(Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The present Tax Appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for sake of brevity) preferred by the Revenue is directed against the order of the Income Tax Appellate Tribunal Ahmedabad Bench 'C' in ITA No.1887/Ahd/2009, wherein the appellant has sought to raise the following question as a substantial question of law.
"Whether the Appellate Tribunal is right in law and on facts in cancelling the penalty levied u/s.271C of the Act?"
2.0 We have heard Mrs. Manua Bhatt, learned advocate appearing for the appellant and have considered the facts and the record.
3.0 Summarizing the facts first, a survey under Section 133A of the Act was carried out against the assessee, which is a company engaged in construction business. The said search on 09.10.2007 was with a view to verify the compliance of provisions about deduction of tax at source, in which it was noticed that the assessee company had made in Assessment Year 2008-09 interest payment of Rs.75,18,057/-to GRUH Finance Limited without deducting tax at source (TDS) on that amount. It was the case of assessee that said GRUH finance was a subsidiary of the HDFC Ltd. and as the HDFC Ltd. was exempted from TDS payment requirement, by virtue of notification No.1724 dated 2.6.1980 issued by the Central Government, it remained under impression that the subsidiary would also be exempted. The assessee had deposited the tax with the government once it came to know that provisions of Section 194A relating to deduction of tax at source were applicable.
3.1 The Assessing Officer, however, was not pleased with the assessee's explanation and levied penalty amounting to Rs.17,03,593/-. The Commissioner (Appeals) cancelled that penalty taking view that since the parent company HDFC ltd. was exempted from deduction of tax at source under the Central Government Notification, it provided the assessee had a reasonable cause to entertain a belief that it was not required to deduct tax at source while making payment of interest under Section 194A of the Act to the subsidiary GRUH Finance Limited.
3.2 The Income Tax Tribunal dismissed the appeal of the Revenue and in its order dismissing the appeal, which is the impugned, observed to record it confirming findings as under:
"It is not disputed by the Revenue that Gruh Finance Ltd. is a subsidiary of HDFC Ltd., and the HDFC has been notified by the Central Government for the purpose of payment of interest without deduction of tax vide notifications S. O. No. 1724 dated 2.6.1980. On the above facts if the assessee believed that the payment to subsidiary of HDFC Ltd. would also be covered by such notification, such a belief is a bona fide belief and would constitute a reasonable cause for non-deduction of tax at source on the payment to Gruh Finance Ltd. As soon as the assessee was pointed out that it is liable to deduct the tax, it has duly deducted the tax and deposited the same with the Central Government along with interest thereon. We therefore find to justification to interfere with the orders of the CIT(A) in all the appeals before us. Accordingly, we dismiss this ground of the Revenue in all the appeals."
4.0 The view taken by the Tribunal is eminently just and proper in the facts and circumstances of the case and it has rightly upheld the decision of Commissioner (Appeals) that the penalty sought to be levied upon the assessee was required to deleted. The finding recorded by the Tribunal that the belief of the assessee was a bona fide belief and it would constitute a reasonable cause for not deducting the tax at source is reasonable. The bona fide of the assessee was also seen from his conduct as the assessee had paid the tax immediately on knowing its liability in law to pay.
5.0 It may be pertinently noted here that we have dismissed by an oral judgment of even date a cognate Tax Appeal No.1025 of 2011 in respect of previous Assessment Year 2007-08 raising an identical question arising from ITA No.1886/2009 decided by the same Tribunal on the same subject matter in respect of same assessee.
6.0 In light of above facts and premises, no substantial question of law arises for this Court's consideration in this Tax Appeal and therefore the appeal does not deserve any consideration.
7.0 This Appeal is accordingly dismissed.
[V.
M. SAHAI, J.] [N.
V. ANJARIA, J.] Amit Top