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TMI Blog2007 (6) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and circumstances of the case, the Tribunal was right in holding that penalty under section 271C is not leviable on the assessee-company ? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that penalty under section 271C is not leviable when the assessee had advertised in the newspaper that the return on the investments made with the company will not attract tax deduction at source, which is against the provisions of section 194A and thereby induced the depositors to invest?" 2. The facts leading to the above substantial questions of law are as under: The assessee is a public limited company incorporated under the Companies Act. The assessee is engaged in retail financial services, corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence, the assessee is liable to deduct tax at source under section 194A, on the payments made to the investors. The Tribunal has also upheld the order that has been made by the authorities under section 201 of the Act. Aggrieved by the order, the assessee filed an appeal to this court, and this court in Viswapriya Financial Services and Securities Ltd. v. CIT [2002] 258 ITR 496 held as follows : "The scheme under which the assessee induced investors to entrust their moneys to the assessee, under the very terms of the scheme, imposed an obligation on the assessee to repay the investor at the end of the period of 36 months, and also to ensure a monthly payment of 1.5 per cent. to the investor during that period. The mere fact that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investors, no tax was deducted at source. Also, an opinion was also obtained from the senior counsel before devising the scheme to the effect that no tax need be deducted at source on the payments made to the investors who had invested the money in the fund organised by the assessee. The Assessing Officer rejected the contention of the assessee and levied penalty of Rs. 2,20,811 and Rs. 2,72,393 for the assessment years 1994-95 and 1995-96, respectively. Aggrieved by the orders, the assessee filed appeals to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) allowed the appeals and deleted the penalty levied by the Officer. Aggrieved, the Revenue filed appeals to the Income-tax Appellate Tribunal ("the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th section 2(28A) of the Act are not attracted. These explanations were considered by the authorities below and both the authorities had taken a view that there is a reasonable cause for non-deduction of tax at source. Section 271C deals with penalty for failure to deduct tax at source, which reads as under : "271C. (1) If any person fails to— (a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B ; or (b) pay the whole or any part of the tax as required by or under,— (i) sub-section (2) of section 115-O ; or (ii) the second proviso to section 194B,then, such person shall be liable to pay, by way of penalty a sum equal to the amount of tax which such person failed to deduct or pay as afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase for levying penalty. The Tribunal, in its order, held as follows : "Rival contentions in regard to the above have been very carefully considered. The issue in regard to levy of interest for non-deduction of tax at source came up before the Tribunal in the case of the assessee for the assessment years 1993-94 and 1994-95. The order of the Tribunal so considered is reported in Viswapriya Financial Services and Securities Ltd. v. ITO [1997] 60 ITD 401. In that case, it was held that the assessee was liable to deduct tax and that interest could also be levied. The practice of the assessee not to deduct tax was stated to be continuing. On the stated facts, in our opinion the orders of the authorities levying interest is reasonable. We uphol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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