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TMI Blog2016 (4) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee had remitted an amount of U.S. $ 77,500, to Ms. Simone Sheffield, resident of U.S.A., towards reimbursement of expenses without deduction of tax under section 195 of the Act, the Assessing Officer called upon the assessee to explain why she should not be held as assessee in default under section 201(1) of the Act. As stated, in response to the said letter, it was submitted by the assessee, not only the payment was made outside India but also for services rendered outside India. Hence, the provision of section 195 is not applicable. It was further submitted, the payment made was not towards reimbursement of expenses but for maintenance of website and other allied services rendered to the assessee. The Assessing Officer, however, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1C alleging failure to deduct tax at source under section 195, by issuing a show cause notice. In response, it was submitted by the assessee that there was reasonable cause for not deducting tax at source as the assessee was under the bonafide impression that payments made to a non-resident for the services rendered outside India do not attract provisions of section 195. It was also submitted, reasons for entertaining such belief was due to the certificate issued by the Chartered Accountant stating that remittance is exempt from withholding tax at source. The Assessing Officer, after considering the submissions of the assessee and facts on record, found that the assessee before the Tribunal had accepted that she was required to deduct tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at source. Referring to the said certificate of the C.A., learned Authorised Representative submitted on the basis of certificate issued by the C.A., assessee was under bonafide belief that tax was not required to be deducted at source on the remittances made to the non-resident. He submitted, that being the case there is a reasonable cause for not deducting tax at source, hence, no penalty is required to be levied. He submitted as proceedings under section 201 and 271C are two separate proceedings, merely because assessee was held liable to deduct tax under section 201, it will automatically not lead to imposition of penalty under section 271C. Learned Authorised Representative submitted, even otherwise also, the penalty order passed is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was held liable for deduction of tax at source under section 195, whether automatically it will result in imposition of penalty under section 271C. On a careful reading of the provision as contained under section 271C, it is noticed that any person who fails to deduct tax at source, shall be liable to pay by way of penalty a sum equal to the amount of tax which he has failed to deduct. However, imposition of penalty under section 271C is subject to the condition imposed under section 273B. A reading of section 273B of the Act suggests that where the assessee proves that the failure to deduct tax was for a reasonable cause, no penalty can be imposed. Therefore, from the conjoint reading of section 271C and 273B, it is clearly evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to guide her in complying to statutory requirements. Therefore, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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