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TMI Blog2016 (3) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... being disposed of by this common order. 3. The assessee has raised common grounds of appeal in all the three years and for the sake of convenience we hereby reproduced the grounds pertaining to AY 2008-09: 1. Because the learned authorities below have erred both on facts and in law in imposing penalty under section 271C of the Income Tax Act, 1961 amounting to Rs. 6,296/- without appreciating the reasonable cause of defiance of the provisions of law for failure of the assessee to deduct tax at source. The penalty imposed is liable to be deleted. 2. Because the learned authorities below have erred both on facts and in law in relying upon the decision of Hon'ble Kerala High Court in the case of U.S. Technologies International (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Kerala High Court in the case of US Technologies International (P) Ltd. Vs. Commissioner of Income-tax (2010) 195 Taxman 323 wherein it was held that failure to deduct tax at source or failure to remit recovered tax both attracted penalty under section 271 C. The matter was taken up in appeal before the Ld. CIT(A) where the assessee pleaded reasonable cause for the default. The same was not found convincing by the Ld. CIT(A) and therefore the penalty levied was upheld. 5. Aggrieved by the same the assessee filed the present appeal before us. 6. Before us the Ld. AR pleaded that there was no cause for levy of penalty under section 271C in the present case since the assessee had reasonable cause for not deducting the TDS. Ld. AR stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary exceeding Rs. 10 lacs and therefore the software of the assessee was not programmed correctly. Ld. AR submitted that in the impugned year certain employees of the assessee Institute had received arrears of salary due to which their income exceeded Rs. 10 Lacs, but since the software was not programmed correctly, surcharge was not calculated on the tax leviable and as a result tax was calculated short and consequently deducted short on the salary paid. Ld. AR submitted that in this case also when non deduction of surcharge was pointed out by the survey team on 18/11/2009 the assessee immediately deducted tax from their salary for November itself and deposited it on 01/12/2009. Ld. AR therefore submitted that since there was reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,296/- 2008-09 Rs. 7,910/- 2009-10 Rs. 7,928/- On being confronted with the same during the course of TDS survey carried out at the assessee's premises on 18/11/2009, the assessee paid the TDS alongwith interest on 19/12/2009. Subsequently an order under section 201(1) / 201(1A)/ 154 was passed stating that since the entire payment of TDS had been made by the assessee no demand was to be paid under this head. At the same time penalty proceedings under section 271C were initiated for the default committed of non deduction of TDS and penalty levied on the same. 10. We find that the assessee had offered an explanation for not deducting TDS on advertisement payment made, stating that since the payment had been made for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he explanation of the assessee cannot be said to be frivolous or unreasonable. Further the subsequent action of the assessee of depositing TDS on becoming aware of the default and of deducting TDS in future years also on such payment lends credence to the bonafide of the assessee in harboring a belief that such payments were not to be subjected to TDS. It is evident that that there was no contumacious conduct on the part of the assessee and hence penalty under section 271 C cannot be levied in such circumstances. The Hon'ble Apex Court in the case of CIT Vs. Bank of Nova Scotia (supra) has held that for the levy of penalty under section 271 C, it is necessary to establish contumacious conduct on the part of the assessee. 11. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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