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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI PAVAN KUMAR GADALE
O R D E R Per Shri A.K. Garodia, Accountant Member All these five appeals are filed by the assessee which are directed against five separate orders of ld. CIT(A)-3, Bangalore all dated 09.01.2019 for Assessment Years 2011-12 to 2013-14. In fact, there are two appeals for each year of the two Assessment Years i.e. 2011-12 and 2012-13 whereas in Assessment Year 2013-14, there is only one appeal. 2. The grounds raised by the assessee for Assessment Year 2011-12 in are as under. “1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) erred in upholding levy of the penalty of Rs. 25,157/- u/s 271C (1) of the Income- tax Act, 1961.
3. The learned Commissioner of Income (Appeals) erred in confirming levy of penalty without appreciating the fact that as per Section 273B, if there is any reasonable cause, no penalty can be levied. 3.1. The learned Commissioner of Income Tax (Appeals) erred in levying penalty without appreciating the fact that there was a ITA Nos. 532 to 536/Bang/2019 Page 2 of 9 reasonable cause for the Appellant bank in not deducting the TDS. 3.2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that appellant was under the bonafide belief that even where the journey undertaken by an employee involves a foreign leg, the employee is entitled to exemption under Section 10(5) when the employee's designated place is in India. 3.3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had honestly and fairly formed an opinion and arrived at the estimated income of the employees. 3.4. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant was not required go beyond the declarations given by employees and ascertain the LFC amount exempted. 3.5. The learned Commissioner of Income Tax (Appeals) failed to appreciate that very fact that the appeal of the appellant has been admitted by the Hon'ble Karnataka High Court, would itself show that the issue is debatable and there was a reasonable cause and hence, no penalty is leviable u/s 271C.
4. The learned Commissioner of Income Tax (Appeals) erred in not following the decision of the Tribunal applicable to the facts of the case. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed.”
The grounds raised
by the assessee for Assessment Year 2011-12 in are as under. “1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) erred in upholding levy of the penalty of Rs. 37,992/- u/s 271C (1) of the Income- tax Act, 1961.
3. The learned Commissioner of Income (Appeals) erred in confirming levy of penalty without appreciating the fact that as per Section 273B, if there is any reasonable cause, no penalty can be levied. 3.1. The learned Commissioner of Income Tax (Appeals) erred in levying penalty without appreciating the fact that there was a reasonable cause for the Appellant bank in not deducting the TDS. 3.2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that appellant was under the bonafide belief that even where the journey undertaken by an employee involves a foreign leg, the employee is entitled to exemption under Section 10(5) when the employee's designated place is in India.
3.3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had honestly and fairly formed an opinion and arrived at the estimated income of the employees. 3.4. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant was not required go beyond the declarations given by employees and ascertain the LFC amount exempted. 3.5. The learned Commissioner of Income Tax (Appeals) failed to appreciate that very fact that the appeal of the appellant has been admitted by the Hon'ble Karnataka High Court, would itself show that the issue is debatable and there was a reasonable cause and hence, no penalty is leviable u/s 271C.
4. The learned Commissioner of Income Tax (Appeals) erred in not following the decision of the Tribunal applicable to the facts of the case. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed.”
The grounds raised
by the assessee for Assessment Year 2012-13 in are as under. “1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) erred in upholding levy of the penalty of Rs. 39,830/- u/s 271C (1) of the Income- tax Act, 1961.
3. The learned Commissioner of Income (Appeals) erred in confirming levy of penalty without appreciating the fact that as per Section 273B, if there is any reasonable cause, no penalty can be levied. 3.1. The learned Commissioner of Income Tax (Appeals) erred in levying penalty without appreciating the fact that there was a reasonable cause for the Appellant bank in not deducting the TDS. 3.2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that appellant was under the bonafide belief that even where the journey undertaken by an employee involves a foreign leg, the employee is entitled to exemption under Section 10(5) when the employee's designated place is in India. 3.3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had honestly and fairly formed an opinion and arrived at the estimated income of the employees. 3.4. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant was not required go beyond the to 536/Bang/2019 Page 4 of 9 declarations given by employees and ascertain the LFC amount exempted. 3.5. The learned Commissioner of Income Tax (Appeals) failed to appreciate that very fact that the appeal of the appellant has been admitted by the Hon'ble Karnataka High Court, would itself show that the issue is debatable and there was a reasonable cause and hence, no penalty is leviable u/s 271C.
4. The learned Commissioner of Income Tax (Appeals) erred in not following the decision of the Tribunal applicable to the facts of the case. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed.”
5. The grounds raised by the assessee for Assessment Year 2012-13 in are as under. “1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) erred in upholding levy of the penalty of Rs. 84,724/- u/s 271C (1) of the Income- tax Act, 1961.
