INCOME TAX ACT, 1961

Sections 271C & 273B

Penalty under section 271C - Wrong deduction of tax at source - Bona fide belief - Reasonable cause

Assessee and other two persons entered into agreement/sale deed for transaction of purchase of immoveable property valuing at Rs. 75 lakhs. This transaction was carried out through a broker. All the three joint owners considering total transaction value being more than Rs. 50 lakhs, (though individually consideration was Rs. 25 lakhs only) deducted tax at source @1% under section 194IA on gross sale consideration and deposited it with Government treasury on 15-1-2015. Subsequently on receiving information from ITO (TDS-II), Indore, AO examined transactions of TDS and noticed that seller was a non resident Indian and, therefore, tax had to be deducted on gross purchase consideration @ 20.6% as provided in section 195. Since assessee had not deducted tax at the correct rate, he considered assessee as assessee-in-default under section 201(1)/201(1A). Assessee(s) deposited due tax to be deducted under section 195 along with the applicable interest. However, AO levied penalty under section 271C. Held: Clearly, assessees were under bona fide belief it had correctly deducted tax at source under section 194-IA, but the moment assessees came to know about wrong rate of tax, they deducted tax @20.6% under section 195 and deposited due amount along with applicable interest. Accordingly, assesses were duly eligible to get benefit of section 273B and penalty levied under section 271C was, therefore, deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

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