2014 (7) TMI 589 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act Liability to deduct TDS u/s 194J of the Act - Held that - There is no dispute about the fact that TDS was not deducted on MICR charges - in earlier years also assessee was not deducting TDS on these charges and no penal action was initiated by the AO - it can be said that assessee was under bonafide belief that on payment of MICR charges no TDS was to be deducted by it The decision in Canara Bank Vs. ITO 2008 (2) TMI 515 - ITAT AHMEDABAD-B followed - assessee was required to deduct TDS on MICR charges assessee has been regularly deducting tax on payment - assessee was prevented by reasonable cause in not deducting TDS on the payment of MICR charges - the penalty imposed is set aside Decided in favour of Assessee.

Summary

Issues:
Appeal against penalty imposed under section 271(1)(c) for non-deduction of TDS on MICR charges by a cooperative bank.

Analysis:
The appeals were filed by the assessee against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Act. The penalty was confirmed by the Ld. CIT(A) in separate orders for different assessment years. The brief facts of the case revealed that the assessee, a cooperative bank, did not deduct TDS from the payment made to the State Bank of India as MICR charges. The AO contended that TDS should have been deducted under section 194J of the Act as the payment was for technical charges. The AO relied on a previous decision by the Hon'ble Ahmedabad Bench of Tribunal to support this contention. The penalty was imposed by the AO due to the non-deduction of TDS amounting to Rs. 40,533. The Ld. CIT(A) upheld the AO's decision, leading to the appeals before the ITAT.

The assessee argued that there was a bona fide belief that TDS was not deductible on MICR charges, as in previous years, no such TDS was deducted, and no action was taken by the revenue department. It was contended that the assessee only started deducting TDS on these charges after a decision by the Tribunal in a similar case involving Canara Bank. The assessee claimed that there was a reasonable cause for not deducting TDS and requested the deletion of the penalty. The assessee relied on a decision by the Ahmedabad Bench of Tribunal in the case of Central Bank of India vs. JCIT where a similar penalty was deleted. The Departmental Representative (DR) supported the orders of the lower authorities.

After considering the arguments from both parties and reviewing the facts, the ITAT found that there was no dispute that TDS was not deducted on MICR charges. It was noted that in previous years, the assessee did not deduct TDS on these charges, and no penal action was taken by the AO. The ITAT concluded that the assessee had a bona fide belief that TDS was not required on MICR charges. Additionally, after the Tribunal's decision in the Canara Bank case, the assessee began deducting TDS on such payments. Based on these facts and the decision in the Central Bank of India case, where a similar penalty was deleted, the ITAT held that the penalty imposed by the AO and confirmed by the Ld. CIT(A) should be deleted.

In conclusion, the ITAT allowed the appeals filed by the assessee, and the penalty under section 271(1)(c) for non-deduction of TDS on MICR charges was deleted.