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2019 (7) TMI 1163 - AT - Income TaxLevy of the penalty u/s 271C (1) - non dedction of TDS on employees claims towards their LFC - HELD THAT - In STATE BANK OF INDIA VERSUS THE ACIT (TDS) , JAIPUR 2019 (1) TMI 145 - ITAT JAIPUR although LFC claim was made by many employees, the objection was only regarding 12 employees and for this one of various reasons, the Tribunal came to the conclusion and the Tribunal did not accept the contention that assessee bank has not deducted tax intentionally. The second reason in that case for which the Tribunal deleted the penalty was this that the assessee has complied with the Tribunal order in quantum proceedings and deposited the outstanding demand along with interest and has taken corrective steps in the subsequent years as well. On this factual aspect also, the required details are not available on record and there is no finding of any of the authorities below on this factual aspect. Hence we feel it proper to set aside the order of ld. CIT(A) and restore the matter back to the file of ld. CIT(A) for fresh decision in the light of this Tribunal order rendered in the case of State Bank of India Vs. ACIT (supra) after examining the facts of the present case in the light of this Tribunal order keeping in mind the above discussion after providing adequate opportunity of being heard to both sides. Appeals filed by the assessee are allowed for statistical purposes.
Issues Involved:
1. Legality of the penalty levied under Section 271C of the Income Tax Act, 1961. 2. Applicability of Section 273B regarding reasonable cause for non-deduction of TDS. 3. Exemption under Section 10(5) of the Income Tax Act, 1961 for travel involving a foreign leg. 4. Consistency in application of tax exemption rules by the assessee bank. 5. Compliance with Tribunal orders and corrective actions taken by the assessee. Issue-wise Detailed Analysis: 1. Legality of the Penalty Levied Under Section 271C: The primary issue raised by the assessee in all appeals is the legality of the penalty imposed under Section 271C of the Income Tax Act, 1961. The assessee contends that the Commissioner of Income Tax (Appeals) erred in upholding the penalty for various assessment years. The penalties in question range from ?25,157 to ?84,724 for different years. The assessee argues that the penalties are bad in law and against the facts of the case. 2. Applicability of Section 273B Regarding Reasonable Cause for Non-Deduction of TDS: The assessee asserts that the penalties should not be levied due to the reasonable cause provision under Section 273B of the Income Tax Act, 1961. The assessee maintains that there was a reasonable cause for not deducting TDS, as they were under a bona fide belief that the exemptions claimed were valid. The Tribunal in the case of State Bank of India Vs. ACIT had previously held that there was reasonable cause for non-deduction of tax, and the assessee argues that similar facts apply in the present case. 3. Exemption Under Section 10(5) for Travel Involving a Foreign Leg: A significant point of contention is whether travel involving a foreign leg qualifies for exemption under Section 10(5) of the Income Tax Act, 1961. The assessee believed that employees were entitled to exemption even if their journey included a foreign leg, provided their designated place of travel was in India. The Commissioner of Income Tax (Appeals) failed to appreciate this belief, which the assessee argues was formed honestly and fairly. 4. Consistency in Application of Tax Exemption Rules by the Assessee Bank: The assessee contends that the Commissioner of Income Tax (Appeals) did not consider the consistency in the application of tax exemption rules. The assessee bank had allowed exemptions to all employees who submitted LFC claims, and this practice was followed consistently over the years. The Tribunal in the State Bank of India case noted that the bank had made an error in judgment but had not acted with malafide intent. 5. Compliance with Tribunal Orders and Corrective Actions Taken by the Assessee: The Tribunal highlighted the importance of compliance with its orders and the corrective actions taken by the assessee. In the State Bank of India case, the bank had complied with the Tribunal's order, deposited the outstanding demand along with interest, and taken corrective steps in subsequent years. The Tribunal in the present case pointed out that details about these factual aspects were not readily available and needed verification. Conclusion: The Tribunal decided to set aside the orders of the Commissioner of Income Tax (Appeals) and restore the matter for fresh decision after verifying the factual aspects in light of the Tribunal order in the State Bank of India case. The Tribunal emphasized the need to examine whether the demand was raised for all employees or only a few, whether the assessee had complied with the Tribunal's order, and whether corrective steps were taken in subsequent years. The appeals filed by the assessee were allowed for statistical purposes, and the matter was remanded for further examination.
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