2019 (7) TMI 1163 - AT - Income Tax

Tribunal Remands Income Tax Appeal for Fresh Decision

The Tribunal set aside the Commissioner of Income Tax (Appeals) orders and remanded the case for fresh decision. The Tribunal emphasized verifying factual ... Penalty under Section 271C - reasonableness under Section 273B - error of judgment versus mala fide - consistency of past practice and corrective steps - remand for fresh decision in light of precedentPenalty under Section 271C - reasonableness under Section 273B - consistency of past practice and corrective steps - error of judgment versus mala fide - remand for fresh decision in light of precedent - Whether the penalty imposed under Section 271C should be sustained or the matter should be remanded to the CIT(A) for fresh adjudication in light of the Tribunal's decision in State Bank of India v. ACIT and the factual matrix of the present case - HELD THAT: - The Tribunal examined the reasoning in the cited Tribunal decision (State Bank of India v. ACIT) which found that the bank had undertaken reasonable steps to verify leave fare concession (LFC) claims, that the non-deduction resulted from an error of judgment and not mala fide conduct, and that the bank had complied with the quantum order by depositing outstanding demand with interest and taking corrective steps subsequently. The bench observed that the factual details underlying those conclusions-specifically whether the demand in the present case relates to all employees or only certain employees, and whether the assessee here complied with the quantum order and took corrective steps-are not available on the record before it and have not been found by the authorities below. Because those factual aspects were material to applying the principle of reasonable cause under Section 273B and to deciding the sustainability of penalty under Section 271C, the Tribunal considered it appropriate to remit the matters. The remand directs the CIT(A) to examine the present case in the light of the Tribunal precedent, verify the factual aspects identified (scope of employees affected, compliance with quantum order, deposit of outstanding demand and interest, and corrective measures), and pass a fresh decision after affording opportunity of hearing to both parties. [Paras 8, 9, 10, 11]Matters restored to the file of the CIT(A) for fresh decision in light of the Tribunal order in State Bank of India v. ACIT after verification of the identified factual aspects; appeals disposed of for statistical purposes.Final Conclusion: All five appeals are disposed of for statistical purposes and the matters are remitted to the CIT(A) for fresh adjudication on the penalty issue in light of the cited Tribunal decision after verifying the relevant factual aspects and affording both parties an opportunity of hearing. Issues Involved:1. Legality of the penalty levied under Section 271C of the Income Tax Act, 1961.2. Applicability of Section 273B regarding reasonable cause for non-deduction of TDS.3. Exemption under Section 10(5) of the Income Tax Act, 1961 for travel involving a foreign leg.4. Consistency in application of tax exemption rules by the assessee bank.5. Compliance with Tribunal orders and corrective actions taken by the assessee.Issue-wise Detailed Analysis:1. Legality of the Penalty Levied Under Section 271C:The primary issue raised by the assessee in all appeals is the legality of the penalty imposed under Section 271C of the Income Tax Act, 1961. The assessee contends that the Commissioner of Income Tax (Appeals) erred in upholding the penalty for various assessment years. The penalties in question range from Rs. 25,157 to Rs. 84,724 for different years. The assessee argues that the penalties are bad in law and against the facts of the case.2. Applicability of Section 273B Regarding Reasonable Cause for Non-Deduction of TDS:The assessee asserts that the penalties should not be levied due to the reasonable cause provision under Section 273B of the Income Tax Act, 1961. The assessee maintains that there was a reasonable cause for not deducting TDS, as they were under a bona fide belief that the exemptions claimed were valid. The Tribunal in the case of State Bank of India Vs. ACIT had previously held that there was reasonable cause for non-deduction of tax, and the assessee argues that similar facts apply in the present case.3. Exemption Under Section 10(5) for Travel Involving a Foreign Leg:A significant point of contention is whether travel involving a foreign leg qualifies for exemption under Section 10(5) of the Income Tax Act, 1961. The assessee believed that employees were entitled to exemption even if their journey included a foreign leg, provided their designated place of travel was in India. The Commissioner of Income Tax (Appeals) failed to appreciate this belief, which the assessee argues was formed honestly and fairly.4. Consistency in Application of Tax Exemption Rules by the Assessee Bank:The assessee contends that the Commissioner of Income Tax (Appeals) did not consider the consistency in the application of tax exemption rules. The assessee bank had allowed exemptions to all employees who submitted LFC claims, and this practice was followed consistently over the years. The Tribunal in the State Bank of India case noted that the bank had made an error in judgment but had not acted with malafide intent.5. Compliance with Tribunal Orders and Corrective Actions Taken by the Assessee:The Tribunal highlighted the importance of compliance with its orders and the corrective actions taken by the assessee. In the State Bank of India case, the bank had complied with the Tribunal's order, deposited the outstanding demand along with interest, and taken corrective steps in subsequent years. The Tribunal in the present case pointed out that details about these factual aspects were not readily available and needed verification.Conclusion:The Tribunal decided to set aside the orders of the Commissioner of Income Tax (Appeals) and restore the matter for fresh decision after verifying the factual aspects in light of the Tribunal order in the State Bank of India case. The Tribunal emphasized the need to examine whether the demand was raised for all employees or only a few, whether the assessee had complied with the Tribunal's order, and whether corrective steps were taken in subsequent years. The appeals filed by the assessee were allowed for statistical purposes, and the matter was remanded for further examination.