M/s Syndicate Labels,6-E, Rani Jhansi Road, Jhandewalan Extension, New Delhi. Vs. Assistant Commissioner ofIncome Tax, Circle-38(1),New Delhi.
October, 23rd 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
`SMC-1' : NEW DELHI
DELHI BENCH `SMC-
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
Assessment Year : 2008-
M/s Syndicate Labels, Vs. Assistant Commissioner of
6-E, Rani Jhansi Road, Income Tax,
Jhandewalan Extension, Circle-38(1),
New Delhi. New Delhi.
PAN : AAXFS1523P.
Appellant by : Shri Niren Gupta, CA.
Respondent by : Shri K.K. Jaiswal, Senior DR.
This appeal by the assessee is directed against the order dated
12.06.2014 passed by the ld. CIT(A) confirming penalty of `4,06,009/-
imposed by the Assessing Officer u/s 271(1)(c) of the Income-tax Act,
1961 in relation to assessment year 2008-09.
2. Briefly stated, the facts of the case are that the assessee claimed
deduction in respect of certain payments made to M/s Maersk India
Pvt.Ltd. The Assessing Officer observed that such payments totalling
`11,94,498/- were made without deduction of tax at source. He,
therefore, invoked the provisions of Section 40(a)(ia) of the Act by
holding that the assessee ought to have deducted tax at source.
Resultantly, addition was made for the sum which constituted bedrock
for the imposition of penalty u/s 271(1)(c) of the Act. The learned
CIT(A) upheld this penalty. The assessee is aggrieved against the
confirmation of this penalty.
3. After considering rival submissions and perusing relevant
material on record, it is observed that the instant penalty has been
imposed only in respect of disallowance u/s 40(a)(i) of the Act. The
assessee entertained a bona fide belief about the non-deduction of tax
at source from the amount paid to M/s Maersk India Pvt. Ltd. on the
basis of a Circular, as per which, the foreign shipping companies and
their agents were governed by the provisions of Section 172 and not
by Section 194C of the Act. Though it is an admitted fact that the
assessee made the payment to a resident but the fact remains that
principal of M/s Maersk India Pvt. Ltd., being M/s A.P. Moller-Maersk
A/S, Denmark, was given 100% DIT relief, copy of which letter issued
by the office of Deputy Director of Income Tax (International Taxation)
dated 23.04.2007, has been placed on record. These facts indicate
that the assessee was under a bona fide belief that the amount paid to
M/s Maersk India Pvt. Ltd. was not liable for deduction of tax at source.
Be that as it may, I am concerned with the imposition and confirmation
of penalty u/s 271(1)(c) of the Act which presupposes concealment of
income or furnishing of inaccurate particulars of income. Here is a
case in which the assessee neither concealed any income nor
furnished inaccurate particulars. Deduction on account of M/s Maersk
India Pvt.Ltd. was claimed after making due payments. The dispute is
only about deduction or non-deduction of tax at source from payments
to M/s Maersk India Pvt.Ltd. for which disallowance has been made u/s
40(a)(ia) of the Act. Under no circumstance can such a disallowance
be brought within the ambit of Section 271(1)(c) of the Act. The
assessee made a proper disclosure about the expense claimed by it as
deduction which was neither bogus nor otherwise non-deductible but
for the application of Section 40(a)(ia) of the Act. Overturning the
impugned order, I order for the deletion of the instant penalty.
4. In the result, the appeal is allowed.
Decision pronounced in the open Court on 21st October, 2015.
Dated : 21.10.2015
Copy forwarded to: -
Appellant : M/s Syndicate Labels,
6-E, Rani Jhansi Road, Jhandewalan Extension,
2. Respondent : Assistant Commissioner of Income Tax,
Circle-38(1), New Delhi.
5. DR, ITAT
Date of dictation 20.10.2015
Date on which the typed draft is placed before the 20.10.2015
Date on which the typed draft is placed before the
Date on which the approved draft comes to the
Date on which the fair order is placed before the
Dictating Member for pronouncement
Date on which the fair order comes back to the
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order