TMI Blog2007 (6) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs. Pushya Sitaraman for the appellant. JUDGMENT The judgment of the court was delivered by P. P. S. Janarthana Raja J.— These appeals are filed under section 260A of the Income-tax Act, 1961, by the Revenue, against the order of the Income-tax Appellate Tribunal, Chennai Bench "B", Chennai, in I. T. A. Nos. 177 and 178(Mds)/98, dated December 29, 2004, raising the following common substantial questions of law : "1. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that penalty under section 271C is not leviable on the assessee-company ? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that penalty under section 271C is not leviable when the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax (Appeals) dismissed the appeals and confirmed the orders of the Assessing Officer. Aggrieved, the assessee filed appeals to the Income-tax Appellate Tribunal ("the Tribunal" in short). The Tribunal held that the moneys received by the assessee from the investors create an obligation, and the return on that investment at the guaranteed minimum payment of 1.5 per cent. per month is covered by the definition of section 2(28A) of the Act and hence, the assessee is liable to deduct tax at source under section 194A, on the payments made to the investors. The Tribunal has also upheld the order that has been made by the authorities under section 201 of the Act. Aggrieved by the order, the assessee filed an appeal to this court, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer issued a show-cause notice requiring the assessee to explain as to why penalty under section 271C of the Act could not be imposed for non-deduction of tax at source for both the years. The assessee also replied to the show-cause notice stating that it had acted under the bona fide belief that the income received from the investments did not attract the liability for deduction at source and therefore, when the amounts were distributed among the investors, no tax was deducted at source. Also, an opinion was also obtained from the senior counsel before devising the scheme to the effect that no tax need be deducted at source on the payments made to the investors who had invested the money in the fund organised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel before devising the scheme to the effect that no tax need be deducted at source on the payments made to the investors who had invested the money in the fund organised by the assessee. Hence, there is a bona fide action by the assessee and its bona fides have also been accepted by the lower authorities. Further, the assessee thought that there is no relationship of debtor and creditor or borrower and lender and therefore, sections 194A, 201(1), 201(1A) read with section 2(28A) of the Act are not attracted. These explanations were considered by the authorities below and both the authorities had taken a view that there is a reasonable cause for non-deduction of tax at source. Section 271C deals with penalty for failure to deduct tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that no penalty shall be imposable on the person or the assessee, for any failure referred to in the said provisions if he proves that there is reasonable cause for the said failure. The reasonable cause involved in the present case is that the assessee acted in a bona fide manner on the basis of the opinion obtained from senior counsel before devising the scheme that the assessee need not deduct tax at source. On this consideration, the Tribunal held that it is not a fit case for levying penalty. The Tribunal, in its order, held as follows : "Rival contentions in regard to the above have been very carefully considered. The issue in regard to levy of interest for non-deduction of tax at source came up before the Tribunal in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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