2015 (8) TMI 553 - AT - Income Tax

Penalties under Income-tax Act for technical interpretation upheld for AY 2008-09

Deputy Commissioner of Income Tax (TDS-I), Pune Versus Grant Medical Foundation

The Tribunal upheld the Ld. CIT(A)'s decision to delete penalties imposed under section 271C of the Income-tax Act for the assessment year 2008-09. The ... Penalty u/s. 271C - assessee failed to deduct tax u/s 192 on the payments to doctors drawing fixed remuneration which are essentially in the nature of 'Salary'- CIT(A) deleted the penalty - Held that:- As per the explanation of the assessee, in our opinion the order of the Ld. CIT(A) has to be confirmed for the reason that admittedly it is not a case of non-deduction of the tax or after deducting or collecting the tax, not depositing the same with the Govt. As per the plea of the assessee, it is merely the process of interpretation which was adopted in respect of both the payments otherwise whatever tax was collected was paid to the Govt. account. See Hindustan Steel Limited Vs. State of Orissa (1969 (8) TMI 31 - SUPREME Court ) There was a reasonable cause for the assessee for short deduction of the tax within the meaning of Sec. 273B of the Act. We, accordingly, confirm the order of the Ld. CIT(A) and grounds taken by the Revenue are dismissed. - Decided in favour of assessee. Issues:Challenge to deletion of penalty under section 271C of the Income-tax Act by the Appellate Tribunal ITAT Pune for the assessment year 2008-09.Analysis:The appeal was filed by the Revenue challenging the deletion of penalties imposed by the Assessing Officer under section 271C of the Income-tax Act. The Revenue raised multiple grounds related to the non-deduction of taxes on payments to doctors and laboratory fees. The facts revealed that the assessee, a Public Charitable Trust running a hospital, faced TDS verification leading to penalties being levied. The penalty amount was revised after appeals, and the penalty was ultimately deleted by the Ld. CIT(A).Regarding the levy of penalties, it was found that the assessee had deducted taxes under section 194J instead of section 192 for payments to doctors and laboratory fees. The Assessing Officer observed short deductions and initiated penalty proceedings. The Ld. CIT(A) deleted the penalties based on the appellant's argument of technical interpretation and reasonable cause for the defaults. The Ld. CIT(A) noted that the appellant had complied with TDS provisions based on its understanding of the law, leading to the deletion of penalties.During the hearing, the appellant's counsel argued that the issue was about the interpretation of the contract terms vis-`a-vis the law, emphasizing that there was no deliberate attempt to avoid tax obligations. The counsel cited Sec. 273B of the Act, stating there was a reasonable cause for the short deductions. The issue revolved around whether the payments to doctors constituted professional fees or remuneration, but the focus was on the reasonable cause for the defaults.The Tribunal considered the case in a narrow context, focusing on whether there was a reasonable cause under Sec. 273B of the Act for the short deductions. Referring to legal precedents, the Tribunal confirmed the Ld. CIT(A)'s order, emphasizing that the penalties were not warranted as the defaults stemmed from a technical interpretation issue. The Tribunal dismissed the Revenue's appeal, upholding the deletion of penalties.In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision to delete the penalties, emphasizing the reasonable cause for the defaults based on technical interpretation issues. The Tribunal's decision was in line with the provisions of the Income-tax Act and legal precedents, ultimately dismissing the Revenue's appeal.This detailed analysis covers the issues raised in the judgment, the facts of the case, the arguments presented, and the Tribunal's decision regarding the deletion of penalties under section 271C of the Income-tax Act for the assessment year 2008-09.