section 271C Archives - Tax Heal

Income Tax Commissioner Power to Reduce or Waive Penalty [ FA 2019]

CA Satbir Singh — Sun, 21 Apr 2019 13:52:00 +0000

Power of Commissioner to Reduce or Waive Income Tax Penalty

[As amended by Finance Act, 2019]

POWER OF PRINCIPAL COMMISSIONER OR COMMISSIONER TO REDUCE OR WAIVE PENALTY

In the tutorial on ‘Penalties Under the Income-tax Act’, we discussed various penalties imposable under the Income-tax Act in respect of various defaults. Apart from enacting penalty provisions, the Income-tax Act also designed provisions empowering the Principal Commissioner of Income-tax or Commissioner of Income-tax to grant relief from penalty to taxpayers in genuine cases. Such power is granted under section 273A and section 273AA. In this part you can gain knowledge about the provisions of section 273A and section 273AA.

Overview of major penalties under the Income-tax Act

Before understanding the provisions of section 273A and 273AA it is better to take an overview of the penal provisions under the Income-tax Act. The following table highlights major penalties imposable under the Income-tax Act.

*Nature of default/failure*	*Sections*	*Penalty*
Default in payment of any tax due	Section 221(1)	Such an amount as the Assessing Officer may impose but not exceeding the amount of tax.
Determination of undisclosed income of block period	Section 158BFA(2)	Minimum : 100 per cent of tax leviable in respect of undisclosed income Maximum : 300 per cent of tax leviable in respect of undisclosed income.
Under-reporting and misreporting of income	Section 270A(1)	A sum equal to 50% of the amount of tax payable on under-reported income.However, if under-reported income is in consequence of any misreporting thereof by any person, the penalty shall be equal to 200% of the amount of tax payable on under-reported income
Failure to comply with notice issued under section 142(1) or section 143(2) and direction for audit under section 142(2A).	Section 271(1)(b)	Rs. 10,000 for each failure. This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017.
Concealment of income or furnishing inaccurate particulars of income	Section 271(1)(c)	100% to 300% of the tax evaded. This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017.
Distribution of profits by registered firm otherwise than in accordance with partnership deed and as a result of which partner has returned income below the real income	Section 271(4)	Not exceeding 150 per cent of difference between tax on partner’s income assessed and tax on income returned, in addition to tax payable This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017.
Failure to keep, maintain or retain books of account, documents, etc., as are required under section 44AA	Section 271A	Rs. 25,000
Failure to keep and maintain information and documents required in respect of international transaction or specified domestic transaction, failure to report such transaction, etc.	Section 271AA	2% of the value of each international transaction or specified domestic transaction entered into by the taxpayer.
Failure to furnish information and document as required under Section 92D(4)	Section 271AA(2)	Rs. 5,00,000/-
Penalty in case of search (Search is initiated on or after July 1, 2012 but before December 15, 2016)	Section 271AAB	10%, 20% and 60% of the undisclosed income, as the case may be.
Penalty in case of search (if search is initiated on or after December 15, 2016)	Section 271AAB	30% or 60% of undisclosed income, as the case may be
Penalty where income includes any income referred to in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D.	Section 271AAC	10% of tax payable on undisclosed income
Failure to get accounts audited or furnish a report of audit as required under section 44AB	Section 271B	One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less
Failure to furnish a report from an accountant as required by section 92E	Section 271BA	Rs. 1,00,000
Failure to deduct tax at source, wholly or partly or failure to pay wholly or partly tax under section 115-O(2)	Section 271C	An amount equal to tax not deducted (in case of TDS) or tax not paid (in case of dividend distribution tax)
Failure to collect tax at source	Section 271CA	An amount equal to tax not collected.
Taking or accepting certain loans or deposits or specified sum* in contravention of provisions of section 269SS *“Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.	Section 271D	An amount equal to loan or deposit or specified sum so taken or accepted
Accepting cash of Rs. 2,00,000 or more in contravention to Section 269ST	Section 271DA	An amount equivalent to cash receipt
Repaying loans or deposits or specified advance* in contravention of provisions of section 269T *“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer takes place	Section 271E	An amount equal to loan or deposit or specified advance so repaid
Failure to furnish the return of income before the end of the assessment year	Section 271F	Rs. 5,000 [Not applicable for any AY commencing on or after 1st April, 2018]
Failure to furnish statement of financial transaction or reportable account (previously called as Annual Information Return) as required under section 285BA(1)	Section 271FA	Rs. 500 or Rs. 1,000, as the case may be, per day of default
Failure to furnish an accurate statement of financial transaction or reportable account	Section 271FAA	Rs. 50,000
Failure to furnish statement or information or document [as required under Section 9A(5)] by an eligible investment fund within the prescribed time-limit.	Section 271FAB	An amount equal to Rs. 5,00,000
Failure to furnish any information or document as required by section 92D(3)	Section 271G	2% of the value of the international transaction or specified domestic transaction for each such failure
Failure to furnish information or document under section 285A* by an Indian concern. *Section 285A provides that where any share or interest of foreign company derives its value substantially from assets located in India, and such company holds such assets in India through Indian Concern then such Indian concern shall furnish the prescribed information to the income-tax authority.	Section 271GA	the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern; An amount equal to Rs. 5,00,000 in any other case
Failure to furnish report under section 286(2)	Section 271GB(1)	Rs. 5,000 per day up to 30 days and Rs. 15,000 per day beyond 30 days.
Failure to produce the information and documents within the period allowed under section 271GB(6)	Section 271GB(2)	Rs. 5,000 for every day during which the failure continues.
Failure to furnish report or failure to produce information/documents under section 286 even after serving order under section 271GB(1) or 271GB(2)	Section 271GB(3)	Rs. 5,00,000
Failure to file the TDS/TCS return	Section 271H	Not less than Rs.10,000 and upto Rs. 1,00,000
Failure to furnish information or furnishing of inaccurate information under Section 195(6) in respect of payment made to non-residents.	Section 271-I	An amount equal to Rs. 1,00,000
Furnishing of Incorrect information by an Chartered Accountant or a merchant banker or a registered valuer in a report or certificate	Section 271J	Rs. 10,000 for each such report or certificate
Failure to co-operate with the tax authorities, (i.e., not answering any question, not signing statements, etc.) or failure to comply with notice issued under section 142(1)/143(2) or failure to comply with direction issued under section 142(2A).	Section 272A(1)	Rs. 10,000 for each failure/default
Penalty under section 272A(2)	Section 272A(2)	Rs. 100 per day for every day during which the default continues.
Failure to comply with section 133B	Section 272AA(1)	An amount not exceeding Rs. 1,000
Failure to comply with provisions relating to Permanent Account Number (PAN)	Section 272B	Rs. 10,000
Failure to comply with provisions relating to Tax Deduction Account Number or Tax Collection Account Number	Section 272BB(1)	Rs. 10,000
Failure to comply with the provisions relating to Tax Collection Account Number	Section 272BBB	Rs. 10,000

