Tribunal upholds CIT decision to delete penalty under Income Tax Act, finding reasonable cause for non-collection of tax.

The Tribunal dismissed the Revenue's appeal, upholding the CIT (Appeals) decision to delete the penalty under section 271CA of the Income Tax Act. The Tribunal found that the assessee had a reasonable cause for not collecting tax at source on the sale of scrap, as taxes had been paid by the buyers, causing no loss to the exchequer. The decision was based on the belief held by the assessee and the absence of categorical proof that the goods sold were scrap.

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Issues:
Penalty under section 271CA of the Income Tax Act for default in collecting tax at source.

Analysis:
The appeal was filed by the Revenue against the order of Ld. CIT (Appeals) deleting the penalty levied under section 271CA of the Income Tax Act for default in collecting tax at source on further sales. The grounds of appeal by the Revenue included contentions regarding the applicability of penalties under various sections of the Income Tax Act, non-compliance with statutory provisions, and the denial of purchasing scrap material. The Revenue's grievance was solely against the deletion of the penalty by the CIT (Appeals).

The brief facts revealed that the assessee, an individual engaged in the business of buying and selling old iron scrap, failed to collect tax at source on the sale of scrap as required under section 206C(1) of the Act. Penalty proceedings were initiated under section 271CA. The Assessing Officer issued a show cause notice, and despite the assessee's reliance on a judgment by Hon'ble I.T.A.T., the penalty was imposed due to non-collection of TCS on sales. The CIT (Appeals) later deleted the penalty, citing reasonable cause for non-levying of the penalty based on the fact that taxes had been paid by the buyers, causing no loss to the exchequer.

During the appeal before the Tribunal, it was noted that in a previous case involving the same assessee, the penalty under section 271CA was deleted, following a similar reasoning based on reasonable cause for not collecting tax at source. The Tribunal upheld the CIT (Appeals) order, emphasizing that the belief harbored by the assessee constituted a reasonable belief, and there was no categorical proof that the goods sold were scrap. The Tribunal referred to the definition of "reasonable cause" as defined by the Delhi High Court and concluded that the assessee had a reasonable cause for not collecting tax at source, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, citing the precedent set in a previous case involving the same assessee. The Tribunal upheld the order of the CIT (Appeals) deleting the penalty under section 271CA of the Income Tax Act, based on the reasonable cause for not collecting tax at source.

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