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 under section 271(1)(c) - Disallowance under section 40(a)(ia) - Wilful concealment or furnishing of inaccurate particulars - Technical breach / bonafide lapse - Requirement of mens rea for levy of penaltyPenalty under section 271(1)(c) - Disallowance under section 40(a)(ia) - Wilful concealment or furnishing of inaccurate particulars - Technical breach / bonafide lapse - Whether penalty under section 271(1)(c) is leviable for disallowance made under section 40(a)(ia) where TDS was deducted and details were furnished but remittance to Government was delayed. - HELD THAT: - The Tribunal found that the assessee had furnished details of TDS deducted and the amounts remitted to the Government treasury as annexures to the tax audit report filed with the return, and that the assessing officer's disallowance arose only from short remittance (delay) which was a technical breach. There was no material that the assessee furnished inaccurate particulars of income or concealed income; the discrepancy was discoverable from the information provided by the assessee. The Tribunal applied precedent treating non-payment or delayed payment of TDS leading to a section 40(a)(ia) disallowance as not ipso facto attracting penalty under section 271(1)(c) absent wilful concealment or furnishing of inaccurate particulars, and treated the lapse as bonafide/technical. In the absence of any contrary material produced by Revenue, the Tribunal sustained the CIT(A)'s deletion of the penalty and dismissed the departmental appeal. [Paras 4, 5]Penalty under section 271(1)(c) deleted; departmental appeal dismissed.Final Conclusion: The Tribunal confirmed the CIT(A)'s order deleting the penalty imposed under section 271(1)(c) in respect of the addition made under section 40(a)(ia) for AY 2005-06, holding the breach to be technical/bonafide and not amounting to concealment or furnishing of inaccurate particulars; Revenue's appeal dismissed. 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.