Power of Principal Commissioner or Commissioner to reduce or waive penalty under sections 273A(1), 273A(4) and 273AA

> Waiver or reduction of penalty under section 273A(1)

Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty imposed or imposable under section 270A (i.e., penalty for under-reporting and misreporting of income) or under section 271(1)(c) (i.e., penalty for concealment of particulars of income or furnishing inaccurate particulars of income).

Initiation to be taken by Principal Commissioner or Commissioner or the taxpayer

The waiver or reduction under section 273A(1) can be granted by the Principal Commissioner or Commissioner either on his own motion or otherwise, i.e., on an application made by the taxpayer.

Conditions for granting relief

Relief under section 273A(1) is granted if following conditions are satisfied :

(1) Prior to the detection by the Assessing Officer of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, the taxpayer voluntarily and in good faith, makes a full and true disclosure of such particulars.

For the purpose of section 273A(1), a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract penalty under section 270A or under section 271(1)(c).

(2) The taxpayer should have co-operated in any enquiry relating to the assessment.

(3) The taxpayer either should have paid or made satisfactory arrangements for paying any tax or interest payable in consequence of an order passed under the Act in respect of the relevant year.

Previous approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General

If the amount of income in respect of which the penalty is imposed or imposable for the relevant year or, where such disclosure relates to more than one year, the aggregate amount of such income for those years exceeds a sum of Rs. 5,00,000, no order reducing or waiving the penalty under section 273A(1) shall be made by the Principal Commissioner or Commissioner, except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

Finality of the order

Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.

