2023 (1) TMI 865 - AT - Income Tax

Tribunal Upholds CIT(A) Decisions on TDS Penalties; Emphasizes Clarity and Adjudication

Income Tax Officer, TDS Ward-74 (1), New Delhi Versus Delhi Police

Income Tax Officer, TDS Ward-74 (1), New Delhi Versus Delhi Police - TMI Issues:1. Penalty under section 271C for non-deduction of TDS.2. Direction to ascertain TDS deduction requirement under sections 194C and 194J.3. Relief to assessee regarding default under section 201(1) of the Act.Issue 1: Penalty under section 271C for non-deduction of TDS:The appeal by the Revenue challenged the deletion of penalty under section 271C by the Ld. CIT(A). The Revenue argued that the AO was justified in imposing the penalty as the deductor failed to deduct TDS as required by law. However, the Assessee's representative contended that the penalty was imposed without considering all facts and circumstances, leading to its deletion by the Ld. CIT(A). The Ld. CIT(A) observed that penalty proceedings must be strictly construed, citing relevant legal precedents. It was noted that the AO was unsure about the specific payments where TDS was not deducted, and the appellant's conduct was not contumacious, as per Supreme Court judgments. The Ld. CIT(A) found that the penalty was not sustainable due to lack of clarity and reasonable opportunity granted. Consequently, the penalty was deleted, and the appeal was decided in favor of the appellant.Issue 2: Direction to ascertain TDS deduction requirement under sections 194C and 194J:In another appeal, the Revenue contested the Ld. CIT(A)'s directions to the AO to verify the requirement of TDS deduction under sections 194C and 194J. The Revenue argued that the AO correctly deemed the assessee in default for non-deduction of TDS, supported by the lack of evidence provided by the assessee. The Ld. CIT(A) was criticized for taking a hyper-technical approach without a reasonable basis. The Assessee's representative, however, defended the Ld. CIT(A)'s decision, highlighting that the AO's assessment was hasty and lacked proper consideration of submissions. The Ld. CIT(A) remitted the matter to the AO for verification, which the Revenue objected to, stating that the Ld. CIT(A) had no authority to remand the case. The Tribunal noted that the Ld. CIT(A) should adjudicate the appeal himself and not remand it to the AO. However, considering the peculiar circumstances of the case and to avoid multiplicity of proceedings, the Tribunal refrained from interfering with the ongoing proceedings before the AO. The appeal was disposed of with directions to expedite the proceedings as per the Ld. CIT(A)'s order.Issue 3: Relief to assessee regarding default under section 201(1) of the Act:The Ld. CIT(A) granted relief to the assessee regarding default under section 201(1) of the Act, stating that the default could not be attributed to the deductor if the recipient had included the amount in income and paid tax on it. However, interest under section 201(1A) for short/non-deduction remained due. The Revenue raised objections to this relief, emphasizing the liability of the assessee to pay interest. The Tribunal acknowledged the Ld. CIT(A)'s decision and directed the AO to expedite proceedings in accordance with the Ld. CIT(A)'s directions.In conclusion, the Tribunal upheld the Ld. CIT(A)'s decisions in both appeals, emphasizing the need for strict interpretation of penalty provisions, proper adjudication of appeals by the CIT(A), and adherence to legal precedents in tax matters.