2018 (12) TMI 119 - AT - Income Tax

Penalty u/s 271C - Bona fide reasons for not deducting TDS - Held that - From the perusal of the Section 271C, if there is a failure to deduct tax at source then such person is liable to pay the penalty under this section. Merely being under bonafide belief that the tax was not deducted at source will not be a ground for exonerating the assessee from the provisions of this section. The case laws referred by the Ld. AR will also not be applicable in case of assessee as the same are on different footing and facts. Therefore, we are not inclined to interfere with the findings of the CIT(A). Hence, appeal of the assessee is dismissed.

Summary

Issues:
Imposition of penalty under section 271C for ?10,58,313.

Analysis:
The appeal was filed against the order passed by CIT(A)-41, New Delhi for Assessment Year 2008-09. The Assessing Officer imposed a penalty of ?11,52,144 under section 271C for failure to deduct TDS. The CIT(A) partly granted relief by reducing the penalty to ?10,58,313. The appellant, a Public Limited Company registered with BIFR, argued that non-deduction of TDS was due to ongoing litigation and a bonafide belief. The appellant had deposited TDS where applicable and added back the amount to its income. The AR contended that no order under section 201(1) was passed, making the penalty invalid. Citing relevant case laws, the AR argued for quashing the penalty, emphasizing the bonafide belief and lack of mala fide intent.

The CIT(A) upheld the penalty for non-deduction of TDS on interest payable to a company despite a certificate for NIL deduction only on the opening balance. The AR's argument that the deductee had paid tax and there was no loss of revenue was rejected. The CIT(A) noted that being a sick company and adding back the amounts without deduction of tax did not absolve the appellant's responsibility. The absence of an order under section 201(1) was also addressed, citing case laws. The CIT(A) emphasized that penalty under section 271C is not automatic but applicable in the absence of a reasonable cause for non-deduction of TDS.

The Tribunal, after considering the arguments and provisions of Section 271C, upheld the CIT(A)'s decision. It stated that failure to deduct tax at source attracts penalty under the section, irrespective of a bonafide belief. The Tribunal found the case laws cited by the AR not directly applicable to the present case. Therefore, the appeal was dismissed, affirming the imposition of the penalty under section 271C.