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2018 (2) TMI 497

Head Note:
Penalty u/s 271C - assessee had failed to deduct TDS on interest paid on FDRs and to deposit the same - Held that:- The assessee cannot be considered as having done willful neglect for non-compliance of the TDS provisions. This is just a technical mistake and, accordingly, the assessee cannot be held to be an assessee in default and no penalty can be imposed. This is clear from the fact that the moment this descrepancy was highlighted by the AO, the assessee immediately deposited the short deducted amount with the Revenue.

From the above, it is evident that the assessee was visited with reasonable cause beyond its control leading to the alleged default. The mistake occurred because of a software updation error, the Revenue is compensated by paying the interest as well as due taxes by the payee. Therefore, there is no loss to the Revenue in the matter. Moreover, the Branch Manager will personally have no interest in non-deduction/ short deduction/ lower deduction of some of the customers of the Branch. Hence, this is an unintentional mistake and, accordingly, no penalty provisions should get attracted. Accordingly, the assessee is found to have had reasonable cause for not deducting the tax at source. The penalty levied is, accordingly, deleted. - Decided in favour of assessee.


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