2015 (8) TMI 553

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....n law, the learned CIT(A) erred in deleting the penalty u/s 271C of the I T Act levied in respect of payments to doctors drawing fixed remuneration without appreciating the fact that the assessee without reasonable cause failed to deduct tax u/s 192 of the I T Act, 1961 on these payments which are essentially in the nature of 'Salary'. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the penalty u/s 271C of the I T Act levied in respect of payments to doctors drawing fixed plus variable pay with written contract without appreciating the fact that the assessee without reasonable cause failed to deduct tax u/s 192 of the I T Act, 1961 on these payments which are essentially in th....

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....ded in getting the relief. In consequence of the order of the ITAT, Pune the revised penalty order dated 08-11-2012 was passed and the penalty of Rs. 8,73,692/- was worked out by the Addl. CIT(TDS), Pune. The Ld. CIT(A) deleted the penalty in entirety. 3. The facts pertaining to the levy of penalty are that during the course of verification of records, it was noticed that the assessee deducted tax at source u/s. 194J of the Income-tax Act @ 10% on the remuneration paid to the Doctors/Physicians employed in the hospital treating the same as fees for professional services. In the opinion of the Tax Authorities, the assessee should have deducted the tax in compliance with Sec. 192 of the Income-tax Act. As observed by the Assessing Officer ....

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....to the Doctors, the appellant has itself accepted its default and has paid the taxes. In respect of other category of Doctors, the appellant has been allowed relief at CIT(A) as well as ITAT level. Therefore, there was reasonable cause for non-deduction of TDS on account of different perception in respect of interpretation of terms of employment as well as remuneration granted to various Doctors. The appellant was under sincere belief that the deduction is to be required u/s. 194J of Income-tax Act and accordingly, it was complying with the provisions of TDS sincerely. Further, it is also submitted that in respect of laboratory fees too, the appellant was deducting TDS u/s. 194C of Income-tax Act while the department's view is that the ....

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....e heard the parties and perused the impugned order of Ld. CIT(A) as well as penalty order. The Ld. Counsel submits that it is only the question of interpretation of the terms of contract vis-à-vis provisions of law and there was no deliberate act on the part of the assessee to avoid the legal duty cast upon it. He submits that even if the assessee has accepted that tax is to be deducted u/s. 192 but the fact remain that it is the issue of interpretation of law as admittedly the professional services of the doctors are used. He referred to Sec. 273B of the Act and submits that there was a reasonable cause considering the fact of this case for short deduction of tax. He also submits that whatever tax was deducted by the assessee, same ....

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....ther there was a reasonable cause u/s. 273B of the Act and hence, there was no need to levy penalty u/s. 273C of the Act. As per the explanation of the assessee, in our opinion the order of the Ld. CIT(A) has to be confirmed for the reason that admittedly it is not a case of non-deduction of the tax or after deducting or collecting the tax, not depositing the same with the Govt. As per the plea of the assessee, it is merely the process of interpretation which was adopted in respect of both the payments otherwise whatever tax was collected was paid to the Govt. account. 6. In the case of Hindustan Steel Limited Vs. State of Orissa 83 ITR 26 (SC)  it is held as under: "An order imposing penalty for failure to carry out a statutory ....