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Income Tax Appellate Tribunal, [ DELHI BENCH “B” : DELHI ]
Before: SHRI CHALLA NAGENDRA PRASADSHRI M. BALAGANESH
आदेश /O R D E R PER C. N. PRASAD, J. M. :
This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-29 [hereinafter referred 1
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to CIT (Appeals)] New Delhi, dated 8.02.2022 for the assessment year 2016-17 in imposing penalty under section 271(1)(c) of the Income Tax Act, 1961 (the Act) for not remitting the TDS into Govt. account consequently disallowance of Rs.46,50,432/- was made under section 40(a)(ia) of the Act.
Brief facts of the case are that the assessee filed return of income on 17.10.2016 declaring loss of Rs.28,38,65,791/-. The assessment was completed under section 143(3) of the Act on 16.01.2018 determining the loss at Rs.15,72,11,080/- by making several additions. The assessee preferred appeal before the ld. CIT (Appeals) and the ld. CIT (Appeals) by order dated 19.08.2021 partly allowed the appeal of the assessee. However, the ld. CIT (Appeals) while disposing of the appeal by enhancing the assessment made disallowance of Rs.46,50,432/- under section 40(a)(ia) of the Act on the ground that the assessee did not remit the TDS deducted aggregating to Rs.15,46,475/- on various payments made by the assessee towards rent, professional charges, interest and contractors payments invoking the provisions under section 40(a)(ia) of the Act. Subsequently the ld. CIT (Appeals) passed order dated 8.02.2022 levying penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income by the assessee on the disallowance of expenditure of Rs.46,50,432/- under section 40(a)(ia) of the Act for non-remittance of TDS into Govt. account.
The ld. Counsel for the assessee submits that disallowance under section 40(a)(ia) of the Act for non-remittance of TDS is only a technical default and there is no concealment of income
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or furnishing of inaccurate particulars of income. Reliance was placed on the following decisions:-
(i) CIT Vs. LG Chaudhary [(2013) 33 taxmann.com 156 (Guj.)]; (ii) CIT Vs. AT & T Communication Services India (P) Ltd. [(2012) 18 taxmann.com 144 (Del.)]; (iii) PCIT Vs. Torque Pharmaceuticals (P) Ltd. [(2017) 81 taxmann.com 465 (P & H)]; (iv) Tanushree Basu Vs. ACIT in ITA. 2922/Mum./2012 dated 22.05.2013 [ITAT-Mum].
On the other hand, the ld. DR strongly supported the orders of the authorities below. 5. Heard rival contentions perused the orders of the authorities below and the decisions relied upon. In this case of penalty under section 271(1)(c) of the Act was levied for furnishing inaccurate particulars on the disallowance made under section 40(a)(ia) of the Act for non-remittance of TDS deducted by the assessee on various payments. 6. In the case of CIT Vs. LG Chaudhary (supra) the Hon’ble Gujarat High Court held as under:-
“2. The respondent who is engaged in the business of construction for the year under consideration 2006-07, had disclosed his total income at Rs.14 lacs (rounded off). The case was selected for scrutiny. The respondent also filed return after the fresh notice was issued. Certain additions were made by the
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Assessing Officer who imposed the penalty while disallowing various expenses for not having deducted/deposited TDS. When challenged before the CIT (Appeals), it partly allowed the said appeal upholding disallowance of expense and not confirming penalty. When further challenged before the Tribunal it had allowed such order of the CIT (Appeals) whereby it disallowed expenses for want of timely deduction/deposit of TDS. However on the ground of disallowance made by the Assessing Officer with respect to the TDS they did not uphold imposition and penalty u/s. 271(1)(c) of the Act. This has aggrieved the revenue and therefore the present appeal. 3. We heard learned counsel Ms. Paurami Sheth for the appellant and senior counsel, Mr. Soparkar for the respondent Learned counsel, Ms. Sheth has argued that the Tribunal had failed to see that the assessee had failed to deduct the TDS as per law which was also deposited late and on such disallowance as has been confirmed by both CIT (Appeals) and ITAT and therefore, the imposition of penalty by Assessing Officer was just and proper. Per contra, learned senior counsel submitted that none of the elements of Section 271(1)(c) get attracted in case of the respondent assessee. On due consideration of the submissions of both sides and on examining the orders of all the authorities we find no reason to interfere in this appeal in as much as both the authorities namely CIT (A) and ITAT have rightly deleted the penalty observing that the disallowance was due to non-payment of TDS, which was at the most a technical default. There being nothing to indicate any concealment of the income or furnishing of inaccurate particulars of income by the assessee the Assessing Officer was rightly not justified in levying the penalty. 4. This being a correct approach adopted by both the authorities concurrently, this tax appeal poses no question of law and the same requires no interference and is consequently to be dismissed.”
