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Facts
State Bank of India (assessee) was assessed for non-deduction of tax at source on Leave Travel Concession (LTC)/Leave Fare Concession (LFC) reimbursements to employees, particularly those involving foreign travel. The Assessing Officer raised a demand under Section 201(1)/201(1A) and subsequently levied a penalty under Section 271C. Both the initial demand and the penalty were confirmed by the Addl. CIT(A) due to the assessee's non-representation.
Held
The Income Tax Appellate Tribunal found that the assessee was not given adequate opportunity to present its case before the lower authorities, citing non-receipt of notices for hearing. Therefore, invoking principles of natural justice, the Tribunal set aside the orders under Section 201(1)/201(1A) and the penalty under Section 271C, restoring both issues to the Assessing Officer for fresh adjudication after granting the assessee a proper hearing.
Key Issues
Whether the orders passed under Section 201(1)/201(1A) and the penalty levied under Section 271C were valid due to alleged procedural deficiencies or lack of adequate opportunity for hearing. Whether the assessee was in default for non-deduction of tax at source on LFC/LTA reimbursements, and if so, whether there was a reasonable cause for such failure.
Sections Cited
201(1), 201(1A), 201(3), 271C, 10(5), 250, 273B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
PER KUL BHARAT, VICE PRESIDENT.:
These two appeals by the assessee, one against the order u/s 201(1)/201(1A) of the Income Tax Act, 1961 (“Act”, for short) dated 29.03.2023 and another against the order u/s 271C of the Act dated 25.05.2023, pertaining to the assessment year 2016-17 and assessment year 2018-19 respectively. For the sake of convenience, both appeals were heard together and are being disposed of by way of consolidated order. First, we will take up the pertaining to the A.Y. 2016-17. The assessee has raised the following grounds of appeal: - & 636/LKW/2024 Page 2 of 7
1. That Learned Additional CIT (A), National faceless Appeal Centre, has erred in not holding that the order under section 201(1) and 201(1A) of the income Tax Act 1961 dated 29-03-2023 for the financial year-2015-16, Assessment year-2016-17 is barred by limitation and hence, void — ab - initio. (2) That Learned Additional CIT (A), NFAC, has erred in holding that the provisions of section 201(3) of the Income Tax Act 1961, as amended by Finance Act, 2014 are retrospective in nature and applies to the captioned assessment year. (3) That the Learned Additional CIT (A), NFAC, has erred in holding that the appellant as assessee in default on account of non-deduction of tax at source in respect of leave fare concession (LFC) provided by the appellant to its employees amounting to Rs 225953/- in cases where LFC was paid by the shortest route for a journey where the designated place was in India but the same also involved some in route foreign travel being undertaken by the employee. (4) That the Learned Additional CIT(A), NFAC, has erred in not appreciating that the benefit of exemption under section 10(5) of the income Tay. Act 1961 is available to the appellant's employee’s designated place is in India and he actually visits the place as designated. (5) That the Learned Additional CIT(A), NFAC, has erred in not appreciating that the appellant provided exemption under section 10(5) of IT Act 1961 only when the employee’s designated place is in India and he actually visits the place as designated. Further, even in case where the employees travel outside India during the course of his travel to place in India, the exemption under section 10(5) of I T Act 1961 is restricted for travel to place in India. Further, all conditions under section 10(5) of I T Act 1961 and Rules 2B are satisfied. (6) That the Learned Additional CIT(A), NFAC, has erred in not appreciating that if all the LFC payments under section 10(5) of I T Act 1961 involving a foreign leg are to be held as taxable. The employee is entitled for exemption u/s 10(5) of the I T Act 1961 to the extent of expenses incurred for travel in India where the employee’s designated place is in India and he actually visits the place as designated. (7) That Learned Additional C1 T (A), N FAC, has erred in nor appreciating that the appellant was of bona fide belief that it was not liable to deduct at source in respect of LFC provide to employee’s and accordingly the appellant cannot be held to be an assessee in default within meaning of section 201 and 201(1A) of the IT Act 1961. (8) That the grounds of appeal as pleaded before the learned CIT(Appeal) are relied upon the appeal before the Hon’ble Member, ITAT. (9) That the Learned Additional CI T (A) has erred in law in rejecting the appeal arbitrarily and in utter disregard of submission made before him. (10) That the above grounds are independent and without prejudice to each other.
& 636/LKW/2024 Page 3 of 7 (11) That the Appellant craves leaves to add, amend, delete, rescind, forgo, or withdraw any of the above grounds of appeal either before or during the course of the appellate proceedings in the interest of the natural justice.”
2. The facts giving rise to the present appeal are that the assessee is a nationalized bank and the Assessing Officer received an information that the bank has failed to deduct tax on the amount of reimbursement of Leave Travel Concession (LTC)/Leave Fare Concession (LFC) given to the employees in the cases where a foreign destination was recorded in the itinerary of their journey. Accordingly, a notice was issued to the assessee bank. Thereafter, the Assessing Authority issued a show cause notice why should assessee be not treated as assessee in default. There was no compliance to the show cause notice by the assessee, therefore, the Assessing Authority treated the assessee as an assessee in default and made a demand of Rs. 2,25,953/-. The assessee bank carried the matter in appeal before the Ld. Addl. CIT(A), who also dismissed the appeal in the absence of any representation on behalf of the assessee. Aggrieved against this, the assessee is in appeal before this Tribunal.
