2020 (12) TMI 106 - AT - Income Tax

Penalty u/s 271C - Non payment of demand raised u/s 201(1) / 201(1A) - whether the Assessee is guilty of non deduction of tax at source? - HELD THAT - As decided in own case 2019 (11) TMI 1138 - ITAT BANGALORE assessee in the present case had disclosed all the materials on which it was claiming deduction. The matter as to whether the deduction was to be given or not, was taken up by the revenue authorities and it was held that certain deductions claimed by the assessee were to be disallowed. It is not disputed that the questions regarding the disallowance of the deductions claimed by the assessee is under consideration by the High Court, as the appeal filed by the assessee has been admitted, on the substantial questions of law which have been reproduced hereinabove. The mere admission of the appeal by the High Court on the substantial questions of law as have been quoted above, would make it apparent that the additions made were debatable. The Tribunal has thus rightly held that the admission of substantial questions of law by the High Court leads credence to the bona fide of the assessee and therefore, the penalty is not exigible under Section 271(1)(c) of the Act. Merely because the claim of the assessee has been rejected by the revenue authorities would not make the assessee liable for penalty. - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty u/s 271C of the I.T.Act amounting to ?1,40,358 confirmed by CIT(A).

Analysis:
The appeal was against the CIT(A)'s order confirming the penalty imposed by the Assessing Officer (A.O.) under section 271C of the Income Tax Act. The issue revolved around the assessee, a branch of State Bank of India, not deducting tax at source properly, as highlighted during a survey under section 133A of the I.T. Act. The A.O. treated the assessee as an assessee in default and imposed the penalty. The assessee's appeal to the CIT(A) was dismissed due to non-appearance. Subsequently, the assessee appealed to the Tribunal, presenting evidence of similar penalties being deleted in cases of other branches. The Tribunal noted that in comparable cases, penalties were deleted due to reasonable cause, as the non-deduction of tax was not intentional but due to an error in judgment. The Tribunal referenced relevant case laws and held that there was a reasonable cause for non-deduction, leading to the deletion of the penalty.

2. Application of legal precedents and interpretation of section 271C of the I.T. Act.

The Tribunal considered precedents and interpretations of section 271C of the I.T. Act to determine the applicability of penalty in the case. It referenced a decision of the Hon'ble Karnataka High Court in a similar matter, emphasizing that when substantial questions of law are admitted for consideration, it indicates a debatable issue, thus lending credence to the bona fides of the assessee. The Tribunal concluded that in the present case, the levy of penalty under section 271C was not sustainable based on the legal precedents and the circumstances of the case. Following the co-ordinate bench decision and the reasoning provided, the Tribunal held that there was a reasonable cause for the non-deduction of tax, leading to the deletion of the penalty. The Tribunal directed the Assessing Officer to delete the penalty and allowed the appeal of the assessee.

In conclusion, the Tribunal's judgment revolved around the imposition of a penalty under section 271C of the I.T. Act on the assessee for non-deduction of tax at source. By considering legal precedents, the Tribunal found a reasonable cause for the non-deduction, leading to the deletion of the penalty. The decision highlighted the importance of bona fides and reasonable causes in tax penalty cases, ultimately ruling in favor of the assessee based on the specific circumstances and legal interpretations presented.