. Both the Commissioner (Appeals) and the Tribunal concurred that the assessee provided a reasonable explanation for the delay in tax deduction and deposit, meeting the criteria of section 273B, justifying the penalty deletion.

10. The Tribunal's order was found to be without any infirmity, not raising any substantial question of law, leading to the dismissal of the appeal.