2022 (6) TMI 1160 - AT - Income Tax

Tribunal cancels Rs. 9,12,060 penalty under Income Tax Act citing financial hardships

M/s. Vijaya Hospitality And Resorts Limited Versus The Additional Commissioner of Income-tax (TDS) Kochi.

M/s. Vijaya Hospitality And Resorts Limited Versus The Additional Commissioner of Income-tax (TDS) Kochi. - TMI Issues involved:Delay in filing appeal, Justification of penalty under section 271C of the Income Tax Act.Analysis:1. Delay in filing appeal:The appeal was filed with a delay of one day, and the assessee submitted a petition for condonation of delay citing financial problems as the reason. The Tribunal found no fault on the part of the assessee and accepted the reasons provided for the delay. Consequently, the delay was condoned, and the appeal was heard on its merits.2. Justification of penalty under section 271C:The primary issue raised in the appeal was whether the penalty imposed under section 271C of the Income Tax Act was justified. The Additional CIT had imposed a penalty of Rs. 9,12,060 for the delay in remitting TDS. The assessee argued that there were reasonable causes for the delay, such as financial difficulties and the majority of TDS being related to directors' remuneration. However, the CIT(A) upheld the penalty, stating that the assessee was a habitual defaulter in depositing taxes and that the provisions of section 273B were not applicable in this case.3. Judicial Interpretation and Precedents:The Tribunal referred to the Full Bench judgment of the Hon'ble Kerala High Court in the case of Lakshadweep Development Corporation Ltd. v. Addl.CIT & Anr., which overturned previous judgments and clarified the application of penalties under section 271C. The Full Bench held that penalties under section 271C for non-remittance of TDS are limited to specific circumstances, as outlined in the Income Tax Act.4. Decision and Rationale:After considering the facts of the case and the legal interpretations provided by the Full Bench judgment, the Tribunal concluded that the penalty imposed under section 271C was not justified. The Tribunal noted that the delay in remitting TDS was due to severe financial hardships faced by the assessee, leading to accumulated losses and other liabilities. Additionally, the assessee had paid the entire TDS amount along with interest before the notice of penalty was issued. Based on these reasons and the precedent set by the Full Bench judgment, the Tribunal decided to delete the penalty imposed under section 271C.In conclusion, the appeal was allowed, and the penalty under section 271C of the Income Tax Act amounting to Rs. 9,12,060 was deleted.