JCIT, COIMBATORE vs. SELMA MEMOIRAL TRUST, THE NILGIRIS

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – 2, Coimbatore, dated 30.09.2016 and pertains to assessment year 2013-14.

Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that Joint Commissioner of Income Tax, TDS Range, Coimbatore, levied penalty of `10,70,242/- under Section 271C of the Income-tax Act, 1961 (in short 'the Act') for non-deduction of tax at source. According to the Ld. D.R., the assessee-trust established educational institution in the name and style of “Riverside Public School” During the course of inspection, it was found that the assessee incurred expenses towards salary, rent, consultancy charges, interest on securities, etc. The assessee was expected to deduct tax under Section 192B of the Act in respect of salary and under Section 194-I of the Act in respect of rent. In respect of consultancy charges, the assessee was expected to deduct tax under Section 194J of the Act and the assessee was also expected to deduct tax towards interest on securities under Section 194A of the Act. However, the assessee failed to deduct tax, therefore, according to the Ld. D.R., the Joint Commissioner of Income Tax has rightly levied penalty under Section 271C of the Act.

On the contrary, Smt. Nithya Sankaran, the Ld. representative for the assessee, submitted that the assessee has not deducted the tax, however, paid the same to the Government account. During the course of inspection, the Revenue authorities found that tax was not deducted. Admittedly, the assessee paid the tax to the Government account. According to the Ld. representative, there was no negligence or deliberate intention on the part of the assessee for non-deduction of tax. There was a genuine misunderstanding with regard to tax deduction. The mistake pointed out by the Revenue authorities during the course of inspection had been corrected. Admittely, the tax was paid to the Government account and there was no loss to the Revenue.

Referring to the judgment of Apex Court in CIT v Bank of Nova Scotia (2016) 66 taxmann.com 175, the Ld. representative for the assessee submitted that since the assessee has already paid the tax, penalty need not be levied. According to the Ld. representative, there was a reasonable cause on the part of the assessee, therefore, levy of penalty under Section 271C of the Act is not fair.

We have considered the rival submissions on either side and perused the relevant material available on record. No doubt, during the course of inspection, the Revenue authorities found that tax was not deducted as required under Section 194A, 194-I, 194J and 192B of the Act. From the material available on record it appears that deductee has paid the taxes. The assessee also admittedly, after the inspection, paid the entire tax. The assessee appears to have explained before the Joint Commissioner of Income Tax that due to ignorance of Accountant, tax was not deducted. However, it was paid immediately after it was pointed out. In respect of payment of rent, there was a short deduction of tax and it was not the case of non-deduction. By taking into consideration of the fact that the assessee paid the tax to the Government account immediately after the mistake was pointed out and the omission of Accountant to deduct tax, this Tribunal is of the considered opinion that there was a reasonable cause on the part of the assessee for non-deduction of tax. Therefore, the CIT(Appeals) has rightly deleted the penalty levied by the Joint Commissioner of Income Tax. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

In the result, the appeal filed by the Revenue is dismissed.