Cit vs Fourways International
2007 Latest Caselaw 1850 Del

ORDER

1. In this appeal under Section 260A of the Income Tax Act, 1961 Income Tax Act, the revenue is aggrieved by an order dated 4-8-2006 passed by the Income- tax Appellate Tribunal, Delhi Bench 'D' ('Tribunal') in ITA Nos. 2945 & 2946/Delhi/2005 relevant for the assessment years 2000-01 and 2001-02.

2. The issue that arises in this case concerns the levy of penalty on the assessee under Section 271C of the Income Tax Act, 1961.

3. The assessee had made certain payments for fabrication charges but had not deducted the tax at source. The contention of the assessee was that it was not advised by its chartered accountant that it was liable to deduct tax at source under Section 194C of the Act. The assessee was a new firm, the partner was a matriculate and therefore depended entirely on the advice given by the chartered accountant. It appears that the chartered accountant did not correctly advise the assessee.

4. The Tribunal found this explanation to be bona fide. It accordingly cancelled the levy of penalty imposed by the assessing officer, which had been upheld by the Commissioner (Appeals).

5. Another factor held against the assessee was that even after the mistake was realised, he did not deposit the tax due. The Tribunal found this to be incorrect because the assessee had deposited two cheques of Rs. 4 lakhs and Rs. 3.4 lakhs during the survey proceedings. The Tribunal concluded on these facts that the assessee was not avoiding its liability and had co-operated with the revenue in the payment of tax. It also held that the assessee had not been correctly advised by its chartered accountant in regard to its liability.

6. We may note that Section 273B of the Act does not make a levy of penalty under Section 271C of the Act mandatory. The assessee would not be liable to penalty if he is able to prove that there was a reasonable cause for failing to deduct the tax. The assessee in the present case had given an explanation which found favour with the Tribunal. We think that the view taken by the Tribunal is one that could have possibly been taken in the matter. It is not perverse as to warrant interference or which gives rise to a substantial question of law.

7. There is no merit in this appeal.

8. Dismissed.