No relief if waiver claimed earlier

As per section 273A(3), where an order has been made under section 273A(1) in favour of any person, whether such order relates to one or more years, he shall not be entitled to any relief under section 273A in relation to any other year at any time after the making of such order.

Thus, if a person has claimed relief under section 273A(1) at any time, then he cannot claim relief under section 273A [i.e., 273A(1) as well as section 273A(4)] thereafter.

> Waiver or reduction of penalty under section 273A(4)

Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or reduce any penalty imposable under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty.

Initiation to be taken by the taxpayer

For obtaining waiver or reduction or stay or compound any proceeding for the recovery of penalty, the taxpayer has to make an application to the Principal Commissioner or Commissioner.

Conditions for granting relief

Relief under section 273A(4) is granted if following conditions are satisfied :

(1) Levy of penalty will cause genuine hardship on the taxpayer.

(2) The taxpayer has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

Previous approval of Chief Commissioner or Director General

If the amount of any penalty or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds Rs. 1,00,000, no order of reducing or waiving the amount or compounding any proceeding for its recovery under section 273A(4) shall be made by the Principal Commissioner of Commissioner, except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

Time-limit for passing order under section 273A(4)

The Principal Commissioner or Commissioner, as the case may be, shall pass order, either accepting or rejecting assessee’s application to reduce or waive penalty, within a period of 12 months from the end of the month in which application is received.

However, order shall be passed on or before May 31, 2017 in case of application pending as on June 1, 2016.

Further, no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.

Finality of the order

Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.

No relief if waiver claimed earlier

Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty levied under section 270A (i.e., penalty for under-reporting and misreporting of income) or under section 271(1)(c) (i.e., penalty for concealment of particulars of income or furnishing inaccurate particulars of income).

Thus, if a person has claimed relief under section 273A(1) at any time, then he cannot claim relief under section 273A [i.e., section 273A(1) as well as section 273A(4)] thereafter.

Waiver of penalty under section 273AA

Section 273AA empowers the Principal Commissioner or Commissioner to grant immunity from imposition of any penalty under the Income-tax Act in a case where the taxpayer has made an application for settlement under section 245C and the proceedings for settlement have been abated under section 245HA and penalty proceedings are initiated under the Income-tax Act.

Initiation to be taken by the taxpayer

For obtaining waiver, the taxpayer has to make an application to the Commissioner.

Time-limit for passing order under section 273AA

However, order shall be passed on or before May 31, 2017 in case of application pending as on June 1, 2016.

Further, no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.

Other provisions applicable to the case of waiver under section 273AA

The application to the Commissioner for waiver shall not be made after the imposition of penalty after abatement.
The Commissioner may, subject to such conditions as he may think fit to impose, grant to the person immunity from the imposition of any penalty under the Income-tax Act.
Before granting the waiver, the Commissioner should be satisfied that the taxpayer has, after the abatement, co-operated with the Income-tax authority in the proceedings before him and made a full and true disclosure of his income and the manner in which such income has been derived.
The immunity granted under section 273AA shall stand withdrawn, if such person fails to comply with any condition subject to which the immunity was granted and after the withdrawal of the immunity, the provisions of the Act shall apply as if such immunity had not been granted.
The immunity granted under section 273AA may, at any time, be withdrawn by the Principal Commissioner or Commissioner, if he is satisfied that such person had, in the course of any proceedings, after abatement, concealed any particulars material to the assessment from the income-tax authority or had given false evidence, and thereupon such person shall become liable to the imposition of any penalty under the Act to which such person would have been liable, had not such immunity been granted.

( Republished with Amendments, Source- Income Tax Act, Rules and http://www.incometaxindia.gov.in/ )

Income Tax penalty under New Section 270A Income Tax Act

Section 271C Penalty on ” Aishwarya Rai ” deleted due to CA certificate

CA Satbir Singh — Wed, 27 Apr 2016 12:11:50 +0000

Facts of the Case

Assessee is an individual. Assessee had remitted an amount of U.S. $ 77,500, to Ms. Simone Sheffield, resident of U.S.A. without deduction of tax under section 195 of the Act,

It was submitted by the Assessee that the payment made made maintenance of website and other allied services rendered to the assessee.

It was further submitted by the assessee, not only the payment was made outside India but also for services rendered outside India. Hence, the provision of section 195 is not applicable.