In the case of CIT Vs. AT & T Communication Services India (P) Ltd. (supra) the Hon’ble Delhi High Court held as under:-
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“8. Thereafter the Tribunal examined the provisions of Section 40(a)(i) and referred to the decision relied upon by the respondent-assessee in CIT Vs. Nestle India Ltd. [2005] 275 ITR 1/ 145 Taxman 235 (Delhi) and CIT Vs. Oracle Software India Ltd. [2007] 164 Taxman 478/ 293 ITR 353 (Delhi). However it was held that the tax had been deposited only in November 2001, and therefore, in view of Section 40(a)(i), the deduction as an expense would be available in the next assessment year and not in the assessment year in question. Accordingly, the addition made by the Assessing Officer was upheld. 9. After referring to the factual matrix of the present case, the Tribunal in the impugned order in the penalty proceedings went into the question of whether or not the assessee has been able to justify and discharge the onus under Explanation 1 to Section 271(1)(c) of the Act. It may be noted here that the respondent- assessee had contended that Section 40(a)(i) was not applicable as the words used were tax has been paid or deducted. 'The contention of the respondent was that they had deducted the TDS on 31st March, 2001, but the same was paid on 23rd November, 2001. Accordingly, it was submitted that Section 40(a)(i) was not applicable. The said contention was rejected upholding that the words paid or deducted' cannot be interpreted in the manner as suggested by the respondent assessee.” 8. In the case of PCIT Vs. Torque Pharmaceuticals (P) Ltd. (supra) the Hon’ble Punjab & Haryana High Court held as under:-
“4. The primary challenge in this appeal is to the cancellation of penalty on addition made on account of disallowance of expenditure under Section 40(a)(ia) of the Act. The assessee had made a claim of deduction in the return of income. No finding has been recorded by the authorities below that the claim made by the assessee is mala fide. It has been categorically recorded by the Tribunal after examining the entire material on record that the CIT (A) had rightly cancelled the penalty against the assessee. It was further recorded that the assessee made a bona 5
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fide claim of deduction of the expenditure and even though it was not acceptable to the revenue would not lead to the conclusion that the assessee had concealed the particulars of income or filed inaccurate particulars of income. The relevant findings recorded by the Tribunal read thus:- ‘8. We have considered the rival submissions and material available on record. The issue involved in the appeal is regarding cancellation of penalty on addition made on account of disallowance of expenditure under section 40(a)(ia) of the Act. The assessee has disclosed the entire facts before the authorities below without concealing any income. The assessee made a claim of deduction in the return of income and explained the facts but the same were not accepted by the authorities below and additions have been confirmed. Therefore it is a case of mere disallowance of expenditure without bringing any adequate material against assessee to prove that assessee has concealed the particulars of income or has furnished inaccurate particulars of income. The appeal of the assessee on substantial question of law with regard to disallowance under the provision had been admitted by Hon'ble Punjab and Haryana High Court. The Hon'ble Punjab and Haryana High Court in the case of CIT Vs. Haryana Warehousing Corporation 314 ITR 215 held as under:- "Held. Dismissing the appeal that the deduction claimed by the assessee was legitimate and bona fide in terms of the conflicting determination of law on the proposition in question. The categorical finding at the hands of the Tribunal in its order was that the assessee had disclosed the entire facts without having concealed any income. There was no allegation against the assessee that it had furnished inaccurate particulars of its income. The determination of the Tribunal had not been controverted even in the grounds raised in the appeal. The assessee was guilty of neither of the two conditions. Therefore in the absence of two pre- requisites postulated under section 271(1)(c) it was not open to the revenue to inflict any penalty on the assessee."
