2015 (7) TMI 191 - AT - Income Tax

Non deduction of TDS u/s 194H - discounts allowed to the pre-paid SIM card distributors - penalty u/s 271C - Held that - No doubt, in so far as the merit or other of the levy of penalty u/s 271C of the Act is concerned, the same shall be a subject-matter of consideration when the corresponding appeals of the assessee shall be heard by the Tribunal. So however, in so far as it is necessary to appraise the prima-facie nature of assessee s case and the balance of convenience necessary to dispose of the captioned Stay Applications is concerned, the same have been noted by us. Considering the entirety of circumstances and the factual and legal matrix brought out by the Ld. Representative for the assessee, we deem it fit and proper to direct the Assessing Officer not to take any coercive measures to recover the outstanding demands. Meanwhile, the corresponding appeals of the assessee pending with the Tribunal shall be posted for hearing on an out-of-turn basis before the regular Bench on 02nd March, 2015, as announced in the open Court at the time of hearing. Since the aforesaid date of hearing was announced in the open Court in the presence of both the parties, the requirement of issuance of a formal notice of hearing is hereby dispensed with. The above order restraining the Assessing Officer from taking coercive measures shall operate for a period of six months from today or till the date of order of the Tribunal in assessee s appeals, whichever is earlier.

Summary

Issues:
Stay on recovery of outstanding demands related to penalty u/s 271C for failure to deduct tax at source u/s 194H for assessment years 2007-08 to 2010-11.

Analysis:
The assessee, a telecom services provider, sought a stay on the recovery of outstanding demands for penalties imposed for not deducting tax at source on discounts given to pre-paid distributors under section 194H of the Income Tax Act, 1961. The assessee contended that the impugned discounts were not in the nature of commission falling under section 194H. The assessee cited a recent judgment by the Karnataka High Court that supported their stance, contrasting with earlier decisions against them. The assessee argued that at the relevant time, prevailing judicial pronouncements favored their position, indicating a reasonable cause for not deducting tax at source. The CIT(A) had directed the Assessing Officer to grant relief based on a Supreme Court judgment, but the order was not implemented. The assessee presented a tabulation showing the quantum of outstanding demands after applying the CIT(A)'s direction.

The assessee asserted a prima facie case for success in pending appeals regarding the penalty levied under section 271C, requesting a stay on outstanding demands and an expedited hearing of their appeals. The CIT-DR did not contest the factual background but emphasized that the penalty's efficacy could only be determined after resolving the issue of whether the assessee was required to deduct tax at source under section 194H. The Tribunal acknowledged the need to assess the prima facie nature of the assessee's case and the balance of convenience in deciding the stay applications. Consequently, the Tribunal directed the Assessing Officer not to take coercive measures for recovering the outstanding demands until the appeals were heard. The Tribunal scheduled the pending appeals for an expedited hearing, dispensing with the formal notice requirement, and restrained the Assessing Officer from taking coercive actions for six months or until the Tribunal's order in the appeals, whichever came earlier.

In conclusion, the Stay Applications were disposed of, with the Tribunal providing relief to the assessee by directing a stay on recovery and expediting the hearing of pending appeals.