INCOME TAX ACT, 1961

Section 271C Section 273B

Penalty under section 271C - Failure to deduct tax at source - Reasonable cause -

AO levied penalty under section 271C on the ground that assessee-bank was fully knowing that LFC was applicable for travel in India only and no foreign travel was allowable, still the assessee allowed claims of the employees and made re-imbursement, of Leave Fare Concession (LFC) claim, to the extent of foreign leg of travel of 12 employees without deduction of tax under section 192. Assessee pleaded no mala fide on its part.Held: Assessee bank had undertaken reasonable steps in terms of verifying employees claim towards their LFC and was aware of employees travelling to foreign countries as part of their travel itinerary but at the same time, there was an error of judgment on part of assessee in understanding and applying the provisions of section 10(5) of the Act. Therefore, revenue's allegation that assessee had not deducted tax intentionally, fully knowing that LFC was applicable for travel in India only and no foreign travel was allowable, could not be accepted especially in view of the fact that assessee had duly complied and deposited outstanding demand along with interest and had taken corrective steps in subsequent years. Accordingly, there was reasonable cause in terms of section 273B for not deducting tax by the assessee bank and therefore, penalty levied under section 271C was deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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