{"id":3003,"date":"2011-04-13T17:51:39","date_gmt":"2011-04-13T12:21:39","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=3003"},"modified":"2011-04-13T17:51:39","modified_gmt":"2011-04-13T12:21:39","slug":"cit-vs-cadbury-india-ltd-delhi-high-court-no-penalty-for-tds-breach-if-no-mala-fide-intention-or-deliberate-defiance-of-law","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/cit-vs-cadbury-india-ltd-delhi-high-court-no-penalty-for-tds-breach-if-no-mala-fide-intention-or-deliberate-defiance-of-law\/","title":{"rendered":"CIT vs. Cadbury India Ltd (Delhi High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (cadbury_penalty_271C_tds.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nNo penalty for TDS breach if no \u201cmala fide intention\u201d or “deliberate defiance” of law
\n<\/strong><\/p>\n

The assessee engaged Clearing & Forwarding Agents and paid rent for use of space in the warehouse. It deducted tax at source u\/s 194C<\/em> though tax ought to have been deducted u\/s 194-I<\/em>. It did not deduct TDS on payments made to the manpower supplying agencies for supply of pilots though it was liable to do so u\/s 194J<\/em>. The AO passed an order u\/s 201 holding the assessee liable to deduct TDS u\/s 194-I and 194-J and also levied penalty u\/s 271C. In the s. 201 proceedings, the assessee accepted that it was liable to deduct tax u\/s 194-I and 194J<\/em> though it disputed the levy of penalty u\/s 271C on the ground that the failure was due to \u201cmisconceived professional advice<\/em>\u201d. The CIT (A) rejected the plea though the Tribunal accepted it. On appeal by the department, HELD dismissing the appeal: <\/p>\n

(i) The fact that the assessee has not disputed the quantum is not a good ground for imposition of penalty<\/em> since the findings in the assessment proceedings are not conclusive<\/strong>. This is not a good ground for levy of penalty unless and until material is brought on record by the Revenue to the effect that the assessee deliberately defied the provision of the law<\/strong><\/em> (Anwar Ali<\/strong> 76 ITR 696 (SC) referred);<\/p>\n

(ii) Levy of penalty u\/s 271C is not automatic<\/strong>. Before levying penalty, the AO is required to determine whether the failure was without reasonable cause. “Reasonable cause” means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that same was the right thing to do (Woodward Governor India<\/strong> 253 ITR 745 (Del) followed);<\/p>\n

(iii) On facts, there is no reason to disbelieve the assessee that the deduction u\/s 194C was being done on the misconceived professional advice<\/strong> given by the CAs. Since the payment were to be deducted from CFA no benefit was to be derived by the assessee for making lesser or inaccurate deductions. No malafide intention<\/em> of any kind can be attributed to the assessee for deducting tax under one provision of law than the other<\/strong>. This was neither the case of malafide intention<\/em><\/strong> nor that of negligent intention<\/strong><\/em> or want of bonafide, but a case of misconceived belief of applicability of one provision of law. It cannot be said judiciously that the assessee failed to comply with s. 194-I & 194-J without reasonable cause. <\/p>\n

\nNote<\/strong>: Contrast with Zoom Communication<\/a><\/strong> 327 ITR 510 (Del)\n<\/div>\n","protected":false},"excerpt":{"rendered":"

On facts, there is no reason to disbelieve the assessee that the deduction u\/s 194C was being done on the misconceived professional advice<\/strong> given by the CAs. Since the payment were to be deducted from CFA no benefit was to be derived by the assessee for making lesser or inaccurate deductions. No malafide intention<\/em> of any kind can be attributed to the assessee for deducting tax under one provision of law than the other<\/strong>. This was neither the case of malafide intention<\/em><\/strong> nor that of negligent intention<\/em> or want of bonafide, but a case of misconceived belief of applicability of one provision of law. It cannot be said judiciously that the assessee failed to comply with s. 194-I & 194-J without reasonable cause<\/p>\n

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