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2016 (3) TMI 818 - ITAT AGARA

2016 (3) TMI 818 - ITAT AGARA - TMI - Penalty under section 271 C - failure to deduct tax on payment made on account of salary - Held that:- In FY 2008-09 the assessee was found to have failed to deduct tax on payment made on account of salary amounting to ₹ 1,54,072/-. Subsequently an order under section 154/201(1)/201(1A) was passed stating that since the entire amount had either been paid by the deductees or was not required to be paid by the deductees after claiming relief under sectio .....

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therefore applying the ratio laid down by the Hon’ble Apex Court in the case of CIT Vs. Bank of Nova Scotia [2016(1) TMI 583 (SC) ] we hold that no penalty under section 271 C is leviable for nondeduction of TDS on salary.

In FY 2008-09 we find that the assessee has also failed to deduct TDS on AMC charges amounting to ₹ 288/- for which no explanation has been offered. In the absence of any explanation we uphold the levy of penalty on the same. - Decided partly in favour of asse .....

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. Since similar issue is involved in these appeals therefore these appeals are being disposed of by this common order. 3. The assessee has raised common grounds of appeal in all the three years and for the sake of convenience we hereby reproduced the grounds pertaining to AY 2008-09: 1. Because the learned authorities below have erred both on facts and in law in imposing penalty under section 271C of the Income Tax Act, 1961 amounting to ₹ 6,296/- without appreciating the reasonable cause .....

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ollowing ground also : 2. Because the learned authorities below have erred both on facts and in law in considering an amount of ₹ 1,54,072/- incorrectly taken for the imposition of penalty under section 271C which was subsequently reduced in proceedings under section 201(1)/201(1A)/154 vide order dated 16.05.2012 and thereby not considered assessee in default under section 201 of the Income Tax Act, 1961. The penalty imposed is liable to be deleted. 4. Briefly stated the facts of the case .....

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ount of penalty leviable in (Rs.) 2007-08 ₹ 6296/- 2008-09 ₹ 1,62,280/- 2009-10 ₹ 7,187/- for the reason that the assessee had adduced no reasonable cause for not depositing the tax deducted into the account of Government of India in the prescribed time. Further the AO relied upon the decision of the Kerala High Court in the case of US Technologies International (P) Ltd. Vs. Commissioner of Income-tax (2010) 195 Taxman 323 wherein it was held that failure to deduct tax at sourc .....

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e had reasonable cause for not deducting the TDS. Ld. AR stated that primarily the assessee had defaulted in deduction of TDS relating to advertisement, salary, and AMC charges. Ld. AR stated that the default in deduction of TDS on advertisement had occurred on account of the fact that the asseessee was ignorant of its obligation to deduct TDS on the payments made. Ld. AR clarified that the amount on account of advertisement had been paid to M/s Market Creators, Agra and Aaj Prakashan Pvt. Ltd. .....

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y team, the assessee immediately deposited the entire amount alongwith interest. Ld. AR further submitted that thereafter the assessee had been regularly deducting tax on such similar advertisement expenses. As for the default in payment of TDS with regard to salary, Ld. AR submitted that the same was attributable to the software of the assessee which did not contain provision for levying surcharge on income above ₹ 10 lacs . Ld. AR submitted that this was so on account of the fact that ne .....

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y deducted short on the salary paid. Ld. AR submitted that in this case also when non deduction of surcharge was pointed out by the survey team on 18/11/2009 the assessee immediately deducted tax from their salary for November itself and deposited it on 01/12/2009. Ld. AR therefore submitted that since there was reasonable cause with the assessee for not deducting TDS, penalty under section 271 C was not leviable. Ld. AR placed reliance on the decision of Hon ble Supreme Court in the case of CIT .....

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rk Township (P) Ltd. (Delhi HC in ITA No. 160/2015 dt. 26/08/2015, and on the decision of the Hon ble Agra Bench of the ITAT in the case of Rajeev Kumar Agarwal Vs. ACIT (Agra Bench of ITAT) in ITA No. 337/Agra/2013 dt. 29/05/2013 in this regard. 7. Ld. DR on the other hand relied upon the order of the Ld .CIT(A) and stated that no reasonable cause had been forwarded by the assessee for the default in deduction of TDS and penalty under section 271C had been rightly levied. 8. We have heard the r .....

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assessee paid the TDS alongwith interest on 19/12/2009. Subsequently an order under section 201(1) / 201(1A)/ 154 was passed stating that since the entire payment of TDS had been made by the assessee no demand was to be paid under this head. At the same time penalty proceedings under section 271C were initiated for the default committed of non deduction of TDS and penalty levied on the same. 10. We find that the assessee had offered an explanation for not deducting TDS on advertisement payment m .....

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on 271C in the backdrop of Section 273B has been explained by the Hon ble Delhi High Court in the case of Woodward Governors India (P) Ltd. Vs. CIT (2002) 253 ITR 0745 to mean a probable cause, an honest belief founded on reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautious man, placed in the position of the person concerned to come to the conclusion that same was the right thing to do. The cau .....

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ture of advertisement. By any stretch of logic the explanation of the assessee cannot be said to be frivolous or unreasonable. Further the subsequent action of the assessee of depositing TDS on becoming aware of the default and of deducting TDS in future years also on such payment lends credence to the bonafide of the assessee in harboring a belief that such payments were not to be subjected to TDS. It is evident that that there was no contumacious conduct on the part of the assessee and hence p .....

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