Document Fragment View

Matching Fragments

Per Pramod Kumar AM:

1. This appeal filed by the Assessing Officer, as also the cross objection filed by the assessee, challenge correctness of the order dated 27.02.2017 in the matter of penalty under section 271C of the Income Tax Act, 1961, for the assessment year 2007-08.
2. Grievances raised by the Assessing Officer, as set out in the memorandum of appeal, are as follows:-
"1. The Ld. CIT(A) in facts and circumstances of the case erred in deleting the penalty u/s. 271C of the I.T. Act.

5. Vide our order of even date, we have dismissed Assessing Officer's appeal and assessee's cross-objection for assessment year 2006-07 by observing as follows:-

"4. The issue in appeal lies in a narrow compass of material facts. The assessee is engaged in the business of developing, constructing, operating and maintaining the port on "Build Own Operate Transfer" (BOOT) basis. The port is designed to handle bulk, container and liquid cargo and to provide ancillary port services. It was in this backdrop that the assessee entered into an agreement with Gujarat Maritime Board (GMB) under which the assessee was granted the right to use waterfront against payment of charges to be computed on the basis of actual throughputs achieved in a month. Treating this payment as a royalty, the assessee deducted tax at source, under section 194J, which was 5.16% at the relevant point of time, from the payments made to GMB. The Assessing Officer, however, was of the view that the assessee ought to have treated these payments as rent, and, accordingly deducted tax at source under section 194J which was 22.44% at the material point of time. The Assessing Officer raised a demand, under section 201 r.w.s. 194I, for short deduction of tax at source. As this issue regarding short deduction of tax at source travelled in appeal before a co-ordinate bench of this Tribunal, the matter was remitted to the file of the Assessing Officer for re-adjudication in the light of first proviso to section 201(1) which was held to be retrospective in nature. In effect thus, as long as there was no loss of revenue by such short deduction of tax at source, the recipient has duly filed his return of income under section 139(1) and recipient has duly included these amounts in his returned income and paid due taxes thereon, the demand under section 201(1) is not to be raised. The matter, however, did not rest there. The Assessing Officer also imposed penalty under section 271C by, inter alia, observing as follows:-
12. The total amount of tax the assessee company has failed to deduct or pay to govt. account works out to Rs.32,62,080/-. As per provisions of section 271C of the IT Act the assessee company is liable to pay, by way of penalty, a sum equal to the amount of tax which it has failed to deduct or pay, as the case may be. Accordingly I am satisfied that it is a fit case for levy of penalty u/s 271C of the I.T. Act and therefore I impose and order to levy the penalty of Rs.32,62,080/- i.e. equal to the amount of tax which it has failed to deduct or pay. Issue demand notice and challan accordingly I.T.N.S. 150 forms part of this order."

8. We find that it is only elementary that, as provided in section 273B, no penalty under section 271C shall be imposable for any failure referred to in section 271C as long as the assessee can prove that there was a reasonable cause for the said failure. It is in this context that one has to evaluate stated bonafide belief of the assessee that deduction at source was required to be made under section 194J. In our considered view, the application of section 194I on the facts of this case, at the minimum, was not entirely free from doubt. As a matter of fact, there is no finding on this aspect of the matter, by the co-