2022 (3) TMI 77 - AT - Income Tax

Penalty u/s 271C r.w.s 274(1) - assessee has not deducted TDS on certain expenses for which provision was created in its books of account - CIT(A) deleted the penalty levied by the JCIT u/s 271C - HELD THAT - We do not find any infirmity in the order of the Ld. CIT(A) on this issue. The assessee during the course of hearing of penalty proceedings before the JCIT had categorically mentioned that in absence of receipt of actual invoices as in the last day of respective financial years, the amount of provision for expenses were based on estimates. In the absence of invoices and consequential liability to make the payment, the assessee did not withhold taxes on the said year end provision for expenses u/s 40(a)(i)/40(a)(ia) We find identical issue had come up before the Coordinate Bench of the Tribunal in the case of ITO vs DLF Southern Homes Pvt. Ltd. 2017 (12) TMI 1118 - ITAT DELHI wherein under somewhat identical circumstances dismissed the appeal filed by the Revenue against the order of the ld.CIT(A) deleting the penalty levied u/s 271C held the controverted facts establish that because of the peculiarity of the circumstances involved in this matter, namely, at the time of creation of the provision for brokerage expenses, neither the names of the brokers nor the amounts to be paid to them on account of brokerage was a determinable owing to the fluid situation, due to which TDS was not practically feasible to be deducted by the assessee, and more particularly in view of the fact that the assessee neither claimed nor availed any benefit of the provision made for expenses and paid due tax in full, we are of the considered opinion that the findings of the Ld. CIT(A) that there is neither any tax evasion nor loss of revenue to the Government do not suffer any illegality or irregularity, and that this tribunal cannot interfere with the same - Also see M/S. TELCO CONSTRUCTION EQUIPMENT CO. LTD., BANGALORE 2014 (3) TMI 1016 - ITAT BANGALORE Since, the Ld. CIT(A) while cancelling the penalty levied u/s 271C has given justifiable reasons, therefore, in absence of any distinguishable features brought to our notice by the Ld. DR to take a contrary view than the view taken by the Ld. CIT(A) on this issue on the basis of facts available on record, we do not find any infirmity in the order of the Ld. CIT(A). - Decided against revenue.

Summary

Issues:
Penalty under section 271C for non-deduction of tax at source.

Detailed Analysis:
The Revenue filed an appeal against the order of the CIT(A) relating to the Assessment Year 2013-14. The case involved the assessee, a company providing engineering consultancy services and manpower supply. The issue arose when the Deputy Commissioner of Income Tax highlighted the failure of the assessee to deduct tax at source. The JCIT imposed a penalty under section 271C, alleging non-deduction of taxes without reasonable cause. However, the CIT(A) deleted the penalty, considering the provisions created on an estimate basis and subsequent deduction and deposit of taxes upon crystallization of liabilities. The CIT(A) found the appellant not in default of deducting taxes due to reasonable causes, as explained by the appellant, and directed the AO to delete the penalty.

The Revenue challenged the CIT(A)'s decision before the Tribunal, raising grounds related to the identifiability of payable amounts, liability to deduct TDS, failure to comply with statutory provisions, and the distinction between relief provisions. The DR supported the JCIT's order, while the assessee's counsel relied on precedents where penalties were deleted under similar circumstances. The Tribunal analyzed the facts, submissions, and relevant decisions. It noted that the JCIT imposed the penalty due to non-deduction of TDS on expenses provisioned in the accounts. The Tribunal upheld the CIT(A)'s decision, citing the absence of invoices and consequent liability as reasons for non-deduction. The Tribunal referred to similar cases where penalties were deleted based on the peculiar circumstances of non-deduction due to unidentifiable payable amounts. Citing precedents, the Tribunal dismissed the Revenue's appeal, finding no grounds to interfere with the CIT(A)'s order.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271C, as the appellant's reasons for non-deduction were considered justifiable. The Tribunal found no basis to overturn the CIT(A)'s order, as the circumstances mirrored previous cases where penalties were deleted. The appeal filed by the Revenue was dismissed, affirming the deletion of the penalty.

This detailed analysis provides a comprehensive overview of the legal judgment, highlighting the issues, arguments presented, and the Tribunal's decision based on the facts and legal precedents cited in the case.