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2020 (4) TMI 16 - AT - Income TaxPenalty u/s 271C - delay in deposit of the TDS in the Government account - HELD THAT - Penalty under section 271C of the Act can only be levied where the assessee fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B, or pay the whole or any part of the tax as required by or under (i) sub-section (2) of section 115- O, or (ii) the second proviso to section 194B. In Coca Cola Beverage P. Ltd. vs. CIT 2007 (8) TMI 12 - SUPREME COURT and in Jagran Prakashan Ltd. v. Deputy Commissioner of Income-tax (TDS) 2012 (5) TMI 488 - ALLAHABAD HIGH COURT and also various orders of the Tribunal, it has been held that where TDS was paid by the assessee or the required tax was paid by the deductee, the assessee should not be held to be in default. Only interest on delayed payment under section 201(1A) of the Act can be charged. In the light of these decisions, where the assessee has made payment of TDS though late, he cannot be held to be in default and so, there is no question of levy of penalty under section 271C of the Act - We allow the appeal of the assessee and cancel the penalty levied under section 271C - Decided in favour of assessee.
Issues:
1. Justification of confirming penalty under section 271C of the Income Tax Act, 1961. 2. Failure to appreciate the basis of proceedings under section 271C. 3. Reasonable cause for penalty under section 273B of the Income Tax Act, 1961. Issue 1: Justification of confirming penalty under section 271C of the Income Tax Act, 1961: The appeal was against the order of the ld. CIT(A) confirming the penalty under section 271C. The Assessing Officer imposed a penalty of &8377; 50,000/- under section 271C due to a delay in depositing TDS, as the tax was deducted but not deposited promptly. The ld. CIT(A) upheld the penalty, emphasizing the delay in depositing the TDS. However, the ld. CIT(A) directed the Assessing Officer to modify the penalty amount based on the default. The appellant argued that the delay was due to disruptions in business activities caused by legal issues faced by the parent group. The Tribunal noted that the TDS was deducted but deposited late, and referred to relevant case laws. Notably, the Tribunal cited cases where TDS payment, albeit delayed, did not constitute default, and penalty under section 271C was not justified. Citing precedents, the Tribunal allowed the appeal and canceled the penalty levied under section 271C. Issue 2: Failure to appreciate the basis of proceedings under section 271C: The appellant contended that the initiation of proceedings under section 271C was based on a frivolous complaint regarding incorrect TDS deductions. The ld. CIT(A) did not accept this argument and confirmed the penalty, emphasizing the delay in TDS deposit. However, the Tribunal, after a detailed analysis, found that the delay in TDS deposit was due to the parent group's legal issues, causing disruptions in business operations. The Tribunal referred to relevant legal provisions and case laws to support its decision to cancel the penalty under section 271C, highlighting that delayed TDS payment did not constitute default. This issue was crucial in determining the validity of the penalty imposed and was addressed comprehensively in the judgment. Issue 3: Reasonable cause for penalty under section 273B of the Income Tax Act, 1961: The appellant argued that there was a reasonable cause for the delay in TDS deposit, citing disruptions caused by legal issues faced by the parent group. The ld. CIT(A) did not accept this reasoning and confirmed the penalty under section 271C. However, the Tribunal, after considering the facts and legal precedents, concluded that the delayed TDS payment, caused by external disruptions, did not constitute default warranting penalty under section 271C. By analyzing the provisions of section 271C and relevant case laws, the Tribunal found that the appellant had a reasonable cause for the delay in TDS deposit and, therefore, allowed the appeal, canceling the penalty. This issue was crucial in determining whether the penalty was justified based on reasonable cause and was thoroughly deliberated in the judgment. This detailed analysis of the judgment addresses the issues raised in the appeal comprehensively, providing insights into the legal reasoning and precedents considered by the Tribunal in reaching its decision to cancel the penalty under section 271C of the Income Tax Act, 1961.
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