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These three appeals have been filed by the Revenue arising from the orders of learned CIT(A)-IV Surat, dated 31.12.2012. For all the three years grounds raised are identically worded. The main ground which is decided is ground no.1, reproduced below:

"1. The ld. CIT(A) has erred on facts and in law in deleting the penalty u/s.271C of the IT Act of Rs.10,25,957/- (for A.Y.2007-08), of Rs.12,42,922 (for A.Y.2008-09) & Rs.7,03,086/- ( for A.Y.2009-10) levied by the Addl. CIT, Surat (herein after referred as AO) for the reason that the penalty proceedings u/s. 271C were not initiated while passing the order u/s.201(1) & 201(1A) by the ITO, TDS-1, Surat and in deciding so she completely failed in not considering the statutory provisions of sec. 271C(2) according to which the Jt. Commissioner was the statutory authority to impose the penalty and Jt. Commissioner includes Addl. Commissioner as defined u/s.2(28C)."

ITA Nos.625, 626 & 627/Ahd/2013 DCIT Vs. Nuclear Power Corporation of India Ltd.

A.Ys. 2007-08, 2008-09, 2009-10 2 For the years under consideration, penalty u/s.271C was imposed vide orders dated 23.03.2012. The assessee is engaged in generation of power. A survey was conducted to verify the compliance of TDS provisions. It was found that there was short deduction of tax in respect of reimbursement of food expenses paid to employees. It was informed that the company was paying Rs.600/- per month towards canteen reimbursement. The observation of the AO was that as per the provisions of Section 192(1), where any person is responsible for paying any income chargeable under the head "salaries" shall at the time of payment, deduct income tax. Before us an order of ITAT 'A' Bench Ahmedabad for the years under consideration, i.e., A.Y. 2007-08 to A.Y. 2009-10 in the quantum proceedings, bearing ITA No.3059 and 3061/Ahd/2009, dated 30th of September, 2011 has been filed wherein it was held that the assessee was required to deduct the tax, however, it was found that the computation of short deduction u/s.201(1) was made on a flat basis of maximum margin rate. It was directed to re-compute the short deduction u/s.201(1) of IT Act. As far as the levy of interest u/s.201(1A), it was held that the same is mandatory in nature. Once, the issue of short deduction of TDS was decided in favour of the Revenue; hence, thereafter the penalty proceedings were finalized. Since, the assessee had defaulted in deducting the tax from reimbursement of food, therefore, the impugned penalties were levied. Learned CIT(A) was of the view that there was a reasonable as well as sufficient cause for the said failure; hence, complying the ITA Nos.625, 626 & 627/Ahd/2013 DCIT Vs. Nuclear Power Corporation of India Ltd.

A.Ys. 2007-08, 2008-09, 2009-10 provisions of Section 273B, the penalty levied u/s.271C was deleted. Relevant portion is extracted below:

"I have gone through the penalty order, submission of the appellant and the case law relied upon by it. The additional grounds raised at the time of appeal proceedings are admitted in the interest of natural justice. On a perusal of the order u/s.201(1) & 201(1A), it is seen that penalty u/s. 271C of the IT Act was not initiated by the AO while passing the order. It is only by the show cause notice dated 02.03.2012 has the Addl. CIT initiated penalty proceedings u/s.271C of the IT Act. It is a fact that the appellant did not deduct tax at source on food allowances shown as reimbursement u/s. 192 of the IT Act. However, on receipt of order u/s. 201(1) & 201(1A) the appellant paid the tax & interest thereon. The Addl. CIT, TDS did not accept the appellant's contention that it had not deducted as it was under a bona fide belief that tax was not deductible as per provision of section 17(2) & 192 of the IT Act. The concerned officer rejected the appellant's contention that it was a bona fide mistake on the grounds that the appellant had not surrendered the mistake committed by it before the AO before the order u/s. 201 & 201(1A) was passed but had agitated and the matter was carried to the first appellate stage and then to the appellate tribunal. This cannot be the sole ground for imposition of penalty under the Act. Levy of penalty u/s. 271G is not automatic. Before levying penalty the concerned officer should prove that the failure referred to in the concerned provision was without a reasonable or sufficient cause and the appellant deliberately defied the provision of law. In this case there was neither the case of mala fide intention nor that of negligent intention or want of bona fide but a case of misconcerned belief regarding the applicability of provision of Sec. 192 of the IT Act. It cannot be said judiciously that the appellant failed to deduct tax without a reasonable cause. Penalty u/s. 271C cannot be imposed if there was a bona fide belief for non deduction of tax. Penalty cannot be levied for mere rejection of debatable claim. Levy of interest u/s. 201(1A) is automatic, however it is not so in case of imposition of penalty u/s. 271C. Section 273B provides discretion to the AO towards imposition of penalty u/s. 271C after considering the reasonableness of the cause shown by the appellant for failure on its part to deduct tax at source. In this case the appellant was under a bona fide belief that it was not to deduct tax at source u/s. 192 from reimbursement of food expenses paid to its employees. The fact that appellant has paid the entire tax & interest levied as per order u/s. 201 & 201(1 A) further establishes its bona fide intention.
8.2 It is a fact that the appellant paid the tax & interest on receipt of order u/s. 201 & 201(1A). The penalty u/s. 271C was not initiated while passing the order u/s. 201 & 201(1A). From the facts & circumstances of the case, also, it is evident that the appellant had a ITA Nos.625, 626 & 627/Ahd/2013 DCIT Vs. Nuclear Power Corporation of India Ltd.
A.Ys. 2007-08, 2008-09, 2009-10 reasonable cause for failure to comply with the provision of sec. 192 as it was under honest & bona fide belief that it was not to deduct tax on reimbursement of food paid to its employees. In subsequent years, the appellant has rectified this error and has been deducting tax at source regularly from such reimbursements. Penal provision should be construed strictly and no material has been brought on record by the AO to the effect that the appellant deliberately defied the provisions of law. Therefore keeping in view the totality of facts and circumstances, the penalty order u/s. 271C is cancelled.