TaxTMI 
TaxTMI 
2011 (7) TMI 666
X X X X Extracts X X X X
X X X X Extracts X X X X
....the penalty under Section 271C, imposed by the Assessing Authority. 2.The assessee is a Co-operative Bank. In respect of the assessment year 2001-02, the assessee failed to deduct tax at source on the interest payments initiated penalty proceedings under Section 271C of the Income Tax Act of 1961, for short, hereinafter referred to as the 'Act'. The assessee advanced explanation stating that as under law there were not liable to deduct tax at source in respect of the members, they also did not deduct tax from non-members and it was a bonafide mistake. Immediately on being pointed out, they paid tax with interest. Therefore, they prayed for waiver of penalty. 3.The Assessing Authority held that the assessee is carrying on business sinc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee did not carefully notice the said provision which conferred the benefit only in respect of members and the same benefit was not extended to non-members and it is this bonafide mistake which resulted in on-deduction of TDS in respect of interest payable to on-members. On being pointed out, immediately the Bank has paid the tax with interest and therefore the said explanation offered by the assessee being a bonafide one, constitutes reasonable cause, as held by the two authorities and therefore no case for interference is made out. 8. Ignorance of law cannot be an excuse. But under the scheme of Income Tax Act, Section 271C provides for imposition of penalty for non-compliance of the said provision. However, Section 273-B which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason." Further they have held in that case that tax deductor assessee was under a genuine and bona fide belief that I was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the vi....