2022 (7) TMI 588 - AT - Income Tax

Tribunal overturns penalty for TDS violation in payment to government authority

Swiftrans International Pvt. Ltd. C/o RRAT Tax India Versus Addl. CIT Special Range-77 New Delhi

The Tribunal allowed the appeal against the penalty order for Assessment Year 2016-17, directing the Assessing Officer to delete the penalty imposed under ... Penalty u/s 271C - payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS - non deduction of tax at source as per provisions of Chapter XVII-B towards amount paid as External Development Charges (EDC) to Directorate of Town and Country Planning, Haryana (Haryana Government) (DGTCP) through banking channel favouring Haryana Urban Development Authority (HUDA) - HELD THAT:- As relying on own case for A.Y. 2014-15 [2022 (7) TMI 534 - ITAT DELHI]. we hold that imposition of penalty under Section 271C of the Act is not justified in view of the finding of the Co-ordinate Bench that the assessee has not committed any violation of provision of Chapter XVII B of the Act by making payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS. - Decided in favour of assessee. Issues:1. Imposition of penalty under section 271C by the Assessing Officer without jurisdiction.2. Confirmation of penalty by the CIT(A) without considering facts and circumstances.3. Requirement of TDS deduction on payments made to Government Authority.4. Applicability of penalty amount based on co-ownership of property.5. Appeal against the penalty order for Assessment Year 2016-17.Issue 1: Imposition of Penalty Without JurisdictionThe appellant challenged the imposition of penalty under section 271C by the Assessing Officer (AO) without jurisdiction. The Counsel for the assessee referred to a previous Tribunal decision where a penalty for a similar case was deleted. The Tribunal observed that the penalty order for two assessment years was based on identical facts. In a previous case, the Tribunal had deleted the penalty for non-deduction of tax at source on External Development Charges (EDC) paid to a government authority. The Tribunal found no distinguishing decision favoring the revenue.Issue 2: Confirmation of Penalty by CIT(A)The appellant contended that the CIT(A) erred in confirming the penalty imposed by the AO. The Tribunal noted that the penalty order was consolidated for two assessment years, and since the facts were the same, the penalty was levied uniformly. Referring to previous Tribunal decisions, the Tribunal found that the payment made to the government authority was exempt from TDS deduction under Section 196 of the Income Tax Act. The Tribunal held that the penalty imposed under section 271C was not justified as there was no violation of Chapter XVII B provisions.Issue 3: TDS Deduction RequirementThe appellant argued that there was no requirement to deduct TDS on payments made to the Government Authority. The Tribunal considered a clarification from the Directorate of Town and Country Planning, Haryana, stating that since the payment was made to the State Government, no TDS was to be deducted. The Tribunal also referred to a previous case where it was held that Section 194C provisions did not apply to payments to agencies like HUDA on behalf of the State Government.Issue 4: Applicability of Penalty AmountThe appellant suggested that if any penalty were to be imposed, it should be limited to a specific amount due to co-ownership of the property. The Tribunal, following the findings of a coordinate Bench, directed the AO to delete the penalty based on the clarification and previous decisions regarding the applicability of TDS deductions on payments to government authorities.Issue 5: Appeal Against Penalty OrderThe appeal filed by the assessee against the penalty order for Assessment Year 2016-17 was allowed by the Tribunal. The Tribunal, in line with previous decisions and clarifications, directed the AO to delete the penalty imposed under section 271C. The order was pronounced in open court on 23.06.2022.This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented, the Tribunal's findings, and the final decision rendered in favor of the appellant.