2017 (4) TMI 1184 - AT - Income Tax

Tribunal upholds CIT(A) decision on penalty deletion under Income Tax Act

The DCIT, Circle- 6, Jaipur Versus M/s Compucom Software Limited

The DCIT, Circle- 6, Jaipur Versus M/s Compucom Software Limited - [2017] 57 ITR (Trib) 96 Issues Involved:1. Whether the CIT(A) erred in deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.2. Whether the assessee failed to discharge its statutory liability as per the Income Tax Act, 1961.3. Whether the plea of no mens rea is tenable in the context of civil liability for penalty.Issue-wise Detailed Analysis:1. Deletion of Penalty under Section 271(1)(c):The penalty under section 271(1)(c) was levied by the Assessing Officer due to the disallowance made under section 40(a)(ia) of the Act. The assessee did not deduct TDS at the time of crediting the Associate Business Associates (ABA) Pool account but did so when crediting the individual ABA accounts. The CIT(A) noted that this practice had been consistently followed since A.Y. 2002-03 and that TDS was eventually deducted and deposited in subsequent years. The CIT(A) referenced the Supreme Court's decision in Reliance Petro Products Ltd., stating that merely making a claim of expenditure that is not sustainable in law does not amount to furnishing inaccurate particulars of income. The penalty was thus deleted.2. Statutory Liability under the Income Tax Act, 1961:The assessee argued that at the time of booking expenses and crediting the ABA Pool Account, the exact amount payable to each ABA was not ascertainable. Therefore, TDS was not deducted at that stage but was deducted at the time of actual payout. The ITAT Chennai Bench case of Dishnet Wireless Ltd. was cited, which held that TDS is required only if the payee is identified and the payment amount is ascertainable. The assessee's method of deducting tax at the time of payment was deemed plausible.3. Plea of No Mens Rea:The assessee contended that complete details were disclosed in the return filed, and the additions made by the AO were due to different views on the same facts, not due to concealment or inaccurate particulars. The Supreme Court in Reliance Petroproducts Ltd. held that mere disallowance of a claim does not attract penalty under section 271(1)(c). The Karnataka High Court in Manjunatha Cotton & Ginning Factory emphasized that the notice for penalty must specify the exact nature of the default (concealment or inaccurate particulars). The AO's failure to clearly specify the limb under which the penalty was imposed indicated a lack of application of mind.Conclusion:The tribunal found that the assessee's explanation regarding the timing of TDS deduction was reasonable and supported by contractual obligations. There was no evidence of incorrect, erroneous, or false information in the return filed by the assessee. Thus, the penalty under section 271(1)(c) was not justified. The order of the CIT(A) deleting the penalty was upheld, and the Revenue's appeal was dismissed.Order:The appeal of the Revenue is dismissed. Order pronounced in the open court on 25/04/2017.