Late TDS deposit not default: Penalty deleted under Income Tax Act. Revenue appeal dismissed.

The tribunal upheld the decision to delete the penalty imposed under section 271C of the Income Tax Act for delayed deduction of TDS. It was ruled that the delayed payment of TDS, caused by negligence and unawareness, did not constitute a default in compliance. As the appellant eventually deposited the TDS amount, albeit late, the penalty for delayed deduction was deemed unjustified. Therefore, the Revenue's appeal was dismissed, affirming the deletion of the penalty by the Commissioner of Income Tax (Appeals).

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Issues:
- Penalty imposed under section 271C of the Income Tax Act for delayed deduction of TDS.

Analysis:
The appeal was against the penalty imposed by the Assessing Officer (AO) under section 271C of the Income Tax Act for delayed deduction of Tax Deducted at Source (TDS). The appellant, a charitable organization, had expenses subject to TDS provisions under sections 194J and 194C of the Act but failed to comply. The AO initiated penalty proceedings, leading to the imposition of a penalty of Rs. 26,52,615. The appellant argued that it later deducted and deposited the TDS amount to the Government but faced delays due to negligence and unawareness of the law. The Commissioner of Income Tax (Appeals) deleted the penalty, emphasizing that the delay in payment did not constitute a default in deduction. The Revenue appealed the decision.

The key contention was whether the penalty under section 271C could be imposed solely for non-deduction or also for delayed payment of TDS. The appellate tribunal noted that the penalty could be levied for non-deduction under specific sections, but in this case, the AO objected to the late payment of deductions, not non-deduction. As the appellant had eventually deposited the TDS amount with a delay, the tribunal concluded that there was no default in TDS compliance. Therefore, the penalty under section 271C could not be sustained for delayed deduction, and the appeal was dismissed.

In summary, the tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the penalty imposed by the AO under section 271C. The tribunal reasoned that the delayed payment of TDS, due to negligence and unawareness, did not amount to a default in TDS compliance. As the appellant eventually deposited the TDS amount, albeit with a delay, the tribunal found no grounds to levy the penalty for delayed deduction. Consequently, the Revenue's appeal was dismissed, affirming the deletion of the penalty.

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