Assessment Year: 2015-16
Appellant: Sharda Educational Trust, Greater Noida
Respondent: JCIT (International Taxation), Noida
Case Filed On: 24th May 2019
Date of Order: 27th June 2022
Order Type: Final Tribunal Order
Pronounced On: 27th June 2022
The appeal in ITA No. 4745/DEL/2019 was filed by Sharda Educational Trust, Greater Noida, against the Joint Commissioner of Income Tax (JCIT), International Taxation, Noida, challenging the penalty proceedings initiated under Section 271C of the Income-Tax Act, 1961, for the assessment year 2015-16.
The primary issue in this appeal was the penalty imposed under Section 271C(1)(a) for failure to deduct TDS on remittances made abroad, as required under the provisions of the Income-Tax Act and relevant Double Taxation Avoidance Agreements (DTAA).
The appeal was heard on 15th June 2022. The appellant was represented by none, with written submissions placed on record. The respondent was represented by Shri Sanjay Kumar, Senior Departmental Representative (Sr. DR).
During a TDS survey conducted on 29th March 2017 at the educational premises of the appellant, it was found that Sharda Educational Trust had remitted amounts abroad under various heads without deducting TDS. The Assessing Officer (AO) considered these remittances taxable in India as per the provisions of the Income-Tax Act and relevant DTAA, leading to the appellant being treated as an assessee in default under Section 201(1) of the Act and liable for interest under Section 201(1A) of the Act. Consequently, penalty proceedings under Section 271C(1)(a) were initiated, resulting in a penalty order dated 19th September 2018.
The appellant challenged the penalty order before the Commissioner of Income-Tax (Appeals)-2, Noida, who sustained the penalty. The appellant then raised the following grounds of appeal before the Tribunal:
The Tribunal reviewed the case and noted that the quantum appeals in ITA Nos. 3377 to 3383/Del/2018 for the assessment years 2011-12 to 2017-18, titled M/s. Sharda Educational Trust vs. ITO, had been accepted, and the appellant was not found to be an assessee in default under Section 201(1) of the Act. Consequently, the interest levied under Section 201(1A) of the Act was also deleted.
The Tribunal observed that the foundation for issuing the show-cause notice for penalty under Section 271(1)(c) was invalidated by the Tribunal’s verdict in the quantum proceedings. The penalty order could not stand on its own against the appellant. The Tribunal relied on the judgment of the Hon’ble Delhi High Court in the case of Principal CIT vs. Fortune Technocomps P. Ltd., where it was held that once the assessment order was altered significantly, the basis for penalty proceedings became non-existent.
The Tribunal also referred to the judgments of the Hon’ble Allahabad High Court in the cases of Shadiram Balmukand and Dwarka Prasad Subhas Chandra, and the Hon’ble Gujarat High Court in the case of Lakkdhir Lalji, which held that when the basis of penalty proceedings is altered or modified by the appellate authority, the authority initiating the penalty proceedings loses jurisdiction. The Hon’ble Supreme Court in the case of K.C. Builders vs. ACIT also held that where the additions made in the assessment order are deleted, the penalty cannot stand by itself and is liable to be cancelled.
The Tribunal allowed the appeal and cancelled the penalty imposed under Section 271C(1)(a). The order was pronounced in the open court on 27th June 2022.
Members:
Sh. Pradip Kumar Kedia, Accountant Member
Sh. Anubhav Sharma, Judicial Member
Dated: 27th June 2022
Copy forwarded to:
Assistant Registrar, ITAT, New Delhi
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