The Assessing Officer observed, website maintenance falls within the meaning of “fees for technical services”as provided under section 9(1)(vii) r/w Explanation–2. Thus, on the aforesaid basis, the Assessing Officer finally concluded that the assessee was required to deduct tax under section 195 of the Act, on the payment made to Ms. Simone Sheffield. As the assessee had not deducted tax at source, the Assessing Officer treated the assessee as an assessee in default under section 201(1) and passed an order demanding tax of Rs. 4,27,910 and interest under section 201(1A) of Rs. 34,233.

Though, the assessee challenged the order passed under section 201 in appeal, , ultimately she accepted her liability before the 2nd appellate forum.

Issue

On the basis of order passed under section 201 / 201(A), the Assessing Officer initiated proceedings for imposition of penalty under section 271C alleging failure to deduct tax at source under section 195, by issuing a show cause notice

Assessee view

It was submitted by the assessee that there was reasonable cause for not deducting tax at source as the assessee was under the bonafide impression that payments made to a non–resident for the services rendered outside India do not attract provisions of section 195. It was also submitted, reasons for entertaining such belief was due to the certificate issued by the Chartered Accountant stating that remittance is exempt from withholding tax at source.

Held by ITAT

The issue before us is, merely because assessee was held liable for deduction of tax at source under section 195, whether automatically it will result in imposition of penalty under section 271C. On a careful reading of the provision as contained under section 271C, it is noticed that any person who fails to deduct tax at source, shall be liable to pay by way of penalty a sum equal to the amount of tax which he has failed to deduct. However, imposition of penalty under section 271C is subject to the condition imposed under section 273B. A reading of section 273B of the Act suggests that where the assessee proves that the failure to deduct tax was for a reasonable cause, no penalty can be imposed. Therefore, from the conjoint reading of section 271C and 273B, it is clearly evident that imposition of penalty under section 271C is neither automatic nor mandatory. The authority concerned is empowered under section 273B not to impose penalty in a deserving case if he is satisfied that there was reasonable cause for failure to comply to statutory requirement. Therefore, confirmation of demand raised under section 201, cannot be the sole criteria for imposing penalty under section 271C. Keeping in view the aforesaid legal principles, it is to be examined whether there was reasonable cause for failure on the part of the assessee to deduct tax at source. On a perusal of the relevant facts on record, it is observed, the payment of U.S. $ 77,500 was made to a non–resident for development of website and other allied works. Therefore, question is whether such payment attracts deduction of tax under section 195. As is evident, assessee’s C.A., had issued a certificate opining that tax is not required to be deducted at source on the remittances to Ms. Simone Sheffield, as the payment is made to a non–resident having no P.E. in India that too, for services rendered outside India. It is a well accepted fact that every citizen of the country is neither fully aware of nor is expected to know the technicalities of the Income Tax Act.Therefore, in our considered opinion, failure on the part of the assessee to deduct tax at source was due to a reasonable cause. Accordingly, we delete the penalty imposed under section 271C.

Complete Judgement

IN THE ITAT MUMBAI BENCH ‘A’

Smt. Aishwarya Rai Bachchan

Additional Commissioner of Income-tax, Range-2, Mumbai

, ACCOUNTANT MEMBER
AND SAKTIJIT DEY, JUDICIAL MEMBER SAKTIJIT DEY

IT APPEAL NO. 4335 (MUM.) OF 2015
[ASSESSMENT YEAR 2007-08]

MARCH 30, 2016

Darshan Gandhi for the Appellant. Lovish Kumar for the Respondent.

ORDER

Saktijit Dey, Judicial Member – Aforesaid appeal by the assessee is directed against the order dated 30th March 2015, passed by the learned Commissioner (Appeals)–55, Mumbai, confirming imposition of penalty of Rs. 4,27,910, for the assessment year 2007–08.

