Penalty for failure to deduct TDS not applicable if assessee has added back expense on which Tax was not deducted: ITAT

The Income Tax Appellate Tribunal (ITAT) in the matter of ACIT V/s TV Today Network Ltd. has upheld CIT(A) order canceling the penalty levied by the AO u/s. 271C of the Income Tax Act.

The sum and substance of the grievance of the revenue is that the CIT(A) erred in cancelling the penalty levied by the AO u/s. 271C of the Act.

Briefly stated the facts of the case are that during the course of the scrutiny assessment proceedings it was noticed that assessee has added back disallowance u/s. 40a (ia) in the computation of income in respect of expenditure of Rs.2705667199/-. On which there was a TDS liability of Rs.17308103/- .

Assessee carried the matter before the CIT(A) and vehemently contended that the assessee has made the impugned payment and claimed expenditure in the subsequent assessment years in which the assessee has deducted tax at source and deposited the same.

After considering the facts and the submissions the CIT(A) observed that the assessee has already disallowed the entire amount and did not claim the impugned expenditure. The CIT(A) further observed that in subsequent years not only the assessee claimed expenditure but also deducted tax at source and deposited the same. The CIT(A) concluded by holding that it is not a fit case for levy of penalty u/s. 271C of the Act and deleted the same.

ITAT Order:

10. We find that no order u/s. 201 of the Act has been framed by the AO which means the AO never treated the assessee in default. Further during the year under consideration the assessee has only made provision of liability of expenditure and the said provision was added back while computing the income for the year. In subsequent year when the liability crystallized not only the assessee has claimed the expenditure but also deducted tax at source.

11. On these facts we do not find any reason for the levy u/s. 271C of the Act and further we do not find any reason to interfere with the findings of the CIT(A). The appeal filed by the revenue is dismissed.

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