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Benefit of exemption from penalty is available if intention to evade tax doesn’t appear at any stage of proceeding

Jitendra Sharma v. JCIT - [2021] (Indore - Trib.) 

Assessee, along with two persons entered into an agreement for purchase of immovable property valuing Rs. 75 lakhs. The transaction was carried out through a broker. Assessee deducted tax at source at rate of 1 per cent on gross sale consideration under section 194-IA and deposited it with Government treasury. 

However, Assessing Officer (AO) observed that seller was a non-resident Indian and, therefore, tax to be deducted at source on gross consideration should have been 20.6 per cent as provided in section 195. Since the assessee had not deducted tax at the correct rate he considered the assessee-in-default. 

Before the conclusion of the proceedings, assessee deposited the due tax to be deducted along with the applicable interest. However, the AO initiated the penalty proceedings under section 271C of the Act separately. 

During penalty proceedings, the assessee claimed that exemption from penalty provision under section 273B. However, AO rejected and proceeded to levy penalty. CIT(A) confirmed the action of AO. 

The Tribunal held that section 273B contemplates that no penalty shall be impossible on the persons for any violation referred to in the said provisions if he proves that there was a reasonable cause for the said failure. 

In the instant case, the seller did not provide any documentary evidence to show that he was a Non-Resident. Thus, assessee prudently deducted tax @1% under section 194(1A). Subsequently when it was brought to notice that the seller was an NR, the assessee immediately deposited the correct amount of TDS. 

Mens rea to evade tax was not appearing at any stage of the proceedings on the part of the assessee. It would have made no difference for them to deduct tax @1% or 20.6% since it was to be withheld from the purchase consideration. There couldn’t be any other mal intention for deduction of TDS at a lower or wrong rate.Therefore, the assessee was duly eligible to get the benefit of the provisions of Section 273B. 

 

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Mr. Vikas Jain is a reputed Chartered Accountant possessing in-depth understand...

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CA Vikas Jain

CA Vikas Jain - Chief Advisor

Mr. Vikas Jain is a reputed Chartered Accountant possessing in-depth understand...

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