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 Income Tax Addition Made Towards Unsubstantiated Share Capital Is Eligible For Section 80-IC Deduction: Delhi High Court

CIT vs. Bank Of Nova Scotia (Supreme Court)
January, 27th 2016

S. 271C: Penalty for failure to deduct TDS cannot be levied if Dept is unable to show contumacious conduct on the part of the assessee

The Tribunal deleted the levy of penalty u/s 271-C for failure to deduct tax at source on the basis that the department has to show that there was “contumacious conduct on the part of the assessee”. It held:

“We have carefully considered the rival submissions. In the instant case we are not dealing with collection of tax u/s 201(1) or compensatory interest u/s 201(1A). The case of the assessee is that these amounts have already been paid so as to end dispute with Revenue. In the present appeals we are concerned with levy of penalty u/s 271-C for which it is necessary to establish that there was contumacious conduct on the part of the assessee. We find that on similar facts Hon’ble Delhi High Court have deleted levy of penalty u/s 271-C in the cae of M/s. Itochu Corporation, reported in 268 ITR 172 (Del) and in the case of CIT Vs. Mitsui & Company Ltd. Reported in 272 ITR 545. Respectfully following the aforesaid judgments of Hon’ble Delhi High Court and the decision of the ITAT, Delhi in the case of Television Eighteen India Ltd., we allow the assessee’s appeal and cancel the penalty as levied u/s 271-C.”

The department’s appeal was dismissed by the High Court. On appeal to the Supreme Court, HELD dismissing the appeal:

“On facts, we are convinced that there is no substantial question of law, the facts and law having properly and correctly been assessed and approached by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal. Thus, we see no merits in the appeal and it is accordingly dismissed. No costs.”

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