2023 (2) TMI 296 - AT - Income Tax

Penalty u/s 271C r.w.s. 274(1) - Assessee has failed to deduct tax at source - HELD THAT - As decided in assessee own case 2015 (7) TMI 1423 - ITAT LUCKNOW TDS was paid by the assessee or required tax was paid by the deductee, the assessee should not 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 there is no question of levy of penalty under section 271C of the Act. We have carefully perused the order of the ld. CIT(A) and we find that the ld. CIT)A) has adjudicated the issue in the light of various judicial pronouncements. Sine no infirmity has been pointed out in the order of the ld. CIT(A), we confirm the same. Accordingly, the appeals of the Revenue are dismissed.

Summary

Issues:
1. Imposition of penalty u/s 271C for failure to deduct tax at source.
2. Challenge against the penalty imposed by the Commissioner of Income Tax (Appeals).

Issue 1: Imposition of penalty u/s 271C for failure to deduct tax at source:
The Assessee appealed against the penalty imposed under section 271C of the Income Tax Act, 1961, for failing to deduct tax at source. The Assessing Officer (AO) observed that the Assessee had not deducted tax as required under Chapter-XVVB of the Act for specific payments. The Assessee responded to show cause notices but the AO, despite considering the explanation, imposed the penalty. The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the Assessee failed to deduct tax without a reasonable cause. The Commissioner rejected arguments regarding the time limit for initiating penalty proceedings and the requirement to treat the Assessee as "assessee in default" before imposing penalties under section 271C. The Commissioner concluded that the penalty was rightly imposed for the assessment year in question.

Issue 2: Challenge against the penalty imposed by the Commissioner of Income Tax (Appeals):
The Assessee challenged the penalty before the Appellate Tribunal. The Assessee argued that although there was a failure to deduct tax at source within the prescribed period, the tax was deposited promptly upon discovery of the error. The Assessee highlighted a previous Tribunal decision in a similar case where relief was granted. The Department, however, supported the penalties imposed by the AO and the Commissioner. The Tribunal considered the facts and circumstances, noting that in a previous case involving the Assessee, penalties were deleted by the then Commissioner. The Tribunal, therefore, decided to delete the penalty in the current case, citing the previous decision as a precedent. However, the Tribunal cautioned that repeated defaults in the future would not receive the same leniency. The Tribunal allowed the Assessee's appeal and directed that in subsequent defaults, the Assessee would not benefit from this decision as a precedent.

This judgment by the Appellate Tribunal ITAT DELHI involved the imposition of penalties under section 271C of the Income Tax Act for failure to deduct tax at source. The Assessee's challenge against the penalties imposed by the Commissioner of Income Tax (Appeals) was successful based on the Tribunal's consideration of previous decisions and the specific circumstances of the case.