3. The learned Commissioner of Income (Appeals) erred in confirming levy of penalty without appreciating the fact that as per Section 273B, if there is any reasonable cause, no penalty can be levied. 3.1. The learned Commissioner of Income Tax (Appeals) erred in levying penalty without appreciating the fact that there was a reasonable cause for the Appellant bank in not deducting the TDS. 3.2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that appellant was under the bonafide belief that even where the journey undertaken by an employee involves a foreign leg, the employee is entitled to exemption under Section 10(5) when the employee's designated place is in India. 3.3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had honestly and fairly formed an opinion and arrived at the estimated income of the employees. 3.4. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant was not required go beyond the declarations given by employees and ascertain the LFC amount exempted. 3.5. The learned Commissioner of Income Tax (Appeals) failed to appreciate that very fact that the appeal of the appellant has been admitted by the Hon'ble Karnataka High Court, would itself show that the issue is debatable and there was a reasonable cause and ITA Nos. 532 to 536/Bang/2019 Page 5 of 9 hence, no penalty is leviable u/s 271C. 4. The learned Commissioner of Income Tax (Appeals) erred in not following the decision of the Tribunal applicable to the facts of the case. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed.” 6. The grounds raised by the assessee for Assessment Year 2013-14 in are as under. “1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) erred in upholding levy of the penalty of Rs. 37,470/- u/s 271C (1) of the Income- tax Act, 1961.
3. The learned Commissioner of Income (Appeals) erred in confirming levy of penalty without appreciating the fact that as per Section 273B, if there is any reasonable cause, no penalty can be levied. 3.1. The learned Commissioner of Income Tax (Appeals) erred in levying penalty without appreciating the fact that there was a reasonable cause for the Appellant bank in not deducting the TDS. 3.2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that appellant was under the bonafide belief that even where the journey undertaken by an employee involves a foreign leg, the employee is entitled to exemption under Section 10(5) when the employee's designated place is in India. 3.3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had honestly and fairly formed an opinion and arrived at the estimated income of the employees. 3.4. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant was not required go beyond the declarations given by employees and ascertain the LFC amount exempted. 3.5. The learned Commissioner of Income Tax (Appeals) failed to appreciate that very fact that the appeal of the appellant has been admitted by the Hon'ble Karnataka High Court, would itself show that the issue is debatable and there was a reasonable cause and hence, no penalty is leviable u/s 271C.
4. The learned Commissioner of Income Tax (Appeals) erred in not following the decision of the Tribunal applicable to the facts of the case. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed.”
In course of hearing of these appeals, it was submitted by ld. AR of assessee that as per the Tribunal order rendered in the case of State Bank of India Vs. ACIT as reported in [2019] 101 taxmann.com 61 (Jaipur – Trib.), copy available on pages 40 to 46 of the appeal memo, it was held by the Tribunal that there was reasonable cause in terms of section 273B of the IT Act for not deducting tax by assessee bank and therefore, the penalty levied by the AO u/s. 271C of the IT Act is deleted. He submitted that in the present case also, the facts are similar and therefore, in the present case also, the penalty imposed by the AO should be deleted. As against this, the ld. DR of revenue submitted a copy of the Tribunal order in quantum proceedings in assessee’s own case for same Assessment Years in to 1403 & 1435 to 1477/Bang/2016 dated 06.04.2017 and submitted that as per this Tribunal order, the Tribunal upheld the order passed by the AO u/s. 201(1) of the IT Act and this finding is also given by the Tribunal in this case that the assessee has made no efforts to prove how its belief was formed that such foreign travel expenses would come within the ambit of section 10(5) of the IT Act. He submitted that in view of this finding of Tribunal in quantum proceedings, penalty should be confirmed.
