TMI Blog2023 (8) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... n Bank of Nova Scotia [ 2016 (1) TMI 583 - SUPREME COURT] held that when the assessee s conduct is not contumacious, then penalty under Section 271C of the Act is liable to be vacated. Supreme Court of India made the following observation in the Case of M/s Eli Lilly Company (India) Pvt. Ltd. Ors. [ 2009 (3) TMI 33 - SUPREME COURT] with regards to reasonable cause for failure to deposit tax deducted at source held that only those persons will be liable to penalty who do not have good and sufficient reason for not deducting tax and burden, of course, is on such person to prove such good and sufficient reason. Thus as there is a bona fide mistake on part of the assessee in not deducting taxes at source at time of purchase of aforesaid two properties, coupled with the fact that the recipients/sellers have duly accounted for the sale consideration in their respective returns of income and hence, there is no loss to the Revenue, we are of the considered view that this is a fit case for deleting the levy of penalty u/s 271C - Decided in favour of assessee. - Smt. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes thereon. A certificate from the chartered accountant under the First Proviso to Section 201 of the Act was also furnished before the Assessing Officer. However, the Assessing Officer rejected the contention of the assessee and imposed penalty under Section 271C of the Act, with the following observations: 2. The reply of the assessee has been considered, but it is not found tenable for the reasons that assessee was liable to deduct tax and pay it to Government as per the provisions of the section 1941A of the Income Tax Act, 1961, within time limit prescribed in the Act. The payment of taxes by seller may give relief to the assessee to the extent of Tax i.e. applicability of provisions of section 201 of the Income Tax Act 1961 but by not deducting the tax assessee is in default and liable for all other provisions including penalty and interest, which is apparent from the submission of the assessee that penal interest u/s 201(1A) of the Income Tax Act, 1961 has been paid. 3. In view of above mentioned facts the argument that the sellers of property are regularly assessed to tax and they have disclosed income on sale of above referred property in Income Tax Returns a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 194- IA of the Act. The Counsel for the assessee submitted that the sellers/recipient of income have included such income in their returns of income submitted under Section 139 of the Act. A certificate from the recipient s chartered accountant has also been furnished by the assessee at Pages 6-10 of the Paper Book. The Counsel for the assessee submitted that the assessee has also paid interest of Rs. 81,628/- under Section 201 (1A) of the Act and furnished Form No. 26A in support of the aforesaid contention. The Counsel for the assessee submitted that there has been a bona fide mistake on the part of the assessee, for which the assessee also had to bear the burden of interest under Section 201(1A) of the Act. Further, it was submitted that there has been no loss to the Revenue since the recipients of income have offered the sale consideration in their returns of income and also paid taxes thereon. Accordingly, it was requested that it is a fit case where penalty imposed under Section 271C of the Act is liable to be deleted. 6. In response, the Ld. DR placed reliance on the observations made by Ld. CIT(Appeals) and Assessing Officer in their respective orders. 7. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case shall have to be taken into consideration. Section 273B of the Income Tax Act provides that no penalty under Section 271C shall be imposable on the person or the assessee as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. The circumstances explained by the learned counsel for the assessee clearly reveal that the assessee paid interest to nonbanking financial institution and did not deduct tax because the assessee was under the bonafide belief that no TDS was to be deducted on the payments made to nonbanking financial institution. The Assessing Officer made disallowance under Section 40(a)(ia) of the Income Tax Act and other additions were also made in the assessment order, which are accepted by the assessee and the demand raised as per assessment order has been paid. Therefore, these circumstances would clearly reveal that the assessee has reasonable cause for failure to comply with the provisions of section . Therefore, in view it being a beginning of the assessee for failure to deduct tax and then the assessee in future has starting deducting TDS would su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olidation of the entire income chargeable under the head Salaries being exigible to deduction of tax at source under Section 192 was a nascent issue. It has not be considered by this Court before. Further, in most of these cases, the tax-deductor-assessee has not claimed deduction under Section 40(a)(iii) in computation of its business income. This is one more reason for not imposing penalty under Section 271C because by not claiming deduction under Section 40(a)(iii), in some cases, higher corporate tax has been paid to the extent of Rs. 906.52 lacs (see Civil Appeal No. 1778/06 entitled CIT v. The Bank of Tokyo-Mitsubishi Ltd.). In some of the cases, it is undisputed that each of the expatriate employees has paid directly the taxes due on the foreign salary by way of advance tax/self-assessment tax. The tax-deductor-assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the view that in none of the cases penalty was leviable under Section 271C as the respondent in each case has discharged its burden of showing reasonable cause for failure to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 706: There is no presumption in this country that every person knows the law : it would be contrary to common sense and reason if it were so . Scrutton, LJ also once said : It is impossible to know all the statutory law, and not very possible to know all the common law . But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlam, 1937 AC 473 ...the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse a maxim of very different scope and application. It is, therefore, not possible to presume, in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dated 25th June, 1970. We accordingly reject the plea of waiver raised on behalf of the State Government. Further, Reference is drawn to judgment and order of Hon ble Supreme Court in the case of CIT v. P.S.S. Investments Private Limited, reported in (1977) 107 ITR 0001(SC), wherein Hon ble Supreme Court observed, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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