INCOME TAX ACT, 1961

Section 271C

Penalty under section 271C - Leviability - Non-deduction of tax at source on LTC - Reasonable cause

Assessee-bank claimed exemption under section 10(5) towards reimbursement of leave travel concession (LTC). AO was of the view that assessee failed to deduct tax at source on LTC paid to employees and thus, the assessee was treated as 'assessee-in-default' within the meaning of section 201. He alleged that assessee allowed exemption under section 10(5) to employees for travel outside India, which was not in accordance with provisions of section 10(5) read with rule 2B of Income Tax Rules, 1962. Subsequently, AO issued show cause notice under section 271C for levy of penalty. Held: As fairly submitted by assessee that while calculating estimated tax liability of its employees, it always considers LTC claim as exempt under section 10(5) and the same position being followed and accepted consistently in past years, was followed in subject financial year as well. However, for the first time, after the survey by Revenue, the said issue arose for consideration and after judgment of Tribunal, the matter got clarified. Further, during proceedings under section 201, assessee accepted the claim and deposited outstanding demand along with interest and also took corrective steps in subsequent years as well. Thus, there was reasonable cause in terms of section 273B for not deducting tax at source and hence, the penalty levied under section 271C was deleted.

Followed:Syndicate Bank v. Asstt.CIT [ITA Nos. 651 to 656/Bang/2019 dated 19-7-2019]: 2019 TaxPub(DT) 5479 (Bang-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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