THE PRINCIPAL COMMISSIONER OF INCOME TAX 3 vs. ATUL S MEHTA

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TAXAP/453/2018HC GujaratGJHC24025306201807 May 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises from the order of the Income Tax Appellate Tribunal. The Tribunal had upheld the decision of the CIT(A) who had deleted the penalty of Rs. 74,18,771 levied under Section 271(1)(c) for non-deduction of TDS. The reasoning adopted by the CIT(A) and affirmed by the ITAT was that the expenditure disallowed under Section 40(a)(ia) due to non-deduction of TDS was allowable in a subsequent year upon payment of TDS. Consequently, the penalty on this issue was not considered to be based on furnishing inaccurate particulars of income. The Tribunal found no reason to interfere with the CIT(A)'s decision. The High Court, agreeing that no substantial question of law arose, dismissed the Revenue's appeal.

What were the facts?

The Revenue (Principal Commissioner of Income Tax 3) is in appeal against the order of the Income Tax Appellate Tribunal (ITAT) dated November 27, 2017. The ITAT had upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] in deleting a penalty of Rs. 74,18,771 levied under Section 271(1)(c) of the Income Tax Act, 1961. The penalty pertained to the default of non-deduction of Tax Deducted at Source (TDS). The Assessing Officer had initially imposed this penalty. The ITAT's decision was based on the CIT(A)'s finding that while expenditure was disallowed under Section 40(a)(ia) due to non-deduction of TDS, these expenses were allowable in a subsequent year upon payment of TDS. Therefore, the penalty on this issue was not based on furnishing inaccurate particulars of income.

What were the issues?

1. Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT(A) and thereby deleting the penalty of Rs. 74,18,771 levied under Section 271(1)(c) of the Act pertaining to the default of non-deduction of TDS? Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the ITAT's order, as quoted, indicates that the CIT(A) had allowed part relief to the assessee on the penalty. The CIT(A) held that while expenditure was disallowed under Section 40(a)(ia) due to non-deduction of TDS, these expenses were allowable in a subsequent year on the basis of TDS payment. Therefore, part of the penalty levied on this issue was not based on furnishing inaccurate particulars of income. The ITAT agreed with this reasoning. Revenue's Contentions: The Revenue, in its appeal to the High Court, is challenging the ITAT's decision to uphold the deletion of the penalty. The Revenue's argument is implicitly that the penalty under Section 271(1)(c) was rightly levied and should not have been deleted by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/453/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 453 of 2018 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX 3 Versus ATUL S MEHTA ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 07/05/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   27.11.2017 raising following question for our consideration: “Whether the Appellate Tribunal was right in law and on facts in upholding the decision of   the   CIT(A)   and   thereby   deleting   the penalty of Rs.74,18,771/­ levied u/s. 271(1) (c) of the Act pertaining to the default of non­deduction of TDS?

2.

Issue pertains to penalty under section 271(1) (c)   of  the   Income   Tax   Act,   1961. The   Assessing Officer having imposed such penalty, the Commissioner of Income Tax (Appeals) and the Tribunal deleted the same.     The   Tribunal   in   the   process,   observed   as under: C/TAXAP/453/2018 ORDER “5. During   the   course   of   appellate proceedings   before   us,   ld.   departmental representative   has   stated   in   respect   of quantum addition nobody has appeared before the   Co­ordinate   Bench   of   the   ITAT, therefore, the quantum addition order in the case   of   the   assessee   was   dismissed   by   the Hon'ble   Income   Tax   Appellate   Tribunal   vide ITA   No.2806/Ahd/2010   dated   22nd  November, 2013. After   hearing   the   ld.   departmental representative   and   perusal   of   the   material on record, we observed that that ld. CIT(A) has allowed part relief to the assessee on the penalty levied by the assessing officer pertaining   to   the   default   of   non­reduction of   TDS.     The   Ld.   CIT(A)   held   that   use   of deeming fiction of section 40(a)(ia) of the Act, such expenditure  were disallowed.    He has,   however,   stated   these   expenditure   are allowable   in   any   subsequent   year   on   the basis   of   TDS   payment. Therefore,   he concluded that part of the penalty levied on this   issue   is   not   based   on   furnishing   of inaccurate   particulars   of   income.     After considering the detailed findings of the ld. CIT(A), we are not inclined to interfere in the decision of the ld. CIT(A).   Therefore, the appeal of the revenue is dismissed.”

3.

No   question   of   law   arises.   Tax   Appeal   is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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