2023 (10) TMI 131 - AT - Income Tax

Penalty levied u/s 271C - irregularities of non-deduction of tax at source on various payment were observed - HELD THAT - Since the order u/s 201(1)/201(1A) of the Act has already been cancelled by CIT(A) and therefore, the penalty levied u/s 271C of the Act also cannot survive. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order passed u/s 201(1)/201(1A) of the Income Tax Act.
2. Legality of penalty levied u/s 271C of the Income Tax Act.

Summary:

1. Validity of the order passed u/s 201(1)/201(1A):
The appeals were directed against the orders of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, concerning the penalty levied u/s 271C of the Income Tax Act, 1961. The assessee contended that the order passed u/s 201(1)/201(1A) dated 15.12.2015 was invalid as the assessee was not liable to deduct TDS in the financial year 2009-10. The Ld.CIT(A) accepted this submission, noting that the assessee's turnover exceeded the limit prescribed u/s 44AB only in the assessment year 2010-11, making it the first year of audit. Consequently, the assessee was not liable to deduct TDS in the assessment year 2010-11. The Ld.CIT(A) also found that the DCIT(TDS) had not worked out the TDS liability quarter-wise, rendering the order vague and in violation of the statutory requirements. The order u/s 201(1)/201(1A) was thus annulled.

2. Legality of penalty levied u/s 271C:
The Ld.CIT(A) had upheld the penalty levied u/s 271C based on the order of non-deduction of tax and the liability raised u/s 201(1)/201(1A). However, since the order u/s 201(1)/201(1A) had already been cancelled by the Ld.CIT(A), the penalty u/s 271C could not survive. The Tribunal found that the penalty levied for all assessment years involved was not sustainable and accordingly cancelled the penalties. The appeals filed by the assessee were allowed.

Conclusion:
The Tribunal annulled the order passed u/s 201(1)/201(1A) due to the invalidity of the TDS liability and the vague nature of the order. Consequently, the penalties levied u/s 271C were also cancelled, and the appeals filed by the assessee were allowed.