2018 (3) TMI 432 - AT - Income Tax

Levy of penalty u/s 271C - non deduction of tds on payment of lease rent to Noida Authority u/s 194I - Held that - A.O. in the order u/s 201(1) / 201(1A) specifically noted the explanation of assessee in which it was submitted by assessee that assessee requested the Noida Authority to clarify their position whether their income is exempt, but, no reply have been received from them. Prior to it, the Writ Petition of Noida Authority was dismissed by Hon ble Allahabad High Court. A.O. ultimately, rejected the contention of assessee and passed the order for recovery of the short deduction with interest. The assessee in the penalty proceedings claimed before A.O. that income of the Noida Authority exempt under section 10(20) of the I.T. Act, which fact was also has not proved by the assessee because it was incorrect. Therefore, the assessee had been negligent in not deducting TDS on lease rent paid to Noida Authority without any justification. Since assessee failed to prove its bonafide through any relevant and cogent evidence, therefore, assessee cannot take benefit of Section 273B of the I.T. Act as the assessee has failed to prove any reasonable cause for failure to comply with provisions of law. No interference is called for in the matter. Assessee submission that since the assessee moved an application under section 154 before Ld. CIT(A) for rectification of the impugned order, therefore, appeals of the assessee may be kept in abeyance, this issue is not arising out of the orders of the authorities below and even the assessee has not moved any proper application for admission of additional ground before the Tribunal that assessment order is time barred, therefore, such plea of the assessee cannot be entertained at this stage. The request of the assessee for keeping the appeals in abeyance is accordingly rejected. - Decided against assessee.

Summary

Issues:
Appeals challenging penalty under section 271C of the I.T. Act for non-deduction of tax on lease rent payments to Noida Authority.

Detailed Analysis:

1. Facts and Initial Orders:
The Assessing Officer (A.O.) found that the assessee did not deduct TDS on lease rent payments to Noida Authority as required by Section 194-I of the I.T. Act. The A.O. held that Noida Authority was not exempt as a Local Authority and initiated penalty proceedings under section 271C. The A.O. relied on a Kerala High Court decision to support the penalty imposition.

2. Decision of CIT(A):
The CIT(A) dismissed all appeals, noting that the assessee's failure to deduct tax was not justified, even if influenced by Noida Authority's claim of exemption. The CIT(A) emphasized that the deductee cannot influence the deductor to ignore legal requirements.

3. Arguments and Counter-arguments:
The Assessee's Counsel argued that efforts were made to seek clarification from Noida Authority regarding tax exemption, but no response was received. The Departmental Representative contended that the failure to deduct TDS was unjustified negligence on the part of the assessee.

4. Judgment and Reasoning:
The ITAT upheld the penalty under section 271C, emphasizing that the assessee failed to prove any reasonable cause for not deducting TDS. Despite claiming to seek clarification from Noida Authority, the assessee did not provide sufficient evidence to support their contention. The ITAT concluded that the assessee's negligence in not deducting TDS without justification warranted the penalty.

5. Additional Submissions and Dismissal:
The Assessee's request to keep the appeals in abeyance due to a rectification application under section 154 was rejected. The plea that penalty orders were time-barred was dismissed as it was not raised earlier in the proceedings. The ITAT directed the CIT(A) to expedite the rectification application independently.

6. Final Decision:
All appeals by the assessee were dismissed, and the ITAT upheld the penalty under section 271C for failure to deduct TDS on lease rent payments to Noida Authority.

This detailed analysis covers the issues, facts, decisions, arguments, judgment, and final outcome of the legal judgment delivered by the ITAT Delhi regarding penalty imposition under the I.T. Act for non-deduction of tax on lease rent payments.