There is no willful default of furnishing inaccurate particulars of income if disallowance made u/s 40(a)(ia)
In a recent judgment, ITAT Cuttack has held that where a disallowance is made by invoking the provisions of section 40(a)(ia) of the act for default for non-deduction of TDS, it cannot be held that the assessee has made a willful default of furnishing inaccurate particulars of income.
ABCAUS Case Law Citation:
4306 (2024) (11) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the PrCIT in order of Pr. CIT in imposing the penalty u/s 271(1)(c) for furnishing of inaccurate particulars of income.
The assessment was originally completed u/s.143(3) of the Act. Thereafter, the Pr.CIT invoked the provisions of section 263 of the Act and held that the assessment order passed was erroneous inasmuch as prejudicial to the interest of the revenue on the ground that the assessee had failed to deduct tax at source u/s 194C of the Act on the payments made to various parties as transportation charges.
In the order passed by Pr. CIT u/s 263 of the Act, he directed to modify the assessment order by making disallowance u/s 40(a)(ia) of the Act and thereafter upon dismissal of the appeal against the said order, penalty was imposed u/s 271(1)(c) of the Act.
The Tribunal observed that though the assessee had failed to deduct TDS on the payments made to various parties u/s.194C of the Act and no plausible explanation was tendered with regard to the same. However, the expenses were claimed by the assessee in profit and loss account and they were neither held as unreasonable nor excessive nor bogus by the Pr. CIT.
The Tribunal opined that merely for the reason that the assessee had not complied with the provisions of section 194C of the Act , the disallowance was made u/s 40(a)(ia) of the Act. The case of the assessee was not of the guilty by furnishing of any inaccurate particulars nor with an attempt to deliberately concealing the particulars of income. At the most, it was a technical default thereby nothing to indicate any concealment of income and furnishing of inaccurate particulars. The default committed by the assessee at the most can be termed as technical or venial breach of law for which rigors penalty provisions cannot be invoked.
The Tribunal observed that the Hon’ble Supreme Court held that penalty provisions u/s.271(1)(c) of the Act cannot be levied for concealment/furnishing inaccurate particulars of income in case of bonafide/inadvertent/human error. The Hon’ble Supreme Court had held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of the income the assessee.
The Tribunal observed that the assessee had made a claim, which was not found disallowable on account of genuineness of such claim nor was held as bogus nor fabricated but in view of the provisions of law that the assessee did not deduct TDS on such payments, the disallowance was made after invoking the provisions of section 40(a)(ia) of the Act.
The Tribunal opined that under the given circumstances, the ratio laid down by the Hon’ble Supreme Court was squarely applicable to the facts of the instant case and, therefore, levy of penalty u/s.271(1)(c) of the Act was not justified.
The Tribunal further observed that various Hon’ble High Courts and Benches of the Tribunal are taking consistent view that where a disallowance is made by invoking the provisions of section 40(a)(ia) of the act for default for non-deduction of TDS, it cannot be held that the assessee has made a willful default of furnishing inaccurate particulars of income.
Accordingly, following the judicial pronouncements, penalty levied was deleted.
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