2013 (5) TMI 613 - AT - Income Tax

Penalty for Delayed TDS Remittance: ITAT Upholds CIT(A) Decision

The ITAT upheld the CIT(A)'s decision to delete the penalty under Section 271(1)(c) of the IT Act, ruling that the delay in TDS remittance was a technical ... Penalty u/s 271(1)(c) - disallowance made u/s 40(a)(ia) - Held that:- Disallowance omade by the AO due to non-payment of TDS in time which is technical in nature. Hence, the same does not amount to concealment of income or furnishing of inaccurate particulars of income by the assessee. Further, the addition account of disallowance of expenses was made on estimate basis. It is also settled law that addition made on estimate basis does not attract penalty. The CIT(A) on proper appreciation of facts has rightly deleted the penalty made by the AO on both the above issues. DR also has not produced any material on record to controvert the findings of the learned CIT(A). As decided in case of M/s. Lucky Star International [2012 (5) TMI 344 - ITAT, Ahmedabad] it is a bonafide lapse at the end of the assessee. There is no deliberate attempt to conceal the particulars of income. In favour of assessee. Issues Involved:1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act due to disallowance made under Section 40(a)(ia) of the IT Act.2. Determination of whether the delay in TDS remittance constitutes furnishing inaccurate particulars of income.3. Consideration of precedents and case laws in deciding the applicability of penalties.Detailed Analysis:1. Deletion of Penalty under Section 271(1)(c) of the IT Act:The Revenue appealed against the CIT(A)'s decision to delete the penalty imposed under Section 271(1)(c) of the IT Act. The penalty was initially levied due to the disallowance of Rs.59,40,914 under Section 40(a)(ia) for the assessment year 2005-06, based on the assessee's failure to remit TDS within the stipulated time.2. Determination of Whether the Delay in TDS Remittance Constitutes Furnishing Inaccurate Particulars of Income:The assessee had filed the return of income declaring Rs.15,05,881 and included an audit report indicating the delay in TDS remittance. The AO disallowed the expenditure and initiated penalty proceedings, which were later sustained partially by the CIT(A). The CIT(A) observed that the TDS was eventually deposited, albeit late, and ruled that this constituted a technical breach, not warranting a penalty under Section 271(1)(c). The CIT(A) cited Supreme Court decisions, including Hindustan Steel Limited v. State of Orissa and Union of India v. Rajasthan Spinning & Weaving Mills, to support the view that penalties should not be imposed for technical or venial breaches.3. Consideration of Precedents and Case Laws:The ITAT reviewed the case and noted that the details of TDS deducted and remitted were disclosed in the tax audit report. The Tribunal referenced its previous decisions, such as DCIT Vs M/s. L. G. Chaudhary and ACIT Vs M/s. Saraswati Construction Co., which held that penalties under Section 271(1)(c) are not applicable in cases of disallowance under Section 40(a)(ia) due to delayed TDS remittance. The Tribunal emphasized that the disallowance did not result from furnishing inaccurate particulars of income but from a technical delay.Conclusion:The ITAT upheld the CIT(A)'s decision to delete the penalty, agreeing that the delay in TDS remittance was a technical breach and did not amount to furnishing inaccurate particulars of income. The Tribunal reiterated that penalties under Section 271(1)(c) are not justified for disallowances made under Section 40(a)(ia) due to non-payment of TDS within the prescribed time. The appeal by the Revenue was dismissed, confirming the CIT(A)'s findings and aligning with established precedents.Order Pronouncement:The order was pronounced in the open Court on 10/05/2013, dismissing the Revenue's appeal and confirming the deletion of the penalty.