2024 (8) TMI 882 - AT - Income Tax

Penalty u/s 271CA and 271C - assessee has failed to collect tax at source (TCS) on parking lot being given on license - HELD THAT - As assessee submits that assessee is a Nagar Palika Parishad supervising the area of Hapur. As pointed out that the money from contract on parking lot is collected on behalf of the Govt. from citizens and the same is expended on the welfare of the citizens of the town. The assessee is a non-profit organization and has constraints, at times, in correct understanding of tax laws. No advise was received towards collection of TCS on such payment and as soon as the default was pointed out, the assessee made swift compliance. Thus, we are of the considered view that assessee cannot be treated as assessee in default per se in the present circumstances and there exists reasonable cause giving rise to such technical default. Penalty imposed u/s 271CA/271C in all the three captioned appeals stands deleted.- Assessee appeal allowed.

Summary

Issues:
- Appeal against first appellate order of Ld. Commissioner of Income Tax
- Imposition of penalty under Section 271CA and 271C of the Income Tax Act
- Proper opportunity of hearing not provided by Commissioner of Income Tax (Appeals)
- Technical default in compliance with TCS provisions
- Deletion of penalties in all three appeals

Analysis:
The judgment involves three appeals filed by the assessee against the first appellate order of the Ld. Commissioner of Income Tax (Appeals) arising from the assessment order passed by the Ward TDS and Addl. Comm. TDS Ghaziabad under Section 271CA and 271C of the Income Tax Act for Assessment Years 2017-18 and 2018-19. The grounds of appeal in each case primarily challenge the initiation of proceedings, imposition of penalties, and lack of proper opportunity of hearing by the Commissioner of Income Tax (Appeals).

In the first appeal for A.Y. 2017-18, the assessee argued that the initiation of proceedings was arbitrary and the penalty levied was unjust, emphasizing that the breach was technical and venial in nature. The appellant contended that since the tax was deposited promptly after the default was noticed, the penalty should be deleted. Additionally, it was claimed that the Commissioner of Income Tax (Appeals) did not provide a proper opportunity of hearing, rendering the order liable to be set aside.

Moving to the second appeal for A.Y. 2018-19, the assessee raised similar arguments regarding the initiation of proceedings and the imposition of penalties under Section 271C. The appellant also pointed out that a rectification order was passed under section 154, which was not considered by the Additional Commissioner of Income Tax, leading to an unsustainable levy of penalty. Similar to the first appeal, the lack of proper opportunity of hearing by the Commissioner of Income Tax (Appeals) was highlighted as a ground for setting aside the order.

In the third appeal for A.Y. 2018-19, the assessee reiterated the arguments regarding the initiation of proceedings, the imposition of penalties, and the lack of proper opportunity of hearing. The appellant emphasized that the breach was technical and that there was no willful default in complying with the TCS provisions. The counsel for the assessee presented the organization as a non-profit entity with constraints in understanding tax laws, seeking deletion of the penalty.

Ultimately, the Appellate Tribunal, after considering the submissions made on behalf of the assessee, concluded that there was no willful default in compliance with the TCS provisions and that the breach was technical in nature. It was held that there existed reasonable cause for the technical default, leading to the deletion of penalties imposed under section 271CA/271C in all three appeals. As a result, all three appeals were allowed, and the penalties were deleted.

In conclusion, the judgment focused on the technical nature of the default in complying with TCS provisions, the lack of willful default, and the reasonable cause for the breach, leading to the deletion of penalties in all three appeals.