Agra bench of Income Tax Appellate Tribunal (ITAT) granted relief to State Bank of India (SBI) from penalty imposed by the Assessing Officer (AO) on account of non-deduction of Tax at Source (TDS).
Assessee in the instant case is State Bank of India. During the assessment proceedings the assessing Officer (AO) observed that the assessee has failed to deduct TDS on interest paid on FDRs and to deposit the same. Simultaneously he imposed a penalty of Rs.4,25,420 on the assessee under section 271C of Income Tax Act 1961.
CIT(A) also confirmed the penalty imposed by the AO. However the assessee approached the Tribunal on further appeal.
Before the bench, the counsel for the assessee advocate Prarthna Jalan and advocate Chanchal Jain submitted that both the lower authorities confirmed the penalty without appreciating the fact that there was a reasonable cause which prevented the assessee to act like a man of average intelligence and ordinary prudence under normal circumstances. Counsel also submitted that the assessee voluntarily deposited the amount of short deduction as soon as it came to its notice that the compliance was not done in accordance with the Act. Further they argued that the authorities not appreciating the fact that the assessee, being a Branch of a banking company, has no reason to deduct the tax at lower or NIL rate and hence, the penalty levied is without any application of mind and is unjustified and bad in law.
After considering the facts and circumstances of the case, Tribunal bench including Judicial Member A.D.Jain observed that “the assessee cannot be considered as having done willful neglect for non-compliance of the TDS provisions, it was just a technical mistake and, accordingly, the assessee cannot be held to be an assessee in default and no penalty can be imposed.
The division bench further observed that evident revealed that the assessee was visited with reasonable cause beyond its control leading to the alleged default and mistake occurred because of a software updation error. Therefor it can be concluded that it was an unintentional mistake and, accordingly, no penalty provisions should get attracted.
Subscribe Taxscan Premium to view the Judgment
