2019 (1) TMI 951 - AT - Income Tax

Penalty u/s 271(1)(c) - non deduction of tds u/s. 194H on payment gateway charges - disallowance u/s. 40(a)(ia) - Held that - This issue has been decided by ITAT in assessee s own case by the Tribunal for the year under consideration held that assessee is not liable to make TDS on payments gateway charges. Therefore, provisions of section 194H of the Income Tax Act would not apply to the facts and circumstances of the case. Accordingly, we are of the opinion that once the very basis of imposing penalty on this addition stood collapsed, there remaining no justification to sustain penalty on this count. For this view, we stand fortified by the decision of K.C. Builder v. Asstt. CIT 2004 (1) TMI 7 - SUPREME COURT wherein it has been laid down that where the additions made in the assessment order on the basis of which penalty for concealment was levied has been deleted, there remains no basis at all for levying concealment penalty and therefore, in such a case no such penalty can survive. - decided in favour of assessee Excess depreciation claimed on website development cost @ 60% - Held that - We find substantial weight in the contention of the assessee. It is notable that complete details/facts relating to the assets on which depreciation was claimed were furnished before the Assessing Officer and as such it can hardly be said that the assessee has furnished inaccurate particulars of income merely because the claim of assessee was not, in the opinion of Assessing Officer, sustainable in law. For this view, we stand fortified by the decision of Hon ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT). - Appeal of assessee allowed.

Summary

Issues Involved:
1. Upholding of penalty under section 271(1)(c) of the Act for controversial/disputed disallowances.
2. Applicability of section 271(1)(c) in cases with full disclosure and bona fide explanations.
3. Adequacy of explanations provided by the Appellant to avoid penalty.
4. Justification for upholding penalty based on upheld disallowances.
5. Mechanical nature of the order passed by the Ld. CIT(A) without proper consideration of legal submissions.

Issue 1: Upholding of Penalty on Disallowed Payment Gateway Charges:
The Appellant contested the penalty imposed on disallowed payment gateway charges under section 40(a)(ia) for alleged non-deduction of TDS under section 194H. The ITAT Delhi noted that the issue was debatable and litigative, with previous decisions favoring the Appellant's position. The ITAT cited the decision in the case of CIT Vs. JDS Apparels (P.) Ltd. to support the Appellant's argument that TDS was not required on such payments. Consequently, the ITAT set aside the penalty on this addition, citing the principle that where additions leading to penalties are deleted, no basis remains for levying the penalty.

Issue 2: Penalty on Excess Depreciation on Website Development Cost:
The Appellant claimed excess depreciation on website development cost, which was disallowed by the Assessing Officer. The ITAT observed that the rate of depreciation on website development cost was a debatable issue, with conflicting decisions from various authorities. The ITAT held that the mere difference in opinions on depreciation rates did not warrant the imposition of penalties for furnishing inaccurate income particulars. Therefore, the penalty based on this addition was deemed unsustainable.

Issue 3: Penalty on Difference in Rate of Depreciation on Computer Peripherals:
The Assessing Officer disallowed excess depreciation claimed on computer peripherals at a higher rate. The ITAT noted that the Appellant's claim had been accepted in previous years and that there was a difference in opinions between the Assessing Officer and other authorities on this issue. The ITAT emphasized that the Appellant had provided complete details and facts to support the depreciation claim, indicating no intent to furnish inaccurate particulars of income. Citing the decision in Reliance Petroproducts Pvt. Ltd., the ITAT canceled the penalty based on this addition.

Conclusion:
The ITAT allowed the appeal of the Appellant, canceling the penalties imposed on the disallowed payment gateway charges, excess depreciation on website development cost, and difference in the rate of depreciation on computer peripherals. The ITAT emphasized the debatable nature of the issues and the Appellant's provision of complete information, leading to the penalties being deemed unsustainable.