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2016 (4) TMI 1097 - AT - Income TaxPenalty under section 271C - Non deduction of TDS u/s 195 - DTAA between India–U.S.A. - Held that:- When the C.A. issued a certificate opining that there is no requirement for deduction of tax at source, assessee under a bonafide belief that withholding of tax is not required did not deduct tax at source on the remittances made. Though, this fact was brought to the notice of the Departmental Authorities in course of the penalty proceedings but due weightage has not been given to such contention of the assessee. In our view, the explanation submitted by the assessee is a valid explanation and cannot be brushed aside with some general observations. Only because the assessee before the Tribunal had accepted her liability for deduction of tax at source, cannot be the sole basis for imposition of penalty completely ignoring the primary and fundamental reason shown by the assessee for failure to deduct such tax. Proceedings under sections 201 and 271C, are two independent and separate proceedings. While imposing penalty, the authority concerned is duty bound to examine assessee’s explanation to find out whether there was reasonable cause for failure to deduct tax at source. As is evident, the assessee being advised by a professional well acquainted with provisions of the Act had not deducted tax at source. Therefore, no malafide intention can be imputed to the assessee for failure to deduct tax. More so, when the issue whether tax was required to be deducted at source, on payments to a non–resident for services rendered is a complex and debatable issue requiring interpretation of statutory provisions vis–a–vis relevant DTAA between the countries. Therefore, in our considered opinion, failure on the part of the assessee to deduct tax at source was due to a reasonable cause. The decisions relied upon by the learned Authorised Representative also support this view. Accordingly, we delete the penalty imposed under section 271C. - Decided in favour of assessee.
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