2016 (4) TMI 114 - AT - Income Tax

Penalty u/s. 271(1)(c) - non deduction of tds u/s 194A - Held that - The assessee made a claim but the same was rejected and disallowed not for the reason that the claim was fabricated, but keeping in view the statutory provision of law that the assessee did not deduct TDS thereon. It, therefore, can hardly be said that the assessee had furnished inaccurate particulars of income entailing penalty u/s. 271(1)(c) of the Act. The assessee had offered bona fide explanations before the authorities below and as such, the Assessing Officer was not justified to hold that the case of the assessee is hit by Explanation 1 to Section 271(1)(c) of the Act. We also find that the decisions relied upon by the ld. Counsel for the respondent go to support the case of the assessee, against which no counter material could be adduced on behalf of the Revenue. The ld. CIT(A) also reached his conclusions after following decisions of Hon ble Supreme Court in the case of Reliance Petroproducts Ltd. 2010 (3) TMI 80 - SUPREME COURT which do not stand rebutted on behalf of the Revenue. We, therefore, find no justification to interfere with the order of the ld. CIT(A). Accordingly, the appeal of the Revenue is found to have no merits and is liable to fail - Decided in favour of assessee

Summary

Issues:
1. Deletion of penalty imposed under section 271(1)(c) of the IT Act for non-deduction of tax at source.
2. Justification of penalty deletion by the ld. CIT(A).
3. Assessment of whether non-deduction of tax at source constitutes inaccurate particulars of income.

Analysis:
1. The appeal involved the deletion of a penalty of &8377; 18,67,162 imposed by the Assessing Officer under section 271(1)(c) of the IT Act for non-deduction of tax at source on interest payments to ONGC, as required under section 194A of the Act. The Revenue challenged this deletion, while the cross-objection by the assessee supported the impugned order.

2. The ld. CIT(A) deleted the penalty after considering the Explanation 1 to section 271(1)(c) and various judicial pronouncements. The explanation offered by the assessee for non-deduction of tax at source was deemed bona fide, as the non-deduction was disclosed in the Tax Audit Report. The Revenue contended that sustaining the disallowance of interest by ITAT justified the penalty, but the ld. CIT(A) found the explanations satisfactory and deleted the penalty.

3. The ITAT analyzed whether the non-deduction of tax at source constituted furnishing inaccurate particulars of income. The respondent's belief in not deducting tax was based on the payee company's assurance of paying the tax, which was communicated to the respondent. The respondent also disclosed the non-deduction in the Tax Audit Report. The ITAT held that the mere non-deduction of tax did not amount to furnishing inaccurate particulars of income, especially when explanations were bona fide and based on reasonable grounds. Citing legal precedents, the ITAT concluded that the penalty was unjustified, as the claim was rejected due to non-compliance with TDS provisions, not due to fabricated claims.

In conclusion, the ITAT upheld the deletion of the penalty, emphasizing the bona fide nature of the explanations provided by the assessee. The appeal of the Revenue was dismissed, and the cross-objection of the assessee was deemed infructuous. The ITAT found no merit in the Revenue's appeal and upheld the order of the ld. CIT(A), ultimately dismissing both the appeal and cross-objection.