INCOME TAX ACT, 1961

Section 271C, Section 273B

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

In case of assessee, bank survey was conducted to verify compliance of TDS. AO noticed that, assessee paid reimbursement of leave travel concession to its employees, even in cases where foreign destination was included in itinerary of such employees and such reimbursements was made without deducting TDS, and amount paid on foreign travel was treated as exempt under section 10(5). As employees were allowed exemption under section 10(5) read with rule for travel outside India, assessee was treated as an assessee in default, for not making TDS from such payments, made for foreign travel and order under section 201(1) was passed raising demand. Also, AO levied penalty under section 271C which had been subject matter of dispute. Assessee that assessee was under bona fides belief that there was no liability for assessee to deduct TDS on LTC reimbursement which included foreign travel, made to its employees as the same was covered and exempted under section 10 (5) read with rule 2B. Assessee, being a nationalised bank and government of India undertaking had been following same procedure for calculation of taxability of salaries paid to its employees for past many years without any change in method/principles which has been accepted by revenue authorities all along. Held: Assessee hank had undertaken reasonable steps in terms of verifying assessee's claim towards their LTC claims and was aware of employees travelling to foreign countries as part of their travel itinerary but at the same time, there was an error of judgment on part of assessee in understanding and applying section 10(5). Therefore, it could not be that assessee bank has not deducted the tax intentionally, fully knowing that LTC was applicable for travel in India only and no foreign travel was allowable as it was a case of error of judgment and no mala fide could be assumed on part of the hank. Further, nothing had been brought on record to suggest connivance on part of assessee bank or forged claims submitted by employees discovered by the Revenue during the course of its examination. As fairly submitted by assessee bank, while calculating estimated tax liability of its employees, it always considered LTC claim as exempt under section 10(5) and same position being followed and accepted consistently in past years, was followed in concerned year as well. However, for the first time, after survey by tax department, issue arose for consideration and after the judgment of Tribunal, matter got clarified and assessee bank had duly complied and deposited outstanding demand along with interest and had taken corrective steps in subsequent years as well. Accordingly, there was reasonable cause in terms of section 273B for not deducting tax by assessee Bank and, therefore, penalty's levied under section 271C was deleted.

Relied:Syndicate Bank, NGV Koramangala, Bangalore, Syndicate Bank, NGV Yelhanka, Bangalore, Syndicate Bank, Ganganagar, Bangalore v. The Assistant CIT (TDS), Range 3, Bangalore. [ITA No. 651 to 656/B/2019, dated 19-7-2019] : 2019 TaxPub(DT) 5479 (Bang-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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