2015 (10) TMI 1859 - AT - Income Tax

Penalty u/s 271C - non deduction of tax at source u/s 194A - CIT(A) deleted penalty levy - Held that - No merit in the appeal of revenue. The ld. CIT(Appeals) found that in case of three of the societies, the assessee was not liable to deduct tax at source. In the case of Shri Aurobindo Society, the exemption certificate under section 80G(5)(vi) was also filed. It would, therefore, prove that assessee had a reasonable cause for failure to deduct tax at source under section 201(1) of the Act. The facts are identical in the case of State Bank of Patiala, Shimla (2015 (10) TMI 1745 - ITAT CHANDIGARH). Hon ble Himachal Pradesh High Court dismissed departmental appeal finding no substantial question of law. These facts would clearly support the findings of ld. CIT(Appeals) that assessee had a genuine belief that it would not require to deduct tax at source. The case of the assessee, therefore, squarely falls under the provisions of Section 273B of the Act and penalty is not leviable because assessee is able to prove that there was a reasonable cause for the said failure. - Decided in favour of assessee.

Summary

Issues:
Challenge to cancellation of penalty under section 271C of the Act for assessment year 2011-12.

Analysis:
The appeal by the revenue challenged the cancellation of penalty under section 271C of the Act for failure to deduct tax at source on payments of interest to specific societies. The Assessing Officer created a demand under section 201(1) and (1A) of the Act and initiated penalty proceedings under section 271C. The ld. CIT(Appeals) canceled the penalty after considering the appellant's explanations and written submissions.

The ld. CIT(Appeals) referred to section 194A(3)(iii)(f) and a notification by the Central Government regarding institutions financed wholly by the Government exempted from tax deduction at source. The appellant argued that the societies in question fell under this exemption as they were registered under the Societies Registration Act 1860 and funded by the Government. The appellant's belief that tax deduction was not required was supported by previous ITAT judgments.

Regarding one society, the appellant provided an exemption certificate under section 80G(5)(vi) of the Act. The appellant's genuine belief and reasonable cause for not deducting tax were emphasized, leading to the cancellation of the penalty under section 271C.

The Tribunal considered the findings of the ld. CIT(Appeals) and previous judgments, concluding that the appellant had valid reasons for not deducting tax at source. The appeal of the revenue was dismissed based on the appellant's genuine belief and reasonable cause for the failure to deduct tax, in line with Section 273B of the Act.

In summary, the Tribunal upheld the cancellation of the penalty under section 271C, emphasizing the appellant's genuine belief and reasonable cause for not deducting tax at source. The decision was supported by relevant legal provisions and previous judgments, leading to the dismissal of the revenue's appeal.