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2022 (6) TMI 79 - AT - Income TaxPenalty u/s 271C - assessee did not deducted income tax at source u/s. 194IA @ 1% on payments made for transfer of immovable property(other than agricultural land) - HELD THAT - Revenue is not able to controvert this submission of the assessee. The assessee is the Prop. of New Manish Medical Agencies, and it could not be shown that the assessee is in the business of real estate or is regularly indulging in sale and purchase of properties . This is the solitary property purchased by the assessee, during the year under consideration, which was covered under the ambit of Section 194IA, consideration being not lower than Rs. 50,00,000/- . There is a latin maxim ignorantia legis neminem excusat which means that ignorance of law shall not excuse a person. But at the same time there is no presumption in law that all persons know all the laws, and more so complex fiscal laws concerning taxing statutes. We are of the considered view that the assessee has demonstrated a reasonable cause u/s 273B for not deducting income-tax at source under the provisions of Section 194IA, and hence the penalty levied by AO u/s 271C and confirmed by ld. CIT(A) is not sustainable in the eyes of law, and is hereby ordered to be deleted - Decided in favour of assessee.
Issues Involved:
1. Whether the assessee was liable for penalty under Section 271C for failure to deduct tax at source under Section 194IA. 2. Whether ignorance of law can be considered a reasonable cause under Section 273B to avoid penalty. 3. Whether the fact that the seller paid due taxes can negate the penalty for the assessee. Detailed Analysis: Issue 1: Liability for Penalty under Section 271C for Failure to Deduct Tax at Source under Section 194IA The assessee purchased a property for Rs. 68,25,000 but failed to deduct tax at source at 1% of the purchase price as mandated by Section 194IA. The Assessing Officer (AO) initiated penalty proceedings under Section 271C for this failure and levied a penalty of Rs. 68,250. The CIT(A) upheld this penalty, stating that the penalty under Section 271C is independent of the provision under Section 201 and that failure to deduct tax invites consequences including penalty. Issue 2: Ignorance of Law as a Reasonable Cause under Section 273B The assessee argued that being an individual, he was unaware of the provisions of Section 194IA, and thus his failure to deduct tax was not willful. The CIT(A) rejected this argument, citing that the provisions were widely publicized and that ignorance of law is no excuse. However, the tribunal noted that the assessee is an individual and not in the business of real estate, and that this was a solitary transaction. The tribunal referred to the Supreme Court judgment in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., which states that there is no presumption that everyone knows the law, and ignorance of the law can be a reasonable cause under certain circumstances. Issue 3: Seller’s Payment of Due Taxes and its Impact on Penalty The assessee contended that the seller had disclosed the capital gains in his return and paid the due taxes, causing no loss of revenue to the department. The tribunal found this fact uncontroverted by the Revenue and noted that the purpose of Section 194IA is to widen the tax base and prevent tax evasion. Since the seller had already paid the due taxes, the tribunal concluded that the primary objective of the provision was met, and no prejudice was caused to the Revenue. Conclusion: The tribunal concluded that the assessee had demonstrated a reasonable cause under Section 273B for not deducting tax at source under Section 194IA. Consequently, the penalty levied under Section 271C was not sustainable and was ordered to be deleted. The appeal filed by the assessee was allowed.
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