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Facts
The assessee appealed against the order of the Commissioner (Appeals) upholding a penalty of Rs.10,61,318/- imposed for non-deduction of TDS. The penalty was levied because the assessee allegedly failed to deduct tax at source as required by Chapter XVII-B of the Income Tax Act, 1961.
Held
The Tribunal held that the impugned penalty order suffers from delay and deserves to be quashed. Furthermore, the addition that formed the root cause of the penalty levy had been deleted in the quantum proceedings, rendering the penalty unsustainable.
Key Issues
Whether the penalty order under Section 271C is barred by limitation and whether it survives if the primary addition leading to the penalty has been deleted.
Sections Cited
201(1), 201(1A), 271C, 154, 275, 246, 246A, 253, 263, 264, 274, 129, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI NIKHIL CHOUDHARY
PER KUL BHARAT, VICE PRESIDENT.:
This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), New Delhi dated 29.05.2023, pertaining to the assessment year 2012-13. The assessee has raised the following grounds of appeal: -
1. Because the order u/s 201(1)/201(1A) having being passed on 28.03.2019 and the ACIT(TDS) having referred the matter for levy of penalty u/s 271C to the Addi. CIT (TDS) on 28.03.2019 itself, the penalty if any, ought to have been imposed within six months from the end of the month in which the penalty proceedings are initiated or reference is made, such period having being expired on 30.09.2019, the order passed u/s 271C dt. 15.11.2019, with notice of demand dated 19.11.2019 issued by DCIT(TDS) being invalid, is barred by limitation be quashed.
2. Because on the facts and circumstances of the case, the CIT (NFAC) has legally and factually erred in upholding the order u/s 271C of the Act, 1961 without appreciating the facts of the case in right prospective and overlooking the submissions of various dates and compliances, as made Page 2 of 5 by the appellant before the AO, the order as passed upholding the levy of penalty of "Rs.10,61,318/- being bad in law be quashed.
3. Because the tax deductible at source where ever applicable, having being deducted and deposited, there being a mismatch on the portal, the Addl. CIT(TDS) as well as the CIT(NFAC) were not justified in ignoring the same and in levying and upholding the penalty of Rs.10,61,318/which penalty is bad in law be quashed.
4. Because there being no default u/s 201(1)/201(1A) the CIT (NFAC) has erred on facts and in law in upholding the assessee to be in default, thereby erred in upholding the levy of penalty which penalty being not imposable be quashed.
5. Because the penalty order as passed by the Addl. CIT (TDS) and as upheld by the CIT(NFAC), overlooking and ignoring the petition for rectification u/s 154 of the act, being totally in disregard to the provision of the act, being violative to the principles of natural justice, totally unwarranted be quashed.
6. Because there being neither failure to the deduct whole or any part of the tax, the discrepancy, if any, being on account of wrong display and mismatch on the IT Portal, the CIT(NFAC) having failed to consider the submission/explanation and the evidence as filed has wrongly relied upon the decision of the Apex Court in the case of US Technologies Pvt. Ltd. and has thereby erred in upholding the levy of the penalty of Rs.10,61,318/- u/s 271C which penalty being bad in law be quashed.
7. Because in any case the penalty imposed amounting to Rs.10,61,318/- u/s 271C is totally unwarranted, misconceived, invalid, without jurisdiction bad in law be quashed.”
2. In this case, it was found that the assessee has not deducted the tax at source as required under the provisions of Chapter XVII-B of the Income Tax Act, 1961 (“the Act”, for short). The Assessing Officer levied penalty under section 271C of the Income Tax Act for a sum of Rs.10,61,318/- vide order dated 15.11.2019. Aggrieved by this, assessee preferred appeal before the Ld.CIT (A) who sustained the penalty. Aggrieved against this, the assessee is in appeal before this Tribunal.
3. At the outset, the Ld. Counsel for the assessee, Shri Rakesh Garg, Advocate, contended that in the quantum proceedings, the Assessing Authority had carried out the necessary rectification, and the impugned addition, which is germane to the present penalty proceedings, has been deleted. It Page 3 of 5 was further submitted that the income was assessed at ‘Nil’ and that the order passed under section 154 by the Assessing Authority has also been placed on record. Therefore, he prayed that impugned penalty order may be quashed.
On the other hand, the Ld. CIT-DR fairly conceded that the necessary rectification had already been carried out.
Heard the Ld. Representatives of the parties. Section 275 of the Act prescribed bar on account of limitation for imposing penalty is reproduced as under for the sake of clarity: -
Bar of limitation for imposing penalties “275 (1) No order imposing a penalty under this Chapter shall be passed after the expiry of six months from the end of the quarter in which,—
(a) the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, if the relevant assessment or other order is not the subject matter of an appeal under section 246 or section 246A or section 253; (b) the order of revision under section 263 or section 264 is passed, if the relevant assessment or other order is the subject matter of revision under the said sections; (c) the order of appeal under section 246 or section 246A is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said sections and no further appeal has been filed under section 253; (d) the order of appeal under section 253 is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said section; (e) notice for imposition of penalty is issued, in any other case. (2) The order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be revised on the basis of assessment as revised by giving effect to the order passed under section 246 or section 246A or section 253 or section 260A or section 261 or revision under section 263 or section 264, where the relevant assessment or other order is the subject matter of an appeal or a revision under the said sections. (3) No order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty under sub-section (2) shall be passed— unless the assessee has been heard, or has been given a reasonable (a) opportunity of being heard; (b) after the expiry of six months from the end of the quarter in which the order passed under section 246 or section 246A or section 253 or section 260A or section 261 is received by the jurisdictional Principal Commissioner or Commissioner, or the order of revision under section 263 or section 264 is passed. (4) The provisions of sub-section (2) of section 274 shall apply to the order imposing or enhancing or reducing penalty under sub-section (2). (5) In computing the period of limitation for the purposes of this section, the following period shall be excluded:— the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; (a) the period commencing on the date on which stay on proceeding for levy of (b) penalty was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner.]”
5. Thus, we find force into the contention of Ld. Counsel that the impugned order suffers from delay and deserves to be quashed. Further, the Revenue has also not rebutted the fact that the notice does not disclose any specific charge. In view of the fact that the addition forming the root cause of levy of penalty has been deleted, therefore, the impugned penalty does not survive. We hold accordingly. We hereby direct the AO to delete the penalty. The grounds raised in the appeal are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 17/10/2025.