No penalty under section 271(1) (c) can be levied on account of failure in deduction of TDS
The ITAT Mumbai in the case of Rushi Builders and Developers Hotel Bay View, Gorai Khadi, L. T. Road, Borivali (W), Mumbai – 400 091, vs. Asst. CIT-15(3), Mumbai, I.T.A. No. 6684/Mum/2012, held that no penalty under section 271(1) (c) can be levied on account of failure in deduction of TDS.
The “D” Bench of the Tribunal at Mumbai consisting of J. B. R. Baskaran, AND J. Sanjay Gar passed the said judgment on 04.03.2015 to the above effect.
The Respondent was represented by Shri Love Kumar though the appellant was not represented by anyone.
Brief facts and circumstances of the case:
The appeal was preferred by the assessee being aggrieved by the order of the ld. CIT (A)-26 passed on 13.08.2012. The assessee challenged the levy of penalty amounting to Rs.3, 83,890/-. During the assessment proceedings it was observed by the Assessing Officer that the assessee had made a claim for deduction of interest expenses amounting to Rs.11, 40,492/- without actually deducting any TDS.
The Assessing Officer made a disallowance of the said expenses according to the provisions of section 40(a)(ia) of the Income Tax Act. Thereafter, penalty proceedings under section 271(1) (c) of the Act were initiated against the assessee.
During the penalty proceedings, the assessee contended before the Assessing Officer that there was only an irregularity on the part of the assessee in non- production of proof of Forms No. 15G as they were misplaced and could not be traced.
The assessee submitted that some interests were paid to a HUF and the assessee was under the impression that the payments of interest did not ask for any deduction of TDS. The Assessing Officer did not agree with the contentions of the assessee. It was held by the Assessing Officer that the assessee had furnished incorrect particulars of income and had concealed its income. Accordingly, the penalty under section 271(1) (c) of the Act was levied.
In the first appeal, the ld. CIT (A) confirmed the penalty imposed upon the assessee by the Assessing Officer. Being aggrieved by the said order, the assessee preferred the instant appeal before the ITAT, Mumbai.
After hearing the contentions of both the sides and after going through the records of the case, it was observed that penalty was levied for disallowance of expenses under section 40(a) (ia) of the Act. It was not a case of furnishing of incorrect details of income or concealment of income. The failure in deduction of TDS by the assessee resulted in disallowance of expenses. However, the assessee did not file any inaccurate particulars of his income or expenses. The assessee has already suffered due to disallowance of expenses for non-deduction of TDS according to the provisions of section 194C of the Act.
It was further observed that it was not the case of the Revenue that the assessee had not incurred the expenses as claimed or that the claim was incorrect. The disallowance of expenditure occurred due to non-deduction of TDS. The case did not comprise a case of concealment of income or that of furnishing of inaccurate details of income.
The bench of the ITAT, Mumbai held that the levy of penalty under section271 (1)(c) of the Act should not be attracted in this case. The assessee’s appeal was allowed. Accordingly penalty under section271 (1) (c) of the Act was ordered to be deleted.