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2022 (4) TMI 1379 - AT - Income TaxPenalty u/s 271C - non-deduction of tax at source from the payment of harvesting charges paid to contractors - whether there exists reasonable cause for default trigger penalty proceedings? - HELD THAT:- Penalty section 271C and section 273B, we find that the word 'shall' is used in section 271C prima-facie makes it clear that imposition of penalty is mandatory, nonetheless it reveals the imposition of penalty is non-discretionary. Au contraire the word 'shall' used u/s 273B provides that, it is mandatory not to impose penalty if the assessee establishes the existence of reasonable cause for its failure in compliance of provision of chapter XVII-B of the Act. That is to say, even if the assessee make itself liable for penalty for violation of chapter XVII-B of the Act, provision of section 273B acts as immune on reasonable cause in the give circumstances. To our limited knowledge, there is no definition of the term “reasonable cause”, and it has to be decided upon the facts of each case or a situation that would stimulate or encourage a person of ordinary intelligence under the given facts and circumstances to believe, based on observations or conversations to be not applicable or applicable as the case may be. In this regards it apt to quote the decision in the case of “CIT Vs M/s Eli Lilly & Company (India) Pvt. Ltd. & Ors”[2009 (3) TMI 33 - SUPREME COURT] with regards to reasonable cause for failure to deduct TDS, the Hon’ble Lordship on the scope of Section 271C r.w.s 273B. The expression “reasonable cause“ gives the impression that prima facie, if a person of average intelligence has acted and under those circumstances the said action was at that point of time not infringed the settled law then it can be reasonably held that assessee was prevented by a “reasonable cause” under those circumstances not to act as prescribed or determined by a case law. We are aware that ignorance of law is not an excuse but at the same time, it is not practical that every taxpayer should always be aware about the latest development of fiscal laws; which are ever and fast changing. We find that, the issue at hand was highly debatable at relevant point of time and assessee was prevented by a reasonable cause for not complying with the provisions of chapter XVII-B of the Act, ergo placing reliance on the judgement of Hon’ble Apex Court in “CIT Vs M/s Eli Lilly & Company (India) Pvt. Ltd. & Ors” (Supra), we are of considered view that, the appellant assessee is entitled to relief from 271C penalty by virtue of provisions of section 273B Act, on the aforestated reasoning, consequently penalty levied u/s 271C. - Decided in favour of assessee.
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