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2016 (4) TMI 1097 - ITAT MUMBAI

2016 (4) TMI 1097 - ITAT MUMBAI - TMI - Penalty 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 weightag .....

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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 .....

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1C. - Decided in favour of assessee. - ITA no.4335/Mum./2015 - Dated:- 30-3-2016 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER For The Assessee : Shri Darshan Gandhi For The Revenue : Shri Lovish Kumar ORDER PER SAKTIJIT DEY, J.M. Aforesaid appeal by the assessee is directed against the order dated 30th March 2015, passed by the learned Commissioner (Appeals)-55, Mumbai, confirming imposition of penalty of ₹ 4,27,910, for the assessment year 2007-08. 2. Briefl .....

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ssessee, 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, did not find merit in the submissions of the assessee. He was of the view that the person to whom the payment was made by the assessee was not act .....

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site maintenance falls within the meaning of fees for technical services as provided under section 9(1)(vii) r/w Explanation-2. Thus, on the aforesaid basis, the Assessing Officer finally concluded that the assessee was required to deduct tax under section 195 of the Act, on the payment made to Ms. Simone Sheffield. As the assessee had not deducted tax at source, the Assessing Officer treated the assessee as an assessee in default under section 201(1) and passed an order demanding tax of ₹ .....

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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 f .....

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etween India - U.S.A. and India Bulgaria. Assessing Officer, therefore, holding that assessee has failed to establish existence of reasonable cause for not deducting tax at source imposed penalty of ₹ 4,27,910 under section 271C. Being aggrieved of the penalty order so passed, assessee preferred appeal before the first appellate authority. 4. The learned Commissioner (Appeals) also confirmed imposition of penalty by holding that assessee having failed to deduct tax at source without any re .....

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s of section 195 in view of Article-7 of DTAA between India-U.S.A., therefore, he advised for non-deduction of tax 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 .....

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, the order in second appeal was passed by the Tribunal on 3rd May 2012, and was served on the defendant On 13th June 2012, whereas, the Assessing Officer passed the order imposing penalty under section 271C on 21st March 2013, which is beyond the prescribed period of six months. He submitted, for this reason also, penalty order is unsustainable. In support of his submissions, learned Authorised Representative relied upon the following decisions. i) ADIT v/s Leighton Welspun Contractors Pvt. Ltd .....

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available on record. No doubt, in the quantum proceedings before the Tribunal, the assessee has accepted her liability for deduction of tax at source, for whatever reason may be, and as a result the issue was decided against the assessee by the Tribunal by upholding the order passed under section 201(1). However, the issue before us is, merely because assessee was held liable for deduction of tax at source under section 195, whether automatically it will result in imposition of penalty under se .....

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nalty can be imposed. Therefore, from the conjoint reading of section 271C and 273B, it is clearly evident that imposition of penalty under section 271C is neither automatic nor mandatory. The authority concerned is empowered under section 273B not to impose penalty in a deserving case if he is satisfied that there was reasonable cause for failure to comply to statutory requirement. Therefore, confirmation of demand raised under section 201, cannot be the sole criteria for imposing penalty under .....

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pining that tax is not required to be deducted at source on the remittances to Ms. Simone Sheffield, as the payment is made to a non-resident having no P.E. in India that too, for services rendered outside India. It is a well accepted fact that every citizen of the country is neither fully aware of nor is expected to know the technicalities of the Income Tax Act. Therefore, for discharging their statutory duties and obligations, they take assistance and advise of professionals who are well acqua .....

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