2. Briefly stated the facts are, assessee is an individual. On the basis of information received to the effect that assessee had remitted an amount of U.S. $ 77,500, to Ms. Simone Sheffield, resident of U.S.A., towards reimbursement of expenses without deduction of tax under section 195 of the Act, the Assessing Officer called upon the assessee to explain why she should not be held as assessee in default under section 201(1) of the Act. As stated, in response to the said letter, it was submitted by the assessee, not only the payment was made outside India but also for services rendered outside India. Hence, the provision of section 195 is not applicable. It was further submitted, the payment made was not towards reimbursement of expenses but for maintenance of website and other allied services rendered to the assessee. The Assessing Officer, however, did not find merit in the submissions of the assessee. He was of the view that the person to whom the payment was made by the assessee was not actually a service provider but a website designer. Thus, Ms. Simone Sheffield, gets commission for designing the contents of the website of the assessee and the balance payment is forwarded to actual service provider. He also observed, assessee has taken a contradictory stand by submitting on one hand that Ms. Simone Sheffield, is resident of U.S.A. and again resorting to DTAA between India and Bulgaria to contended that remittance is not liable to tax. Further, the Assessing Officer observed, website maintenance falls within the meaning of “fees for technical services”as provided under section 9(1)(vii) r/w Explanation–2. Thus, on the aforesaid basis, the Assessing Officer finally concluded that the assessee was required to deduct tax under section 195 of the Act, on the payment made to Ms. Simone Sheffield. As the assessee had not deducted tax at source, the Assessing Officer treated the assessee as an assessee in default under section 201(1) and passed an order demanding tax of Rs. 4,27,910 and interest under section 201(1A) of Rs. 34,233. Though, the assessee challenged the order passed under section 201 in appeal, , ultimately she accepted her liability before the 2nd appellate forum.

3. On the basis of order passed under section 201 / 201(A), the Assessing Officer initiated proceedings for imposition of penalty under section 271C alleging failure to deduct tax at source under section 195, by issuing a show cause notice. In response, it was submitted by the assessee that there was reasonable cause for not deducting tax at source as the assessee was under the bonafide impression that payments made to a non–resident for the services rendered outside India do not attract provisions of section 195. It was also submitted, reasons for entertaining such belief was due to the certificate issued by the Chartered Accountant stating that remittance is exempt from withholding tax at source. The Assessing Officer, after considering the submissions of the assessee and facts on record, found that the assessee before the Tribunal had accepted that she was required to deduct tax at source. Therefore, taking into consideration such admission of the assessee Assessing Officer held that her explanation that due to a bonafide belief she failed to deduct tax at source is not acceptable. The Assessing Officer observed, once the assessee had accepted her liability under section 195, she cannot turn around and say that tax is not deductible by taking shelter under DTAA between India – U.S.A. and India Bulgaria. Assessing Officer, therefore, holding that assessee has failed to establish existence of reasonable cause for not deducting tax at source imposed penalty of Rs. 4,27,910 under section 271C. Being aggrieved of the penalty order so passed, assessee preferred appeal before the first appellate authority.

4. The learned Commissioner (Appeals) also confirmed imposition of penalty by holding that assessee having failed to deduct tax at source without any reasonable cause, was liable for penalty.

5. Learned Authorised Representative submitted, penalty under section 271C is not automatic but has to be r/w section 273B of the Act. He submitted, if the assessee shows reasonable cause for failure to deduct tax at source, penalty cannot be imposed. Learned Authorised Representative submitted, the Chartered Accountant of the assessee had issued a certificate indicating that the payment of U.S. $ 77,500, to the non–resident would not attract the provisions of section 195 in view of Article–7 of DTAA between India–U.S.A., therefore, he advised for non–deduction of tax at source. Referring to the said certificate of the C.A., learned Authorised Representative submitted on the basis of certificate issued by the C.A., assessee was under bonafide belief that tax was not required to be deducted at source on the remittances made to the non–resident. He submitted, that being the case there is a reasonable cause for not deducting tax at source, hence, no penalty is required to be levied. He submitted as proceedings under section 201 and 271C are two separate proceedings, merely because assessee was held liable to deduct tax under section 201, it will automatically not lead to imposition of penalty under section 271C. Learned Authorised Representative submitted, even otherwise also, the penalty order passed is barred by limitation as it is not within the time prescribed under section 275(1) of the Act. Learned Authorised Representative submitted, the order in second appeal was passed by the Tribunal on 3rd May 2012, and was served on the defendant On 13th June 2012, whereas, the Assessing Officer passed the order imposing penalty under section 271C on 21st March 2013, which is beyond the prescribed period of six months. He submitted, for this reason also, penalty order is unsustainable. In support of his submissions, learned Authorised Representative relied upon the following decisions.

