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(SMC) ITA Nos. 2811 & 2812/Ahd/2014 The Land Acquisition Collector vs. ACIT AYs: 2009-10 & 2012-13

2. In this appeal, the sole ground raised by the assessee reads as under:-

On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty imposed by the assessing officer u/s 271C of Rs.1,68,588/-

(vii) Shri Natwarsinh R Rathod

(viii) Shri Sandeep N Chauhan Penalty u/s 271C of the I.T. Act was initiated for contravening the provision of section 194LA of the Act for no deduction of tax.

Accordingly, show cause notices were Issued to the deductor assesses to show cause as to why penalty u/s 271C should not be levied for no-deduction of tax on the aforesaid payment. The details of default committed by the deducted assessee given in the show cause notices were as under:

Name of Relevant Amount of Tax Interest Amount Non-

According to the assessing officer in view of the above, the assessee failed to discharge its initial burden cast upon it u/s 194LA of the Act and thereby became liable for penalty and the penalty of Rs.168588/- being an amount equal to the amount of non-deduction of tax at source u/s 194LA of the Act was levied."

3.1 On appeal, the ld. CIT(A) confirmed the penalty levied by the Assessing Officer u/s 271C of the Act. 3.2 As per Assessing Officer, the deductor was required to deduct TDS u/s 194LA of the Act on the amount of compensation disbursed to the various owners of non- agricultural land which was acquired by the Government. However, at the time of disbursement of compensation no TDS was deducted as required under the Act. All these facts came into notice during the visit of concerned ITO while conducting verification in the office of the deductor, i.e., The Land Acquisition Collector on 23.1.2012. Subsequently, an order u/s 201(1) and 201(1)A of the Act was passed and a demand of Rs.1,68,588/- was raised u/s 201(1) for not deducting tax as per section 194LA of the Act, alongwith penalty u/s 271C of the Act. In this regard, the stand of the assessee has been that all this happened due to ignorance of law. The assessee submitted (SMC) ITA Nos. 2811 & 2812/Ahd/2014 The Land Acquisition Collector vs. ACIT AYs: 2009-10 & 2012-13 that there was no intention to violate the provisions of Income Tax Act which in this case - section 194LA of the Act. As soon as the violation of law was brought into assessee's notice, the assessee collected the amount of TDS from some deductees. In case of others the requisite details of TDS to be deducted was collected but by that time those deductees filed their Income Tax return and made the payment of tax due. The proof of such payments made was also collected. During the appellate proceedings, all those details collected by the deductor were filed and the assessee pleaded before the CIT(A) that the whole tax due has been deposited into the Govt account and therefore, there is no revenue loss. In this background, it was submitted that as per the provisions of Section 194LA of the Act, the assessee was required to deduct tax from the payment made towards the compulsory acquisition of non-agricultural land in the Union Territory of Dadra & Nagar Haveli, being unaware of such TDS provisions the assessee had made full payment to the land owners. When the team of Income Tax Officer (TDS), Valsad visited the office of the assessee, then only the office of the assessee came to know about its TDS obligation and thereafter it had taken steps to recover the TDS amount from the land owners and applied for TAN.

(SMC) ITA Nos. 2811 & 2812/Ahd/2014 The Land Acquisition Collector vs. ACIT AYs: 2009-10 & 2012-13 3.3 As stated above, the assessee had paid compensation to the land owners amounting to Rs.16,85,883/- but has not deducted the tax u/s 194LA of the Act from such payments as the assessee was under bona fide belief that he was not under any obligation to deduct the tax u/s 194LA of the Act. The omission on the part of the assessee was inadvertent and there was no mala fide intention. After being made aware about assessee's TDS provisions, it had recovered the TDS from the concerned owners of the land and thereafter deposited the sum of Rs.84,099/- and alongwith interest of Rs.33,480/- to the credit of central govt. As stated above, certain parties to whom the assessee had paid the compensation had paid due taxes on their total income. For non-deduction of TDS and delay in filing the TDS, the assessee had paid interest of Rs.33,480/- and also paid interest of Rs.54,923/- determined to be payable u/s 201(1A) of the Act by ITO(TDS), Valsad. Thus, there is no loss to the Revenue. Therefore, I am of the view that there is no mala fide intention on assessee's part, in 1st lapse on its part, as it seems that there is no loss to the Revenue. In this regard, the Authorized Representative for the assessee relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. (SMC) ITA Nos. 2811 & 2812/Ahd/2014 The Land Acquisition Collector vs. ACIT AYs: 2009-10 & 2012-13 Cadbury India Limited in ITA Nos. 1397/2008, 1398/2008 and 429/2009, dated 28.03.2011; wherein the Hon'ble High Court held that "penalty u/s 271C for non-deduction of TDS not leviable if there was no "mala fide intention" or "deliberate defiance" of law". It was also observed by the Hon'ble Delhi High Court in the aforesaid judgment that the levy of penalty u/s 271C is not automatic. Therefore, in the present case, I am of the considered view that there was no mala fide intention on the part of the assessee for non-deduction of TDS since it had recovered the TDS from the concerned as soon as the violation of law was brought into assessee's notice, as discussed above. Therefore, in the fact and circumstances of the case, I hereby delete the penalty of Rs.1,68,588/- levied by the Assessing Officer u/s 271C of the Act.