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Facts
The assessee, State Bank of India, was levied a penalty under section 271C for not deducting TDS on Leave Travel Concession (LTC) paid to employees, which was treated as taxable perquisite. The penalty was confirmed by the CIT(A). The assessee contested that the employees' travel outside India for LTC was not a bar to exemption under section 10(5) and they had a bona fide belief regarding the taxability.
Held
The Tribunal held that the assessee-employer is not under a statutory obligation to collect evidence to show that employees utilized LTC for travel within India, especially when there was a bona fide belief. Relying on precedent, the Tribunal found the penalty levied under section 271C to be unjustified.
Key Issues
Whether penalty under section 271C is leviable when the employer had a bona fide belief regarding the taxability of LTC payments and was not statutorily obligated to collect proof of travel.
Sections Cited
271C, 270C, 201(1), 201(1A), 274, 10(5), 192B, 192, 273B, XVII-B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI AMARJIT SINGH & SHRI RAJ KUMAR CHAUHAN
O R D E R
PER AMARJIT SINGH, ACCOUNTANT MEMBER:
The appeal of the assessee for the assessment year 2016-17 is directed against the order dated 10.06.2024 passed by the National Faceless Appeal Centre (NFAC), Delhi. The assessee has raised the following grounds of appeal:
“i. On the facts and in law, the learned Assessing Officer (in short Ld. AO) erred in levying penalty of Rs. 48,600/- under section 271C of the Act. ii. On the facts and in law, the Ld. CIT(A) erred in confirming penalty order passed by the Ld. AO imposing penalty under section 271C of the Act. iii. On the facts and in law, the Ld. AO erred in imposing penalty under section 270C of the Act when the issue regarding deduction of TDS on Leave Travel Concession was debatable and subjudice before the Hon’ble State Bank of India A.Y. 2016-17 High Court had reframed assessee from deducting any TDS vide interim order dated 16.02.2015. iv. On the facts and in law, no penalty under section 271C is impossible on the appellant as the appellant had reasonable cause for not deduction TDS for payments made to its employees for Leave Travel concession. Hence, proviso of section 273B shall be applicable. v. The appellant craves, leave to add to alter, modify, revise, or delete any grounds (s) in the interest of justice.”
There is a delay in filing the appeal by 77 days. The assessee filed application for condonation of delay along with affidavit dated 18.10.2020. The assessee submitted that all the proceedings in this case was handled by a Financial Advisory Firm namely Deloitte. However, subsequent to the order of the First Appellate Authority, the assessee had appointed another professional consultant to file appeal before the ITAT. But the process of appointing new counsel and transferring case files from the Advisory Firm Deloitte resulted in delay in filing the appeal before the ITAT. After considering the above facts and submission, we consider that there is a bona fide reason for delay in filing the appeal by 77 days before the ITAT, therefore, in order to decide the appeal on merit we condone the delay of 77 days in filing the appeal.
Fact in brief is that in this case order u/s 201(1)/201(1A) of the I.T. Act was passed on 22.03.2023 raising total demand of Rs. 95,256/- (TDS default u/s 201(1) + interest u/s 201(1A). Thereafter, notice u/s 274 r.w.s. 271C of the I.T. Act was issued on 11.05.2023 to the assessee to explain why penalty u/s 271C of the Act should not be levied in its case on account of default in State Bank of India A.Y. 2016-17 short deduction of tax/failed to deduct/failed to deposit the tax as required under the provision of chapter XVII-B of the I.T. Act. However, the assessee has not made any compliance to the show cause notice issued by the assessing officer. Therefore, the assessing officer on the basis of material placed on record found that employees of assessee bank have claimed leave fair concession amounting to Rs. 1,62,000/- for travelling outside India. As per provision of section 10(5) of the I.T. Act, 1961 exemption of LFC is allowed only if the employee travel to place anywhere in India. Therefore, the assessing officer held that if the employee travels outside India by using circuitous route the amount of travel concession received on account of LTC cannot be claimed as exemption u/s 10(5) of the Act and same has to be taxed as perquisite / part of the salary of the concerned employee. Therefore, the assessee bank was treated as assessee in default u/s 201(1) for not deducting tax u/s 192B of the Act on LTC payment to its employees to the amount of Rs. 48,600/- (30% of leave concession amounting to Rs. 1,62,000/-). Since during the course of penalty proceedings, the assessee failed to explain sufficient and reasonable cause therefore, assessing officer has levied penalty amounting to Rs. 48,600/- u/s 271C of the Act.
The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee reiterating the fact as reported by the assessing officer.
Heard both the sides and perused the material on record. Without reiterating the fact as discussed (supra) in this order, the State Bank of India A.Y. 2016-17 AO has levied penalty under section 271C of the Act to the amount of Rs. 48,600/- for not making compliance with the provision of section 192B of the Act for not deducting tax on account of LTC payment which was not allowable according to the provisions of section 10(5) of the Act. During the course of appellate proceedings before us, the ld. Counsel referred the decision of ITAT Jaipur Bench in the case of State Bank of India vs ACIT, (TDS), Jaipur (2019) (10) taxmann.com 61 (Jaipur-Trib)) wherein it is held that if the assessee was under bona fide belief that there was no Bar on travel to a foreign destination during the course of travel to a place in India while claiming leave fair concession, penalty so levied u/s 271C was to be deleted. In the aforesaid decision the judgment of Hon’ble Supreme Court in the case of CIT vs Larsen & Toubro Ltd. (2009) 181 taxmann.com 71 (SC) was also referred wherein it was held that beneficiary of exemption u/s 10(5) is an individual employee and there was no circular of Central Board of Direct Taxes (CBDT) requiring the employer u/s 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee. Therefore, it was held that an assessee- employer is under no statutory obligation under the Income Tax Act, 1961 and / or the Rules to collect evidence to show that its employees had actually utilized the amount paid towards leave travel concession / conveyance allowance.
Looking to the above facts and circumstances and following the decision as referred (supra) we consider that the decision of ld. CIT(A) in sustaining the impugned penalty levied u/s 271C of the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 04.02.2025.