TaxTMI 
TaxTMI 
2017 (11) TMI 629
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....kindly be deleted in full. 3. That there was not a definite conclusion in the assessment order at the time of initiation of proceedings and there being no satisfaction recorded discernable there from as to on what precise basis the penalty has been imposed nor it is clearly appearing from show cause notice issued u/s 271(1)(c) r/w Sec. 274 of the Act and hence, the impugned penalty deserves to be deleted in full. 2. Regarding ground No. 1 of the assessee's appeal, no specific contentions have been raised by the ld. AR and it was submitted that the same may be read alongwith ground no. 2. Hence the same doesn't require any separate adjudication. 3. Regarding ground no. 2 & 3, the facts of the case are that the assessee filed its return of income declaring total income of Rs. 3,63,84,400/- which was assessed u/s 143(3) of the Act at Rs. 3,81,65,201/-. It was observed by the AO that the assessee has credited the account of its sister concern, Airen Copper Pvt Ltd on 31.03.2009 and made a payment of Rs. 25,20,000 towards rent for use of office premises and no tax has been deducted at source. As the assessee has neither deducted tax at source nor paid the same during the ....
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.... spite of knowing that the provisions of the law are unambiguous in this regard. Moreover, when the assessee was confronted as to why TDS has not been deducted, the assessee is trying to bluff and furnish superficial replies which do not have any basis. The assessee could not furnish the evidence of the payment of TDS during the entire assessment proceedings while in the reply, the assessee has quoted that TDS has been done as per Income Tax Rules. In my opinion, this act of not deducing TDS on the rent paid and claiming the same without any basis has a definite element of mens rea and penalty should be imposed u/s 271 (1)(c) for furnishing inaccurate particulars of income. Therefore, I impose a penalty of 100% on the tax sought to be evaded." 6. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who confirmed the levy of penalty with the following findings which are reproduced as under:- "2.4 It is thus clear that not only did the assessee make an unjustified claimed of deduction but also misled the AO during the assessment proceedings by stating that TDS as applicable had duly been deducted and hence the impugned amount was allowable as p....
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....ely for the reason of non filing of appeal, no penalty could be imposed. However, for the present purpose of penalty, considering afresh the above binding legal position, and admitted facts, the impugned disallowance has to be treated as deleted in full. 8. It was further submitted that this was first occasion/year in which the assessee company was required to make TDS compliance and it was only because of the oversight, this amount escaped the notice of the management. Further, even in the Tax Audit report, no such disallowances were pointed out by the tax auditor. Hence the AO was replied accordingly which cannot be a case of misleading. In this regard, the ld AR placed on the decision of Hon'ble Supreme Court in case of Price Waterhouse Coopers Pvt. Ltd. vs. CIT 348 ITR 306 wherein despite the tax auditor having made a disallowance in the tax audit report, the assessee firm didn't make any disallowance by oversight. 9. Futher reliance was placed on the following decisions whether penalty has been deleted in respect of disallowance made by the AO u/s 40(a)(ia) of the I.T. Act: * Ramkrishna Shetty vs. ACIT (2013) 38 CCH 0020 (Mum) * Tanushree Basu vs. ACIT ....
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....naccurate particulars of income carry different connotations, as held in the case of T. Ashok Pai (2007) 292 ITR (SC) at page 19. This was taken note of by the Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory 359 ITR 565 (Karn). The use of both the limbs by the AO mechanically, clearly shows a complete non application of mind on his part and the requisite satisfaction, this way, is not at all discernable from the assessment orders nor from the penalty orders of all the years. 12. It was further submitted that the Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (supra) has held that notice u/s 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High Court has further laid down that certain printed form where all the grounds given in Sec. 271 are given would not satisfy the requirement of law and our reference was drawn to para 59 of the said order. Therefore, it was submitted that the impugned penalty deserves to be deleted at this stage ....
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....ed at source during the previous year, there is no change in law as per the Finance Act, 2010. The law is clear that where the tax has not been deducted during the previous year and has been deducted in the subsequent financial year, the expenditure shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. In light of the same, the AO has rightly invoked the provisions of section 40(a)(ia) for non-deduction of tax on rent payments credited and paid during the subject financial year. 16. Further, we don't agree with the contention of the ld AR that no penalty can be levied simplicitier on the basis that the assessee was having the option of making the payment either within the prescribed due date or if failed, has the liberty to deposit in a later year where also the law permits the deduction on payment basis. In our view, it is not really an option rather it relaxes the rigour by way of providing an extended time for deposit for the limited purposes of allowance of a particular expenditure. At the same time, it doesn't absolve the assessee from interest and penal consequences for nondeduction or non-payment of taxes. We find th....
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....ered is a bona fide one and all the facts relating to the same and material to the computation of his total income has been disclosed by him, then, in law, a discretion is vested with the authority not to impose penalty. 18. Now, coming to another contention of the learned AR that there was not a definite conclusion in the assessment order at the time of initiation of proceedings and there being no satisfaction recorded discernable there from as to on what precise basis the penalty has been imposed, the impugned penalty deserves to be deleted in full. 19. In this regard, we refer to the decision of the Hon'ble Karnataka High Court in case of Manjunatha Cotton (supra) to which our reference was drawn by the ld AR wherein the Hon'ble High Court in context of recording of satisfaction and initiation of penalty proceedings at Para 53 has held as under: "53. From these discussion, it is clear that condition precedent for initiation of penalty proceedings under Section 271(l)(c) is existence of condition referred to in the said section. The person initiating penalty proceedings should be satisfied about the existence of said conditions which should be reflected in the asse....
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....nd then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation 1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(l)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he....
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....eedings before the AO without showing any reasonable cause, the assessee has effectively waived its right to contest at higher appellate forum that his rights to plead have been violated. Even before us, no pleadings have been taken to show that there existed a reasonable cause for not attending to the penalty proceedings and offering its explanation before the AO. Further, no such pleading has been taken before the ld CIT(A) as well regarding violation of principle of natural justice. Having recorded the satisfaction in the assessment order, the penalty proceedings have been validly initiated and the issuance of notice u/s 274 is in furtherance of recording of such satisfaction and has thus to be read along with the assessment order and not independent of it. In our view, the assessee has rightly been made aware of the initiation of penalty proceedings and it for reasons best known to it choose to remain silent and failed to offer any explanation during the penalty proceedings. We therefore donot see any infirmity in the initiation of the penalty proceedings and there is clearly no violation of principle of natural justice as canvassed by the ld AR. 23. Now coming to the next i....
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....h the assessee company was required to make TDS compliance and it was only because of the oversight, this amount escaped the notice of the management. 25. We have given a careful consideration to the above factual matrix. We find that the assessee made a self-contradictory statement before the AO. The reason for the same is that firstly, the tax was not deducted as apparent from the rent account statement furnished during the assessment proceedings. Given that there was no question of deposit of the taxes, a fact which has been confirmed subsequently from the submissions made before the ld CIT(A) and now before us that the tax has been deposited in the previous year relevant to AY 2012-13. The fact remains that tax was not deducted on the rental payments made during the previous year relevant to impunged assessment year. The only explanation which is now forthcoming before us is that this was the first year of compliance and it was due to oversight that the amount escaped the notice of management. The question is even if we believe the said explanation, the question remains is why it took so many years from AY 2009-10 to AY 2012-13 to deposit such taxes. The oversight could be f....