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TMI Blog2020 (2) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... t has admitted for consideration the correctness of such addition then it means that the additions made were debatable and would lead credence to the bonafides of the assessee and in such circumstances imposition of penalty was not proper and was rightly deleted by the Tribunal. We are of the view that levy of penalty u/s.271C cannot be sustained and the same is directed to be deleted. - Decided in favour of assessee. - ITA Nos. 2413 to 2415/Bang/2019, ITA Nos. 2416 & 2417/Bang/2019 - - - Dated:- 12-2-2020 - Shri N.V. Vasudevan, Vice President And Shri A.K. Garodia, Accountant Member For the Appellant : Shri H. Muralidhara, For the Respondent : Shri Manjeet Singh, Addl.CIT(DR)(ITAT), Bengaluru ORDER PER N.V. VASUDEVAN, VICE PRESIDENT These are all appeals by two different branches of State Bank of India, a nationalised bank, carrying on banking business against two set of orders one dated 11.7.2019 and 9.9.2019 respectively of CIT(A)-10, Bangalore, Ay 2011-12 to 2013-14. The issue involved in all the appeals are common and deal with the only issue of validity of imposition of penalty on the Assessee u/s.271-C of the Income Tax Act, 1961 (Act). The issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions for the purpose of section 10(5) and it reads thus: 2B. (1) The amount exempted under clause ( 5 ) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,- ( a ) on leave to any place in India; ( b ) to any place in India after retirement from service or after the termination of his service, shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely :- ( i ) where the journey is performed on or after the 1st day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination; ( ii ) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the airconditioned first class rail fare by the shortest route to the place of destination; and ( iii ) where the places of origin of journey and destination or part thereof are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was noticed that the Assessee did not deduct tax at source on LTA reimbursement even when the travel was out of India to a destination in India through a long circuitous route. The Act mandates that a specified percentage of Tax is required to be deducted by the payer at the time of making certain payments to the payee. The requirement to deduct tax is there for payments such as payment of Commission, interest, salary, royalty, contract payment, brokerage etc. The non-exempt LTA will be in the nature of salary and the Assessee ought to have deducted tax at source and the Assessee failed to do so under the impression that if the destination is India, irrespective of the fact that enroute the journey is out of India, the entire LTA is exempt. The Department however took a contrary view and held that when the travel is outside India irrespective of the fact that the ultimate destination is India, Tax ought to have been deducted at source. The Assessee was accordingly proceeded u/s.200(1) 200(1A) of the Act for failure to deduct tax at source and was held to be an Assessee in default in respect of taxes not deducted at source and also liable for interest on such tax not deducted at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Ors., CIVIL APPEAL No. 5114/2007, Order Date 25th March, 2009, with regards to reasonable cause for failure to deposit TDS:- (iv) On the Scope of Section 271C read with Section 273B: 35. Section 271C inter alia states that if any person fails to deduct the whole or any part of the tax as required by the provisions of Chapter XVII-B then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct. In these cases we are concerned with Section 271C(1)(a). Thus Section 271C(1)(a) makes it clear that the penalty leviable shall be equal to the amount of tax which such person failed to deduct. We cannot hold this provision to be mandatory or compensatory or automatic because under Section 273B Parliament has enacted that penalty shall not be imposed in cases falling thereunder. Section 271C falls in the category of such cases. Section 273B states that notwithstanding anything contained in Section 271C, no penalty shall be imposed on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tax from the interest payable to nonmembers. That is the bonafide mistake which they have committed. Their bonfides is demonstrated to the effect that once in a survey the said mistake was notice and pointed out immediately they have paid the tax with interest. Therefore, in the light of this undisputed facts of this case, when the Appellate Commissioner and the Tribunal held that the same constitutes a reasonable cause and when the same is not shown to be false, the assessee has satisfied the requirement of Section 273- B, in which event, no penalty shall be imposable. Therefore the order passed by the Tribunal and the appellate Commissioner is valid and legal and do not suffer from any legal infirmity which calls for interference. Accordingly the substantial question of law framed is answered in favour of the assessee and against the Revenue. 9. In the present case, the Assessee was held to be an Assessee in default and orders u/s.200(1) 200(1A) of the Act by the AO and the CIT(A). 10. The Revenue authorities proceeded to impose penalty u/s.271C on the Assessee rejecting the plea of the Assessee that the failure to deduct tax at source was on a reasonable belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally utilized the amount paid towards leave travel concession. Even though the same is not required as per decision referred supra, in the instant case, the assessee bank has been diligent, and has collected and brought on record evidence to show that its employees had actually utilized the amount paid towards leave travel concession. 12. At the same time, in terms of adherence to the provisions as contained in section 10(5) read with Rule 2B, we find that the assessee bank has allowed exemption to all its employees who have submitted LFC claim. The Revenue has not disputed the LFC claim in respect of these employees except in respect of 12 employees. These 12 employees, who have travelled to foreign countries as part of their travel itinerary with designated place of travel in India, and in respect of which they have submitted their LFC claim, has been disputed by the Revenue as not eligible for exemption under section 10(5) in respect of amount reimbursed towards foreign leg of their travel. The explanation of the assessee bank is that while calculating the tax liability of its employees, the figure of LFC was always exempted and this rule was being followed since many years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed in the current financial year as well. However, for the first time, after the survey by the tax department, this issue arose for consideration and after the judgment of the Tribunal, the matter got clarified and the assessee bank has duly complied and deposited the outstanding demand along with interest and has taken corrective steps in subsequent years as well. 13. In light of above discussions and in the entirety of facts and circumstances of the case, we are of the considered view that there was reasonable cause in terms of section 273B of the Act for not deducting tax by the assessee Bank. In the result, the penalty so levied under section 271C is hereby directed to be deleted. 12. The learned counsel for the Assessee submitted that when the Hon ble High Court admits an appeal against the order in quantum proceedings, no penalty can be levied on the Assessee. It was submitted that when the High Court admits substantial question of law on an addition, it becomes apparent that the addition is certainly debatable. In such circumstances no penalty can be levied u/s 271C. In this regard the learned counsel for the Assessee placed reliance on the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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