The Income Tax Appellate Authority (ITAT), New Delhi deletes interest levied under Section 201(IA), when default under Section 201(1) not proved.
The facts in brief are that a TDS survey u/s 133A of the Act was conducted on 29th March, 2017 at the educational premises of the appellant, Sharda Educational Trust and it was found that it had remitted abroad amounts under various heads but failed to deduct TDS. The Assessing Officer (AO) observed from the sum spent were under different heads which were taxable in India as per the provisions of the Act and relevant DTAA. The AO considered it to be a default u/s 201(1) of the Act and the liability for the payment of interest u/s 201(1A) of the Act. Giving opportunity of hearing the AO treated the assessee as assessee in default and also initiated penalty proceedings u/s 271C(1)(a) which were concluded by penalty order dated 19.09.2018. the same was sustained in appeal before the Commissioner of Income Tax (CIT).
The Bench consisting of Pradip Kumar Kedia, Accountant Member and Anubhav Sharma, Judicial Member concluded that “the foundation of issuing show cause notice for penalty u/s 271(1)(c) of the Act, being crumbled by a verdict of this Tribunal, by deletion of additions, the penalty order alone cannot stand by its own against the assessee. Reliance in this regard can be placed on the judgement of Delhi High Court in the case of Principal CIT vs. Fortune Technocomps P.Ltd. dated 13th May, 2016 where it has held that once the assessment order of the AO in the quantum proceedings was altered by the CIT(A), in a significant way, the very basis of initiation of penalty proceedings was non existent. The Allahabad High Court in the case of Shadiram Balmukand [1972] 84 ITR 183 and Dwarka Prasad Subhas Chandra [1974] 94 ITR 154 and the Gujarat High Court in the case of Lakkdhir Lalji [1972] 85. ITR 77 have also held that when the original basis of initiation of the penalty.”
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