(i)		ADIT v. Leighton Welspun Contractors Pvt. Ltd., [2016] 65 Taxmann.com 68 (Mum.);
(ii)		CIT v. Fourways International, [2008] 166 Taxmann.com 461 (Del.);
(iii)		Royala Corporation Pvt. Ltd. v. Union of India, [2008] 161 Taxmann.com 127 (Mad.); and
(iv)		CIT v. Mohair Investment & Trading Co. Pvt. Ltd., [2012] 18 Taxmann.com 239 (Del.).

6. The Learned Departmental Representative relied upon the order of the learned Commissioner (Appeals) and the Assessing Officer.

7. We have considered the submissions of the parties and perused the material available on record. No doubt, in the quantum proceedings before the Tribunal, the assessee has accepted her liability for deduction of tax at source, for whatever reason may be, and as a result the issue was decided against the assessee by the Tribunal by upholding the order passed under section 201(1). However, the issue before us is, merely because assessee was held liable for deduction of tax at source under section 195, whether automatically it will result in imposition of penalty under section 271C. On a careful reading of the provision as contained under section 271C, it is noticed that any person who fails to deduct tax at source, shall be liable to pay by way of penalty a sum equal to the amount of tax which he has failed to deduct. However, imposition of penalty under section 271C is subject to the condition imposed under section 273B. A reading of section 273B of the Act suggests that where the assessee proves that the failure to deduct tax was for a reasonable cause, no penalty can be imposed. Therefore, from the conjoint reading of section 271C and 273B, it is clearly evident that imposition of penalty under section 271C is neither automatic nor mandatory. The authority concerned is empowered under section 273B not to impose penalty in a deserving case if he is satisfied that there was reasonable cause for failure to comply to statutory requirement. Therefore, confirmation of demand raised under section 201, cannot be the sole criteria for imposing penalty under section 271C. Keeping in view the aforesaid legal principles, it is to be examined whether there was reasonable cause for failure on the part of the assessee to deduct tax at source. On a perusal of the relevant facts on record, it is observed, the payment of U.S. $ 77,500 was made to a non–resident for development of website and other allied works. Therefore, question is whether such payment attracts deduction of tax under section 195. As is evident, assessee’s C.A., had issued a certificate opining that tax is not required to be deducted at source on the remittances to Ms. Simone Sheffield, as the payment is made to a non–resident having no P.E. in India that too, for services rendered outside India. It is a well accepted fact that every citizen of the country is neither fully aware of nor is expected to know the technicalities of the Income Tax Act.

Therefore, for discharging their statutory duties and obligations, they take assistance and advise of professionals who are well acquainted with the statutory provisions. In the present case also, assessee has engaged a chartered accountant to guide her in complying to statutory requirements. Therefore, when the C.A. issued a certificate opining that there is no requirement for deduction of tax at source, assessee under a bonafide belief that withholding of tax is not required did not deduct tax at source on the remittances made. Though, this fact was brought to the notice of the Departmental Authorities in course of the penalty proceedings but due weightage has not been given to such contention of the assessee. In our view, the explanation submitted by the assessee is a valid explanation and cannot be brushed aside with some general observations. Only because the assessee before the Tribunal had accepted her liability for deduction of tax at source, cannot be the sole basis for imposition of penalty completely ignoring the primary and fundamental reason shown by the assessee for failure to deduct such tax. Proceedings under sections 201 and 271C, are two independent and separate proceedings. While imposing penalty, the authority concerned is duty bound to examine assessee’s explanation to find out whether there was reasonable cause for failure to deduct tax at source. As is evident, the assessee being advised by a professional well acquainted with provisions of the Act had not deducted tax at source. Therefore, no malafide intention can be imputed to the assessee for failure to deduct tax. More so, when the issue whether tax was required to be deducted at source, on payments to a non–resident for services rendered is a complex and debatable issue requiring interpretation of statutory provisions vis–a–vis relevant DTAA between the countries. Therefore, in our considered opinion, failure on the part of the assessee to deduct tax at source was due to a reasonable cause. The decisions relied upon by the learned Authorised Representative also support this view. Accordingly, we delete the penalty imposed under section 271C.

8. As we have deleted penalty imposed on the reasons stated above, we refrain from adjudicating the alternative contention raised by the learned Authorised Representative on limitation.

9. In the result, appeal stands allowed.