2016 (5) TMI 96 - AT - Income Tax

Tribunal Grants Stay on Penalty Demand Pending Appeals

The Tribunal granted a stay of the balance of the penalty demand under section 271C of the I.T. Act for 180 days or until the disposal of the appeals, ... Stay of penalty under section 271C - Requirement to deduct tax at source under section 194H - Interim stay pending adjudication before the Hon'ble Supreme Court - Balance of convenience - Collection of demand stayedStay of penalty under section 271C - Requirement to deduct tax at source under section 194H - Interim stay pending adjudication before the Hon'ble Supreme Court - Balance of convenience - Stay of the outstanding demand of penalty under section 271C for the assessment years in question was considered and ordered on an interim basis. - HELD THAT: - The Tribunal noted that the central legal question - whether the assessee was obliged to deduct tax at source under section 194H in respect of discounts/transfer of 'right to pre-paid services' to distributors - is pending final adjudication before the Hon'ble Supreme Court, and that divergent views exist among High Courts. The Tribunal also took into account that collection of the related tax demand under sections 201(1) and 201(1A) has been stayed and that the assessee had complied with interim directions by paying a portion of the demand (20% of the penalty and 40% of the tax demand as directed by the jurisdictional High Court). Having regard to these circumstances, and applying the balance of convenience in favour of the assessee while the substantive issue is pending before the Supreme Court, the Tribunal considered it appropriate to grant an interim stay of the remaining penalty demand. The stay was limited in duration and conditional, to operate for a specified short period or until disposal of the appeals earlier, and the appeals were listed for further hearing. [Paras 5]Balance of convenience favoured interim relief; stay of the balance of the penalty demand under section 271C granted for 180 days from the date of order or until disposal of the appeals, whichever is earlier, and appeals posted for hearing.Final Conclusion: The stay petitions are allowed: the Tribunal granted an interim stay of the balance of the penalty demand under section 271C for A.Ys. 2010-2011 to 2014-2015 for 180 days from the order or until disposal of the appeals, and listed the appeals for hearing. Issues:Stay applications for outstanding demand of penalty under section 271C of the I.T. Act for A.Ys. 2010-2011 to 2014-2015.Detailed Analysis:The stay applications were filed by the assessee seeking a stay of the outstanding demand of penalty levied under section 271C of the I.T. Act for multiple assessment years. The total demand of penalty for all relevant assessment years amounted to Rs. 11,95,84,931 after payment of Rs. 2,98,98,234, being 20% of the total demand. The assessee contended that it transfers its 'right to pre-paid services' to distributors on a principal-to-principal basis, and since there is no requirement to withhold any tax under Section 194H of the I.T. Act, the penalty should not be levied. The matter involved a survey under section 133A of the Act and subsequent penalty proceedings initiated by the Assessing Officer (A.O.) under section 271C of the Act. The CIT(A) upheld the penalty orders, leading the assessee to file appeals before the ITAT. The Tribunal considered the divergent views of various High Courts on the issue and noted that the appeals on merits were pending before the Hon'ble Supreme Court. Given these circumstances, the Tribunal granted a stay of the balance of the demand for 180 days or till the disposal of the appeals, whichever is earlier.The main issue revolved around whether the assessee was required to make any Tax Deducted at Source (TDS) under section 194H of the I.T. Act. The Tribunal observed that this issue was pending adjudication before the Hon'ble Supreme Court of India, with different High Courts expressing conflicting views. The Tribunal had already granted a stay of the outstanding tax demand under section 201(1) and the interest under section 201(1A) of the I.T. Act, considering the pending appeals on merits and the fact that the assessee had paid 40% of the demand as directed by the jurisdictional High Court. As the assessee had paid 20% of the demand of penalty under section 271C of the I.T. Act, the Tribunal found the balance of convenience in favor of the assessee and decided to stay the remaining demand for a specified period or until the disposal of the appeals. The Tribunal directed the Registry to schedule the appeals for hearing on a specific date without the need for fresh notices, and consequently, allowed the stay petitions of the assessee.In conclusion, the Tribunal allowed the stay petitions of the assessee concerning the outstanding demand of penalty under section 271C of the I.T. Act, considering the pending appeals on the main issue of TDS under section 194H before the Hon'ble Supreme Court and the partial payment made by the assessee towards the demand. The Tribunal granted a stay for a specified period or till the disposal of the appeals, whichever is earlier, and directed the scheduling of the appeals for a hearing on a specific date.