2016 (9) TMI 904 - AT - Income Tax

Penalty proceedings u/s 271C - non deduction uf tds u/s 194J on the payment made to hospitals nursing homes - Held that - While deleting the penalty the CIT(A) has mentioned that the penalty u/s 271C was not leviable in the case of assessee for the reasons that the assessee did not deduct tax following favourable decisions available to them at that time . According to which no tax was deductible by them for being TPA u/s 195J. Therefore, the CIT(A) while passing the impugned order has held that this being a reasonable cause itself, in view of provisions of sec.273B the penalty levied u/s 271C of the Act, upon the assessee was deleted. The ld. CIT(A) has no where mentioned what were those favourable decisions at that time available to the assessee according to which the assessee was not liable to deduct tax being TPA u/s 194J of the Act and this particular stand taken by CIT(A) is the basis for reaching to the conclusion. However, the orders passed by the ld. CIT(A) lacks mentioning or discussion of any such favourable decisions , while reaching to a conclusion regarding deletion of penalty. Therefore, in our considered view, the ld. CIT(A) has reached to a conclusion without mentioning its basis. Hence, the order of ld. CIT(A) is nonspeaking to that extent. Considering the facts of the present case, in our considered view the present appeal is to be remanded back to the file of the CIT(A) with a direction to pass speaking order, while mentioning the basis or the details of favourable decisions which were available at that time before the assessee, according to which no tax was deductible. Needless to mention that the ld. CIT(A) would give a fresh opportunity of hearing to both parties before passing a fresh order in accordance with law. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
- Applicability of section 194J of the IT Act to payments made by the appellant to hospitals under the cashless hospitalization scheme.
- Imposition of penalty under section 271C of the IT Act for non-deduction of tax at source by the appellant.
- Interpretation of law by the Assessing Officer and the CIT(A) regarding the liability to deduct tax at source for payments made to hospitals.

Analysis:

Issue 1: Applicability of section 194J to hospital payments
The appellant contended that they had a genuine belief that section 194J did not apply to payments made to hospitals under the cashless hospitalization scheme due to various judicial precedents and industry practices. However, the Assessing Officer found the appellant's interpretation inconsistent with the law and imposed a penalty under section 271C. The CIT(A) deleted the penalty relying on the appellant's claim of reasonable cause for non-deduction. The ITAT Mumbai referred to the Bombay High Court's decision in a similar case, holding that TPAs are liable to deduct tax under section 194J when making payments to hospitals. The ITAT noted that the CIT(A) did not adequately explain the basis for deleting the penalty and remanded the case for a speaking order.

Issue 2: Imposition of penalty under section 271C
The Assessing Officer imposed a penalty under section 271C on the appellant for non-deduction of tax at source. The CIT(A) reversed this decision, citing the appellant's claim of reasonable cause for not deducting tax based on perceived favorable decisions at the time. However, the ITAT found the CIT(A)'s order lacking in specifying the favorable decisions relied upon by the appellant. Consequently, the ITAT remanded the case back to the CIT(A) for a detailed explanation and fresh order.

Issue 3: Interpretation of law by revenue authorities
The revenue challenged the CIT(A)'s deletion of the penalty under section 271C, arguing that the CIT(A) failed to appreciate the legal and factual aspects of the case. The ITAT reviewed the orders passed by the revenue authorities, considered judicial pronouncements, and emphasized the need for a clear explanation regarding the basis for the penalty deletion. The ITAT directed the CIT(A) to provide a detailed rationale for the decision, mentioning the specific favorable decisions that influenced the penalty deletion.

In conclusion, the ITAT allowed the appeals filed by the revenue for statistical purposes, remanding the case back to the CIT(A) for a comprehensive explanation and fresh order in accordance with law.