2018 (6) TMI 94 - AT - Income Tax

Penalty u/s 271C - Assessee in default u/s 201(1) - non deduction of tds - TDS u/s 194C OR 194J - Held that - Isuue to be remanded to the file of the AO for verification of the transactions which are technical in nature, requiring deduction of tax at source u/s 194J of the Act and the services which require deductions u/s 194C of the Act. Therefore, the issues are set aside to the file of the AO for de novo verification and only in respect of the transactions which require the deduction of tax at source at a higher rate u/s 194J of the Act, shall the interest u/s 201(1A) shall be considered. Since the assessee has filed the certificates of the recipients with proof that the recipients have offered the income to tax in their hands, the assessee shall not be treated as an assessee in default u/s 201(1) of the Act. Since the assessee has not been treated as an assessee in default u/s 201(1) of the Act, the penalty u/s 271C are not sustainable as held by the Coordinate Bench of the Tribunal in the case of ACIT vs. M/s. Nexgen Educational Trust 2017 (11) TMI 191 - ITAT HYDERABAD - Decided in favour of assessee.

Summary

Issues:
Revenue's appeals against CIT(A)'s order deleting penalty u/s 271C of the I.T. Act for A.Ys 2012-13 to 2015-16.

Analysis:
1. The assessee Trust entered into service agreements with companies for support services related to educational institutions. A survey revealed the need for TDS @ 10% u/s 194J instead of 2% u/s 194C. AO proposed orders u/s 201(1) and 201(1A) for short deductions and initiated penalty proceedings u/s 271C.

2. Assessee claimed the demand u/s 201(1) should not be raised post-amendment to the Finance Act of 2012. AO observed no separate demand u/s 201(1) but charged interest u/s 201(1A) after considering submissions and certificates provided.

3. CIT(A) held that the work performed falls under section 194C, not 194J, and that the assessee correctly deducted tax @ 2%. Relief granted by CIT(A) led to Revenue's appeals for A.Ys 2012-13 to 2015-16.

4. Similar issues were considered in other cases. Tribunal remanded the appeals to AO for verification of transactions requiring different TDS rates. Assessee not treated as 'assessee in default' u/s 201(1), leading to partial relief for Revenue's appeals.

5. Penalty appeals were dismissed as the assessee was not treated as 'assessee in default' u/s 201(1). Tribunal cited relevant case law and upheld CIT(A)'s decision, emphasizing reasonable cause for non-deduction of tax at a higher rate.

6. Tribunal found no need to interfere with CIT(A)'s order, rejecting Revenue's grounds. Appeals of the Revenue were dismissed, and the order was pronounced on 30th May, 2018.