3. Apropos to the grounds of appeal, Ld. Counsel for the assessee bank contended that both the lower authorities have decided the issue in the absence of the assessee. The assessee was not given sufficient opportunity for representing his case effectively. Further, he contended that the assessee has a very strong case on merits and also contended that at least one opportunity be granted to the assessee for effectively representing its case before the Assessing Officer. He contended that in the interest of justice matter may be restored to AO for decision afresh.
4. On the other hand, the Ld. Departmental Representative for the Revenue opposed the submissions and submitted that the & 636/LKW/2024 Page 4 of 7 assessee has not given any plausible explanation for not filing its explanation as called for by the Assessing Authority as well as Ld. CIT(A). Therefore, he prayed for dismissal of the appeal.
We have heard the rival contention and perused the material available on record. There is no dispute with regard to the fact that the Assessing Authority has categorically stated that there was no compliance on behalf of the assessee to the show cause notice issued by him for treating the assessee in default, so is the case with the First Appellate Authority, where there was no representation on behalf of the assessee. As stated by the Ld. Counsel for the assessee, the reason for non-representation on behalf of the assessee was that the assessee has not received the requisite notice of hearing as issued by the Ld. Addl. CIT(A). Considering the material available on record and the submissions made at Bar, we are of the considered view that the assessee ought to have been given adequate opportunity for representing its case effectively. We, therefore, to sub-serve the principles of natural justice do hereby set aside the impugned order and restore the issue to the file of the Assessing Authority to decide it afresh. The assessee is directed to approach the Assessing Officer and file the requisite evidences in support of its claim relating to non-deduction of tax. Grounds raised in this appeal are allowed for statistical purposes.
Now, coming to the assesse’s appeal in A.Y. 2018-19 [Assessment Year has been wrongly mentioned as 2017-18 in the order of Addl. CIT(A)], the assessee is aggrieved by this order of the Ld. Add.CIT(A)/National Faceless Appeal Centre (NFAC), Delhi dated 28.06.2024 challenging the same by raising the following grounds of appeal: - & 636/LKW/2024 Page 5 of 7
1. That on the facts and circumstance of the case and in the law, the order passed u/s 250 r. w. s. 271C of the Act dated 28-06-2024 dismissing the appeal filed by the Appellant and confirming the levy of penalty of Rs 1,68,807/- by National Faceless Appeal Centre ("NFAC hereinafter) without giving any justifiable reasoning and ignoring the submissions made before the Ld. CIT (A) and without appreciating the facts of the case and judicial precedents, bad in law and is liable to be quashed.
2. That on the facts and in the circumstance of the case and in law, the Ld. CIT (A) failed to appreciate the fact that the order of penalty passed by the Ld. Additional Commissioner of income Tax (TDS) dated 25-05- 2023 U/s 271C of the Act is bad in law and void ab initio, since the penalty proceedings have been initiated after almost 6 years from the end of the financial year which cannot be considered reasonable time Period for initiating proceedings as held by various authorities.
That the unsigned impugned order dated 28-06-2024 was communicated to the assessee by the National Faceless Appeal Centre on line through the web portal and first appellate impugned order is neither signed digitally nor physically by the Learned N F A C. Therefore, the same deserves to be cancelled and appeal must be allowed.
That on the facts and circumstance of the case and in law, the Ld. CIT (A) erred in confirming penalty levied by the Ld. AO u/s 271C of the Act 1961, disallowance of LTC /LTA under section 10(5) of the Act, without appreciating that no tax was deductible on the provisions created by the Appellant.
5. That on the facts and circumstances of the case and in law, the td. CIT (A) erred in confirming penalty levied by the Ld. AO u/s 271C of the Act, disallowance of L TC / L T A under section 10(5) of I T Act 1961, without appreciating that there was ‘reasonable cause’ for the said failure as per the provisions of Section 2738 of the Act 1961. (6) That the grounds of appeal
as pleaded before the Learned CIT (Appeal) are relied upon the appeal before the Hon’ble Member, ITAT. (7) That the Learned CIT (Appeal) has erred in law in rejecting the appeal arbitrarily and in utter disregard of the submission made before him. (8) That the above grounds are independent and without prejudice to each other. (9) That Appellant craves leave to add, amend, alter, delete, rescind, forgo or withdraw any of the above grounds of appeal either before or during the course of the appellate proceedings in the interest of the natural justice.”
7. At the outset, Ld. Counsel for the assessee submitted that no reasonable opportunity was granted by the lower authorities and the issue is squarely covered in favour of the assessee. On the other hand, the Departmental Representative for the Revenue & 636/LKW/2024 Page 6 of 7 opposed the submissions and supported the orders of the lower authorities.
We have heard the Ld. Representatives of the parties and perused the material available on record. It is seen from the record that the impugned penalty has been levied on account of failure of the assessee for filing the explanation before the Assessing Authority as well as before the Ld. Addl. CIT(A). It is the case of the assessee that the issue is squarely covered in favour of the assessee. However, these submissions were not raised before lower authorities. We, therefore, to sub-serve the interest of principles of natural justice do hereby set aside the impugned order of the Ld. Addl. CIT(A) and restore the issue of levy of penalty to the file of the Assessing Authority for re- considering the submissions of the assessee and decide the issue afresh. Grounds raised in this appeal are allowed for statistical purpose.
In the result, both appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 29/07/2025.