2019 (10) TMI 1059 - AT - Income Tax

Penalty u/s 271C - No deposit of TDS on the rent-free accommodation provided to the employees - limitation of order passed by the A.O. which was alleged to be beyond limitation period - HELD THAT - Non-deduction of TDS has not resulted into any kind of benefit to the assessee, the non-deduction was only due to bonafide belief of the assessee. Further, that perquisite is taxable in the hands of employees, hence neither assessee get benefitted nor the employees. The TDS alongwith interest under consideration was also immediately deposited. As found that the assessee was deducting TDS from salary without including perquisite in form of rent free/concessional accommodation, therefore, it is a case of short deduction of TDS. The assessee was not willfully disobedient to the authority otherwise assessee would not have deducted TDS on entire salary being issue under consideration is just one item forming part of salary or any other payment It is also clear from the record that the assessee has compiled the TDS provision on almost all payments or heads except not including said perquisite in form of rent free accommodation in salary due to bonafide belief, which itself shows that assessee is law abiding and not having contumacious conduct, hence penalty should not be sustained In view the provisions of Section 273B of the Act, hold that there was a reasonable cause for the failure of the assessee, therefore, no penalty should be imposed - There is no merit in penalty so imposed U/s 271C - Decided in favour of assessee

Summary

Issues:
Appeals against orders of ld.CIT(A) for A.Y. 2014-15 & 2015-16 for imposition of penalty U/s 271C of the Income Tax Act, 1961.

Analysis:
1. The assessee appealed against the imposition of penalty U/s 271C for non-deduction of TDS on rent-free accommodation provided to employees. The AO and CIT(A) confirmed the penalty, leading to the current appeal.
2. The assessee argued that the AO's order was beyond the limitation period and there was a reasonable cause for not depositing TDS on the accommodation, citing Sec.273B of the Act.
3. The demand arose due to non-deduction of TDS on accommodation provided to employees. The assessee believed this accommodation was not a perquisite under the Act, essential for efficient work performance.
4. Once aware of the tax implications, the assessee started deducting TDS on such perquisites from the next financial year. The non-deduction was due to a genuine belief, and the TDS was immediately deposited.
5. The assessee's failure to include the accommodation perquisite in TDS deduction was a case of short deduction, not willful disobedience. The assessee's compliance with TDS provisions on other payments showed law-abiding behavior.
6. Citing a judgment, the assessee argued that the penalty should not be imposed for short deduction of TDS due to a reasonable cause. Similar judgments were referenced to support this argument.
7. The Tribunal found that there was a reasonable cause for the failure of the assessee to deduct TDS on accommodation perquisites, hence no penalty should be imposed.
8. Referring to legal precedents, including decisions by the Supreme Court and High Courts, the Tribunal concluded that the penalty under Section 271C should not be upheld.
9. The Tribunal allowed both appeals of the assessee, stating that the facts and circumstances of the cases did not warrant the imposition of penalties under Section 271C.
10. The findings for the A.Y. 2014-15 were deemed applicable mutatis mutandis to the A.Y. 2015-16 appeal, leading to the allowance of both appeals.

This detailed analysis of the judgment highlights the grounds of appeal, the factual background, legal arguments presented, and the final decision by the Tribunal, providing a comprehensive understanding of the legal issues involved in the case.