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TMI Blog2018 (2) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and in law the Assessing Officer and the CIT(A) erred in not appreciating the fact that the assessee has voluntarily deposited the amount of short deduction /non-deduction / lower deduction as soon as it came to its notice that the compliance was not done in accordance with the Act. 4. On the facts and in the circumstances of the case and in law the Assessing Officer and the CIT(A) erred in not appreciating the fact that the assessee has deducted and deposited the amount of tax before the finalization of the order and has suo-moto made all the compliances. 5. On the facts and in the circumstances of the case and in law the Assessing Officer and the CIT(A) erred in appreciating the fact that the assessee being a branch of a banking company has no reason to deduct the tax at lower or NIL rate and hence the penalty levied is without any application of mind and is unjustified and bad in law." 2. The AO levied penalty of Rs. 4,25,420/- on the assessee u/s 271C of the IT Act, as the assessee had failed to deduct TDS on interest paid on FDRs and to deposit the same. The ld. CIT(A) has confirmed the penalty. 3. The ld. Counsel for the assessee has contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been placed on record. 5. I have heard the parties and have perused the material on record. The ld. CIT(A), while confirming the penalty, has observed as follows: "During the proceedings under section 271C, a show cause notice was issued to the appellant on 31.07.2014 and it was followed by two letters/notices dated 29.08.2014 and 03.03.2015. The only compliance made by the appellant to the three notices/letters was in the form of a letter dated 16.09.2014 duly signed by the Chief Manager, SBI, Mathura received by the A.O. apparently by post. The A.O., after considering the appellant's submission given in the aforementioned letter dated 16.09.2014, completed the proceedings and levied the impugned penalty on 30.03.2015. Before me, the appellant has given more than one arguments in support of its contention against the imposition of the penalty under section 271C. The first argument is that there was no willful default on its part in not deducting or in short- deducting the TDS from the payments of interest to some of its customers. It has explained that due to an updation error in its software, caused, in turn, by some human errors, PANs of some of its customers remained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 273B are not attracted to it, and the appellant is liable to be penalized under section 271C of the Act. Penalty of Rs. 4,25,420/- is accordingly confirmed. Grounds no. 1 to 5 are dismissed. 7. In the result, the appeal is dismissed." 6. Thus, as per the ld. CIT(A), the assessee did not produce any evidence that these occurred some error in the assessee's software, caused by any human error, which resulted in the PANs of some of the assessee's customers to escape consideration for the purpose of TDS. These existed, therefore, according to the ld. CIT(A), no reasonable cause for the assessee not to have deducted and deposited the TDS. 7. In this regard, the case of the assessee is that there is no definition for the term 'reasonable cause' and it has to be decided on the facts of each case. The Hon'ble Delhi High Court, in the case of 'Woodward Governors India (P) Ltd. Vs. CIT', (2002) 253 ITR 0745, has explained the term 'reasonable cause' as under:- "6. Levy of penalty under section 271C is not automatic. Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the appellant had clarified the reasons of such errors to the Assessing Officer and then the assessing officer accepted the justifications and accordingly dropped the tax liabilities on such non- deductions and found that there was no concealment of income and the mistake was bonafide and there was no loss to the Government. The appellant was referring to the letters/explanations which it had submitted before the ITO (TDS), Agra, wherein it had explained all the reasons due to which the non deduction of TDS happened in a few cases (copies enclosed at page 40-44 of the paper book). On page no 43 of paper book, at point nos. 3 and 4 of the reply to AO, it was stated about the updation error in its software caused in turn by some human errors, which allowed PANs of some of its customers to escape consideration for the purpose of deduction of TDS. 10. Moreover, in 'US Technologies' (supra), it has been held that deposit of tax before detection is a mitigating circumstances qua penalty. Herein, as on date, there is no outstanding demand. 11. Thus, in view of this background, the assessee cannot be considered as having done willful neglect for non-compliance of the TDS provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case and in law the Assessing Officer and the CIT(A) erred in not appreciating the fact that if the payee has discharged its tax liabilities then the payer of the income tax need not be held as assessee in default for the interest amount." 16. A survey u/s 133A of the IT Act was conducted on assessee on 11.01.2013. During the course of the survey, the department found that the assessee had not deducted TDS u/s 194A in respect of interest on FDR paid to trust. On 19.03.2015- order under section 201(1)/ 201(1A) of the Income Tax Act, was passed and a demand of Rs. 7,32,951/- was raised. 17. Appeal was filed before the Commissioner of Income-tax (Appeals)-l, Agra who has decided the appeal partly in favor of the assessee by giving relief in five cases out of eight cases and has sustained the addition only in the case of ISKON, as the necessary documents were not submitted at the time of hearing before the CIT(A). 18. The ld. CIT(A) has confirmed the demand u/s 201/201(1) in case of only ISKON accounts, which are as follows[Para 6.4 page no. 15 to 16 of CIT (Appeal) order dated 21.11.2016]: a. ISKON Foreign A/c. b. ISKON Samadhi A/c. c. ISKON Sri Lil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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