At this juncture, the bench pointed out that as per para 12 of the Tribunal order rendered in the case of State Bank of India Vs. ACIT (supra), the Tribunal has considered various factual aspects such as the assessee bank has allowed exemption to all its employees who have submitted LFC claim and the Revenue has not disputed the LFC claim in respect of these employees except in respect of 12 employees who have travelled to foreign countries as part of their travel itinerary with designated place of travel in India. The bench made a query as to whether these details are available on record that the demand in the present case has been raised in respect of all employees or only few employees. The bench also pointed out in that case, it is observed by the Tribunal that the assessee bank has undertaken reasonable steps in terms of verifying the assessee's claim towards their LFC claims and is aware of employees travelling to foreign countries as part of their travel itinerary but at the same time, there is an error of judgment on part of the assessee bank in understanding and applying the provisions of section to 536/Bang/2019 Page 7 of 9 10(5) of the Act. The bench pointed out that this is also the finding of the Tribunal in that case that in earlier years also, the assessee bank considered LFC claim as exempt u/s. 10(5) and the same position being followed and accepted consistently in the past years was followed in the current financial year as well and for the first time, after the survey by the tax department, this issue arose for consideration and after the judgment of the Tribunal, the matter got clarified and the assessee bank has duly complied and deposited the outstanding demand along with interest and has taken corrective steps in subsequent years as well. The bench wanted to know as to whether the assessee in the present case has complied and deposited the outstanding demand along with interest after the Tribunal order in quantum proceedings which is dated 06.04.2017 and whether the assessee has taken corrective steps in subsequent years as well. In reply, both sides agreed that details about these factual aspects is not readily available and hence, matter may be restored back to the file of ld. CIT(A) for fresh decision in the light of this Tribunal order after verifying the factual aspects in the light of this Tribunal order. 9. We have considered the rival submissions. First of all, we reproduce para no. 12 of the Tribunal order rendered in the case of State Bank of India Vs. ACIT (supra). This para reads as under. “12. At the same time, in terms of adherence to the provisions as contained in section 10(5) read with Rule 2B, we find that the assessee bank has allowed exemption to all its employees who have submitted LFC claim. The Revenue has not disputed the LFC claim in respect of these employees except in respect of 12 employees. These 12 employees, who have travelled to foreign countries as part of their travel itinerary with designated place of travel in India, and in respect of which they have submitted their LFC claim, has been disputed by the Revenue as not eligible for exemption under section 10(5) in respect of amount reimbursed towards foreign leg of their travel. The explanation of the assessee bank is that while calculating the tax liability of its employees, the figure of LFC was always exempted and this rule was being followed since many years, being in a nature of thumb rule and TDS exemption of LFC was thus allowed almost mechanically year after year. To our mind, it is important to be consistent but at the same time, one needs to be mindful of what been submitted by the employees towards their LFC claims. It appears that the assessee bank has looked at these 12 employees’ claim broadly, as in other cases, in terms of actual travel being undertaken, the designated place being in India and the amount of claim not exceeding the economy fare of the national to 536/Bang/2019 Page 8 of 9 carrier by the shortest route to the place of destination. However, the Revenue's case is that what the assessee bank has failed to consider is that the travel plan includes the foreign leg of travel and corresponding travel expenses which is not eligible for exemption under section 10(5) of the Act. However, the assessee's bank explanation to this effect is that section 10(5) and Rule 2B doesn't place a bar on travel to a foreign destination during the course of travel to a place in India and there is nothing explicit provided therein to prohibit such travel in order to deny the exemption. Having considered the rival submissions and facts on record, we are of the opinion that the assessee bank has undertaken reasonable steps in terms of verifying the assessee's claim towards their LFC claims and is aware of employees travelling to foreign countries as part of their travel itinerary but at the same time, there is an error of judgment on part of the assessee bank in understanding and applying the provisions of section 10(5) of the Act. Therefore, we are unable to accept the Revenue's contention that the assessee bank has not deducted the tax intentionally, fully knowing that the LFC is applicable for travel in India only and no foreign travel is allowable as it is a case of error of judgment and no malafide can be assumed on part of the bank. Further, nothing has been brought on record which in any ways suggest connivance on part of the assessee bank or forged claims submitted by the employees and which has been discovered by the Revenue during the course of its examination. As fairly submitted by the assessee bank, while calculating the estimated tax liability of its employees, it always consider LFC claim as exempt under section 10(5)and the same position, being followed and accepted consistently in the past years, was followed in the current financial year as well. However, for the first time, after the survey by the tax department, this issue arose for consideration and after the judgment of the Tribunal, the matter got clarified and the assessee bank has duly complied and deposited the outstanding demand along with interest and has taken corrective steps in subsequent years as well.” 10. From the above para reproduced from this Tribunal order, it comes out that in that case although LFC claim was made by many employees, the objection was only regarding 12 employees and for this one of various reasons, the Tribunal came to the conclusion and the Tribunal did not accept the contention that assessee bank has not deducted tax intentionally. The second reason in that case for which the Tribunal deleted the penalty was this that the assessee has complied with the Tribunal order in quantum proceedings and deposited the outstanding demand along with interest and has taken corrective steps in the subsequent years as well. On this factual aspect also, the required details are not available on record and there is no finding of any of the authorities below on this factual aspect. Hence we feel it proper to set aside the order of ld. CIT(A) and restore the matter back to the to 536/Bang/2019 Page 9 of 9 file of ld. CIT(A) for fresh decision in the light of this Tribunal order rendered in the case of State Bank of India Vs. ACIT (supra) after examining the facts of the present case in the light of this Tribunal order keeping in mind the above discussion after providing adequate opportunity of being heard to both sides. 11. In the result, all the five appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.