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TMI Blog2020 (10) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard together and we deem it convenient to pass a common order. 2. At the time of hearing, both the parties agreed that identical issue came up for consideration before this Tribunal in ITA Nos. 651 to 656/Bang/2019 in the case of Syndicate Bank, Koramangala, Yelhanka and Ganganagar Branches, Bangalore, vide order dated 19.07.2019, the appeals of the assessees were allowed deleting the penalty imposed u/s. 271C of the Income Tax Act, 1961 (Act) under similar facts and circumstances as in the present cases before us. The relevant observations in the aforesaid decision are as follows:- "2. Leave Travel Allowance (LTA) is the most common element of compensation adopted by employers to remunerate employees due to the tax benefits attached to it. LTA is the remuneration paid by an employer for Employee's travel in the country, when he is on leave with the family or alone. LTA amount is tax free. Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B (Commonly known as LTA Rules), provides for the exemption and outlines the conditions subject to which LTA is exempt. As per LTA Rules, LTA exemption can be claimed where the employer provides LTA to employee for leave to any pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned 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 not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be :- (a) where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and (b) where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.] (2) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 : [Provided that nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 en-route 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 source and paid to the Government, from the date on which it ought to have been deducted and paid to the Government till the date on which the same is paid to the credit of the Central Government. Over and above the obligation u/s.200 of the Act, the Assessee is also liable for imposition of penalty u/s.271-C of the Act for the failure to deduct Tax at source. The provisions of Sec.271-C reads thus:- "Section: 271C. 1) If any person fails to- a) deduct the whole or any part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 to levy of penalty can be fastened only on 44 the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. In each of the 104 cases before us, we find that non-deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, 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." (emphasis supplied) 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). The Hon'ble ITAT has also confirmed the orders of the revenue authorities on this issue. The Assessee is in appeal before the Hon'ble Karnataka High Court against the said orders and the Hon'ble Karnataka High Court in ITA No.634/2017 by order dated 22.11.2018 admitted the appeal framing the following substantial question of law:- (i) Whether the Tribunal was justified in holding that for the purposes of exemption under section 10(5) of the Act, travel by the employees would only have to be within India, without appreciating that the said provision does not prohibit travel outside India but only limits the exemption available to the employees under the said provision to reimbursements for travel within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring the employer under section 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee(s). Therefore, it was held that an assessee-employer is under no statutory obligation under the Income-tax Act, 1961, and/or the Rules to collect evidence to show that its employee(s) had actually utilized the amount(s) paid towards leave travel concession(s)/conveyance allowance. 11. We thus find that there is nothing specific which has been provided by CBDT in its circular issued under section 192 for the relevant financial year. What has been reiterated is adherence to the provisions as contained in section 10(5) read with Rule 2B. Similarly, the Hon'ble Supreme Court has also held that an assessee employer is under no statutory obligation under the Income-tax Act, 1961, and/or the Rules to collect evidence to show that its employees had actually 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee bank in understanding and applying the provisions of section 10(5) of the Act. Therefore, we are unable to accept the Revenue's contention that the assessee bank has not deducted the tax intentionally, fully knowing that the LFC is applicable for travel in India only and no foreign travel is allowable as it is a case of error of judgment and no malafide can be assumed on part of the bank. Further, nothing has been brought on record which in any ways suggest connivance on part of the assessee bank or forged claims submitted by the employees and which has been discovered by the Revenue during the course of its examination. As fairly submitted by the assessee bank, while calculating the estimated tax liability of its employees, it always consider LFC claim as exempt under section 10(5)and the same position, being followed and accepted consistently in the past years, was followed 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 int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction as per a person properly instructed in law and is not completely debarred at all, the mere fact of confirmation of disallowance would not per se lead to the imposition of penalty." 8. The assessee in the present case had disclosed all the materials on which it was claiming deduction. The matter as to whether the deduction was to be given or not, was taken up by the revenue authorities and it was held that certain deductions claimed by the assessee were to be disallowed. It is not disputed that the questions regarding the disallowance of the deductions claimed by the assessee is under consideration by the High Court, as the appeal filed by the assessee has been admitted, on the substantial questions of law which have been reproduced hereinabove. 9. The mere admission of the appeal by the High Court on the substantial questions of law as have been quoted above, would make it apparent that the additions made were debatable. The Tribunal has thus rightly held that the admission of substantial questions of law by the High Court leads credence to the bona fide of the assessee and therefore, the penalty is not exigible under Section 271(1)(c) of the Act. Merely because the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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