The Tax Publishers2020 TaxPub(DT) 1126 (Bang-Trib) : (2020) 078 ITR (Trib) 0636

INCOME TAX ACT, 1961

Section 271C

Having considered the rival submissions and facts on record, it was clear that assessee bank has undertaken reasonable steps in terms of verifying employees' claim towards LFC and was aware of employees traveling to foreign countries as part of their travel itinerary but at the same time, there was an error of judgment on part of assessee bank in understanding and applying provisions of section 10(5). Therefore, it could not be said that assessee bank has not deducted tax intentionally, fully knowing that LFC was applicable for travel in India only and no foreign travel was allowable as it was a case of error of judgment and no mala fide could be assumed on part of the bank. Further, nothing had been brought on record to suggest any connivance on part of assessee bank or forged claims submitted by employees and which had been discovered by AO during the course of examination. Accordingly, there was reasonable cause in terms of section 273B for not deducting tax by the assessee and, therefore, no penalty could be levied under section 271C.

Penalty under section 271C - Non-deduction of tax at source - Reasonable belief that payment not lead to TDS -

AO noticed that assessee did not deduct tax at source from LTA reimbursement even when travel was out of India to a destination in India through a long circuitous route. Accordingly, AO held assessee as one in default in respect of taxes not deducted at source and accordingly levied Penalty under section 271C. Assessee submitted that section 10(5) and rule 2B doesn't place a bar on travel to a foreign destination during the course of travel to a place in India and there is nothing explicit provided therein to prohibit such travel in order to deny exemption. Held: Having considered the rival submissions and facts on record, it was clear that assessee bank has undertaken reasonable steps in terms of verifying employees' claim towards LFC and was aware of employees traveling to foreign countries as part of their travel itinerary but at the same time, there was an error of judgment on part of assessee bank in understanding and applying provisions of section 10(5). Therefore, it could not be said that assessee bank has not deducted tax intentionally, fully knowing that LFC was applicable for travel in India only and no foreign travel was allowable as it was a case of error of judgment and no mala fide could be assumed on part of the bank. Further, nothing had been brought on record to suggest any connivance on part of assessee bank or forged claims submitted by employees and which had been discovered by AO during the course of examination. Accordingly, there was reasonable cause in terms of section 273B for not deducting tax by the assessee and, therefore, no penalty could be levied under section 271C.

Applied:State Bank of India v. The ACIT (TDS), Jaipur 2019 (1) TMI 145--ITAT Jaipur.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :



IN THE ITAT, BANGALORE BENCH

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