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TMI Blog2017 (8) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... dia) Private Limited’s case (2009 (3) TMI 33 - SUPREME COURT ) wherein it was held that the liability to penalty under Section 271C can be fastened only on the person who does not have good and sufficient reason for not deducting tax at source. The burden, of course will be on that person to prove such good and sufficient reason. In the present case, the assessee had shown good and sufficient reasons for not deducting tax at source within the prescribed time. Thus, the CIT(A) rightly allowed the appeal filed by the assessee - Decided in favour of assessee. - ITA No. 122 of 2016 (O&M) - - - Dated:- 10-5-2017 - MR. AJAY KUMAR MITTAL AND MR. JUSTICE HARINDER SINGH SIDHU For The Appellant-Revenue : Mr. Yogesh Putney, Senior Standing counsel For The Respondent-Assessee : Mr. Nageshwar Rao, Advocate with Mr. Ashim Aggarwal, Advocate ORDER Ajay Kumar Mittal,J. 1. The appellant-revenue has filed the instant appeal under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 30.10.2015, Annexure A.3, passed by the Income Tax Appellate Tribunal, Delhi Bench, E , New Delhi (in short, the Tribunal ) in I.T.A. No.2915/DEL/2011 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction and collection account No. RTKM05568D. The assessee deducted the tax at source (TDS) amounting to ₹ 2,08,74,770/- on the salaries paid to its employees on secondment to India during the financial year in question and in terms of Section 200 of the Act, the respondent-assessee was under a statutory obligation to deposit the amount of tax deducted at source within the prescribed time limit as laid down under Rule 30 of the Income Tax Rules, 1962 (in short, the Rules ). The assessee did not deposit the same. On 16.07.2010, the show cause notice under Section 201 read with Section 221(1) of the Act was issued to the assessee for the financial year 2008- 09 relevant to the assessment year 2009-10 on account of failure to comply with the provisions of Chapter XVII B of the Act calling upon as to why it be not treated as assessee in default as envisaged under Section 201 of the Act and further as to why the penalty under Section 221 of the Act be not imposed. The assessee was called upon to furnish reply by 03.08.2010 positively. On 10.08.2010, the assessee filed its written reply. It was inter alia submitted that the delay in depositing the tax deducted at source to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal by the appellant-revenue. 3. We have heard learned counsel for the parties. 4. The issue that arises for consideration in this appeal relates to whether in the facts and circumstances of the case, the CIT(A) and the Tribunal were justified in setting aside levy of penalty amounting to ₹ 25,00,000/- imposed by the Assessing Officer under Section 221 of the Act. 5. Section 221 of the Act deals with penalty payable when tax in default. According to the said provision, when an assessee is in default or is deemed to be in default in making payment of tax, he shall in addition to the amount of the arrears and the amount of interest payable under Section 220(2) be liable, by way of penalty for such an amount as the Assessing Officer may direct and where there is continuing default such further amount or amounts as the Assessing Officer may direct from time to time but the total amount of penalty shall not exceed the amount of tax in arrears. Explanation to Section 221 of the Act provides that penalty may be imposed even if the assessee makes payment of tax before the levy of penalty. However, according to the first proviso to Section 221(1) of the Act, the assessee sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be fastened only on the person who does not have good and sufficient reason for not deducting tax at source. The burden, of course will be on that person to prove such good and sufficient reason. In the present case, the assessee had shown good and sufficient reasons for not deducting tax at source within the prescribed time. Thus, the CIT(A) rightly allowed the appeal filed by the assessee and set aside the order passed by the Assessing Officer. The relevant findings recorded by the CIT(A) read thus:- This is no dispute to the fact that the tax actually required to be deducted, has been deducted and paid to the Government account alongwith due interest. But there was certainly delay in depositing the TDS. It has been contended that appellant had no malafide intentions as to non compliance of Indian Tax Laws. All the taxes have suo motto been paid by appellant even before the issue of notice under Section 221(1) by the Assessing Officer and therefore, appellant should not be considered as assessee in default on the ground that the appellant has failed to pay the taxes. However, explanation to Section 221(1) provides that an assessee shall not cease to be liable to any penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enture partners in India. In the context of provisions of Section 192 read with Section 9 of the Act vis - vis the deduction of tax at source, the Hon ble Apex court in the case of CIT Vs. Eli Lilly and Co. (312 ITR 225) has held that this was the first instance that such an issue was examined by the Court. The Hon ble Court also went ahead in holding that where the tax deductor was under a genuine and bonafide belief that it was not under an obligation to withhold taxes, there was no question of imposition of penalty as the assesses had been able to discharge the burden of showing reasonable cause for non deduction of taxes. The Hon ble Court held that only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. Accordingly, the penalty proceedings under Section 271C were quashed on the ground that the assessee was under a genuine belief not to deduct taxes and therefore, there was a reasonable cause for not imposing penalty. It has been held that for these reasons, no penalty proceedings under Section 271C shall be taken in any of these cases as the issue involved was a nascent issue. The Hon ble Apex Court has also held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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