2019 (1) TMI 1145 - HC - Income Tax

Stay petition - Penalty u/s 271(1)(c) - Held that - When the very question of levying tax from the petitioner is before the Tribunal, where the Tribunal has required that the Assessing Officer not to pass the order of penalty and that the appeals would be heard out of turn, in order to avoid multiplicity of legal proceedings, we would adopt a formula under which the interest of the petitioner as well as department are taken care of. As noted, the Tribunal has desired that the Assessing Officer may continue with the penalty proceedings but final order thereon may not be passed till disposal of the appeals. In connection with the present assessment order, the Assessing Officer himself has imposed a condition of depositing a portion of tax demand subject to fulfillment of which the remaining recovery would be stayed. Considering such facts, we would require that the Assessing Officer in the present case also not to pass the final order of penalty till the petitioner s appeals before the Tribunal against assessment for assessment years 2016-17 and 2017-18 are disposed of.

Summary

Issues:
1. Applicability of Section 271C of the Income Tax Act, 1961 in relation to TDS deductions by a company providing services to a foreign entity.
2. Stay of penalty proceedings under Section 271C pending appeal before the Income Tax Appellate Tribunal.
3. Request to prevent the Assessing Officer from proceeding with penalty proceedings to avoid multiple legal proceedings.

Analysis:
1. The petitioner, a company providing marketing and support services to a Dutch company, faced a dispute with the department regarding the deduction of TDS while making payments to taxi drivers. The Assessing Officer had previously held the petitioner liable for TDS deductions for the assessment years 2016-17 and 2017-18. The petitioner appealed to the Income Tax Appellate Tribunal, which granted a stay on the recovery of taxes pending appeal. The Tribunal also directed the authorities not to pass any penalty orders under Section 271C during the appeal period, citing relevant case law. The current assessment year 2018-19 raised a similar issue, leading to penalty proceedings by the Assessing Officer.

2. The petitioner requested an adjournment of penalty proceedings for the current assessment year, highlighting the pending appeals before the Tribunal and the stay on penalty orders for previous years. The Assessing Officer adjourned the proceedings, considering the Tribunal's stay order. The court, acknowledging the Tribunal's direction to continue penalty proceedings but not pass final orders until appeal disposal, balanced the interests of both parties. It directed the Assessing Officer not to finalize the penalty order for the current assessment year until the petitioner's appeals for previous years are resolved. The petitioner was instructed to cooperate with the proceedings and ensure prompt disposal of appeals before the Tribunal.

3. The court's decision aimed to prevent a multiplicity of legal proceedings by aligning with the Tribunal's approach and ensuring fairness to both the petitioner and the department. The order provided clarity on the penalty proceedings, maintaining a balance between the interests of the petitioner and the department. The directive allowed for the continuation of penalty proceedings while withholding the final order until the resolution of pending appeals, promoting efficiency and coherence in the legal process.

This comprehensive analysis of the judgment addresses the issues involved, the background of the case, the Tribunal's directives, the petitioner's requests, and the court's final directions to ensure a fair and balanced resolution of the legal matters at hand.