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The learned CIT (Appeals) considering the material on record correctly followed the decision of the Delhi Bench in the case of AT&T Communications Services (India) Pvt. Limited (supra) for cancelling the penalty against the assessee. The assessee made a bona fide claim of deduction of the expenditure even though it was not acceptable to the revenue, would not lead to inference that assessee has concealed the particulars of income or filed inaccurate particulars of income. Nothing is brought on record if claim of assessee was incorrect in law or was mala fide. Therefore, decision relied upon by learned DR is not applicable to the facts of the case'. 5. In CIT Vs. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158/189 Taxman 322, the Apex Court was of the view that under section 271(1)(c) of the Act there has to be concealment of income of the assessee or the assessee must have furnished inaccurate particulars of his income. In the present case the claim made by the assessee has not been shown to be suffering from any of these conditions. In the absence of any finding recorded by the CIT(A) or the Tribunal with regard to the claim of the assessee that it was mala fide there is no error in cancelling the penalty imposed by the Assessing Officer. 6. Further, reliance of the revenue on the judgment of the Delhi High Court in CIT Vs. Zoom Communication (P) Ltd. [2010] 327 ITR 510/191 Taxman 179 is of no help to them as therein the High Court was considering the question of levy of penalty under Section 271(1)(c) of the Act wherein it had concluded to be a case of furnishing of inaccurate particulars of income with mala fide intention which is not the case herein.”
The co-ordinate bench of Mumbai in the case of Tanushree Basu Vs. ACIT (supra) considering the decision of the apex court in the case of CIT Vs. Reliance Petroproducts P. Ltd. [322 ITR 158 (SC)] deleted the penalty levied under section 271(1)(c) of the Act for the disallowance made under section 40(a)(ia) of the Act observing as under:- 7
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“6. We have considered submissions of ld representatives of parties and perused orders of authorities below. It is a fact that assessee has claimed expenses aggregating to Rs.16,17,766/- and same were disallowed by the AO while completing the assessment under section 143(3) of the Act on the ground that assessee failed to deduct TDS. We observe that the genuineness of the claim of the assessee has not been disputed by the department. Therefore, it cannot be said that assessee has claimed expenses which are false or not genuine. Assessee has furnished all the relevant facts concerning the claim made by it in the return filed. AO has levied penalty in respect of said amount merely because said claim of the assessee was disallowed u/s. 40(a)(ia) of the Act as assessee failed to deduct TDS thereon. The Apex Court in the case of Reliance Petroproducts Ltd. (supra) has held that a mere making of the claim which is not sustainable in the law, by itself will not amount to furnishing inaccurate particulars of income. In the present case, admittedly, assessee made a claim but the same was rejected and disallowed not for the reason that the claim was not genuine or was fabricated but in view of provisions of law that assessee did not deduct TDS thereon. We are of the considered that view that the ratio of judgment of Hon’ble Apex Court in the case of Reliance Petroproducts Ltd (supra) squarely applies to the facts of the case before us and, therefore, levy of penalty is not justified. We also observe that similar issue has also been considered by ITAT Ahmedabad in the case of Mazda Ltd (supra), wherein, levy of penalty u/s.271(1)(c) of the Act was cancelled which was levied on account of disallowance of claim for deduction of royalty and technical know how as per section 40(a)(ia) of the Act., as the assessee failed to deduct TDS on above payments. The ratio of the said case also applies squarely to the case before us. 7. In view of above, we hold that levy of penalty, in the facts and circumstances of the case, is not in accordance with law and same is deleted by allowing ground of appeal taken by assessee.”
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Applying the ratios of the above decisions to the facts of the assessee’s case we hold that the ld. CIT (Appeals) has not made out a case for levy of penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. Respectfully following the above decisions, we set aside the order of the ld. CIT (Appeals) in imposing penalty under section 271(1)(c) of the Act. Grounds raised by the assessee on this issue are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on : 31/10/2023.
Sd/- Sd/- ( M. BALAGANESH ) ( C. N. PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 31/10/2023. *MEHTA* Copy forwarded to :- 1. Appellant; 2. Respondent; 3. CIT 4. CIT (Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT, New Delhi.
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Date of dictation 18.10.2023 Date on which the typed draft is placed before the dictating 20.10.2023 member Date on which the typed draft is placed before the other 31.10.2023 member Date on which the approved draft comes to the Sr. PS/ PS 31.10.2023 Date on which the fair order is placed before the dictating 31.10.2023 member for pronouncement Date on which the fair order comes back to the Sr. PS/ PS 31.10.2023 Date on which the final order is uploaded on the website of ITAT 31.10.2023 Date on which the file goes to the Bench Clerk 31.10.2023 Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the order