2015 (7) TMI 1423 - AT - Income Tax

Tribunal rules in favor of assessee on penalty under Income-tax Act

JCIT (TDS) Lucknow Versus M/s PVR Ltd.

The Tribunal dismissed the Revenue's appeals, upholding the order of the CIT(A) regarding the penalty under section 271C of the Income-tax Act. It was ... Penalty levied u/s 271C - order passed u/s 201(1A) charging interest on the delayed payment of tax - HELD THAT:- No order was passed under section 201(1) of the Act holding the assessee to be in default. The Assessing Officer has passed an order under section 201(1A) of the Act charging interest on the delayed payment of tax. We have also carefully perused the relevant provisions of section 271C of the Act and we find that the penalty under section 271C of the Act can only be levied where the assessee fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B or 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. Hon'ble Apex Court in the case of Coca Cola Beverage P. Ltd. [2007 (8) TMI 12 - SUPREME COURT] and Jagran Prakashan Ltd [2012 (5) TMI 488 - ALLAHABAD HIGH COURT] and also various orders of the Tribunal, in which it has been held that wherein TDS was paid by the assessee or required tax was paid by the deductee, the assessee should not held to be in default. Only interest on delayed payment under section 201(1A) of the Act can be charged. In the light of these decisions where the assessee has made payment of TDS though late, he cannot be held to be in default and there is no question of levy of penalty under section 271C - Decided against revenue. Issues:Penalty under section 271C of the Income-tax Act, 1961 for delayed payment of tax deducted at source.Analysis:The Appellate Tribunal heard appeals by the Revenue against orders deleting penalties under section 271C of the Income-tax Act. The counsel for the assessee argued that since no order was passed holding the assessee to be in default under section 201(1) of the Act, the penalty under section 271C cannot be levied. The Assessing Officer had only levied interest under section 201(1A) for delayed tax payment. The Tribunal noted that penalty under section 271C can only be imposed if the assessee fails to deduct or pay tax as required by the Act. The Tribunal referred to judicial decisions and circulars supporting the view that if TDS was paid by the assessee albeit late, the assessee should not be considered in default. The Tribunal upheld the order of the lower authorities and dismissed the Revenue's appeals.The Tribunal highlighted that no order was passed under section 201(1) holding the assessee in default, and the Assessing Officer had only levied interest under section 201(1A). Referring to relevant provisions of section 271C, the Tribunal emphasized that penalty can only be imposed if the tax is not deducted or paid as required by the Act. Citing decisions by the Supreme Court and High Court, the Tribunal reiterated that if TDS was paid late by the assessee, they cannot be deemed in default. The Tribunal affirmed the order of the CIT(A) who considered various judicial pronouncements in deciding the penalty issue.In conclusion, the Tribunal dismissed the Revenue's appeals, confirming the order of the CIT(A) regarding the penalty under section 271C. The Tribunal held that since the assessee had made the TDS payment, albeit delayed, they should not be considered in default, and thus, the penalty under section 271C was not applicable. The decision was based on the interpretation of relevant provisions of the Income-tax Act and supported by judicial precedents and circulars.