M/s. State Bank Of India, Bangalore V. Additional Commissioner Of Income Tax, TDS Range - 3, Bangalore

ITA 2414/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5998 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH BENGALURU
• Assessee Lawyers: H MURALIDHARA
• Keywords: Question of law; Non-deduction of tax; Reasonable cause; Corroborative evidences; Bonafide mistake; TDS
• Section: 271(1)(c); 273B; 192; 271B; 194A; 13; 6; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A.K.GARODIA , ACCOUNTANT MEMBER IT A NO S . 2413 TO 241 5 /BANG/2019 ASSESSMENT YEAR S : 2011 - 12, 2012 - 13 & 2013 - 14 STATE BANK OF INDIA, LOCAL HEAD OFFICE, NO.65, ST. MARKS ROAD, BANGALORE-560001 T AN : BLRS O 0572F VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX (TDS) RANGE-3, BANGALORE. APPELLANT RESPONDENT IT A NO S . 241 6 & 241 7 /BANG/2019 ASSESSMENT YEAR S : 2012 - 13 & 2013 - 14 STATE BANK OF INDIA, SMALL AND MEDIUM ENTERPRISES CITY CREDIT CENTRE, 20, B BADAGANADU SANGHA, OPP.MAHALAKSHMI TEMPLE, SESHADRIPURAM KUMARA PARK, BANGALORE-560020 T AN : BLRS3 6467E VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX (TDS) RANGE-3, BANGALORE. APPE LLANT RESPONDENT AP PEL LANT BY : SHRI H. MURAL I DHARA, RE SPONDENT BY : SHRI MANJEET SINGH , ADDL. CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 05 . 0 2 .20 20 DATE OF PRONOUNCEMENT : 12 . 0 2 .20 20 ITA NOS. 2413 TO 2415/BANG/2019 PAGE 2 OF 15 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THESE ARE ALL APPEALS BY TWO DIFFERENT BRANCHES O F STATE BANK OF INDIA, A NATIONALISED BANK, CARRYING ON BANKING BUS INESS AGAINST TWO SET OF ORDERS ONE DATED 11.7.2019 AND 9.9.2019 RESPECTIVE LY OF CIT(A)-10, BANGALORE, AY 2011-12 TO 2013-14. THE ISSUE INVOLV ED IN ALL THE APPEALS ARE COMMON AND DEAL WITH THE ONLY ISSUE OF VALIDITY OF IMPOSITION OF PENALTY ON THE ASSESSEE U/S.271-C OF THE INCOME TAX ACT, 19 61 (ACT). THE ISSUE ARISES UNDER IDENTICAL FACTS AND CIRCUMSTANCES AND THE REASONING FOR LEVYING PENALTY AND THE ARGUMENTS OF THE ASSESSEE F OR NOT LEVYING PENALTY ARE IDENTICAL IN ALL THESE CASES. THESE CASES WERE HEARD TOGETHER AND WE DEEM IT CONVENIENT TO PASS A COMMON ORDER. 2. LEAVE TRAVEL ALLOWANCE (LTA) IS THE MOST COMMON ELEMENT OF COMPENSATION ADOPTED BY EMPLOYERS TO REMUNERATE EMPLOYEES DUE TO THE TAX BENEFITS ATTACHED TO IT. AN LTA IS THE REMU NERATION PAID BY AN EMPLOYER FOR EMPLOYEES TRAVEL IN THE COUNTRY, WHEN HE IS ON LEAVE WITH THE FAMILY OR ALONE. LTA AMOUNT IS TAX FREE. SECTION 10 (5) OF THE INCOME-TAX ACT, 1961, READ WITH RULE 2B (COMMONLY KNOWN AS LTA RULES), PROVIDES FOR THE EXEMPTION AND OUTLINES THE CONDITIONS SUBJE CT TO WHICH LTA IS EXEMPT. AS PER LTA RULES, LTA EXEMPTION CAN BE CLAIMED WHER E THE EMPLOYER PROVIDES LTA TO EMPLOYEE FOR LEAVE TO ANY PLACE IN INDIA TAKEN BY THE EMPLOYEE AND THEIR FAMILY. SUCH EXEMPTION IS LI MITED TO THE EXTENT OF ACTUAL TRAVEL COSTS INCURRED BY THE EMPLOYEE. TRAVEL WITHIN INDIA ONLY ALLOWED- AS PER LTA RULES, TRAVEL HAS TO BE U NDERTAKEN WITHIN INDIA AND OVERSEAS DESTINATIONS ARE NOT COVERED FOR EXEMPTION . SEC.10(5) OF THE ACT READS THUS:- ITA NOS. 2413 TO 2415/BANG/2019 PAGE 3 OF 15 SECTION: 10 ( 5 ) IN THE CASE OF AN INDIVIDUAL, THE VALUE OF ANY T RAVEL CONCESSION OR ASSISTANCE RECEIVED BY, OR DUE TO, HI M, ( A ) FROM HIS EMPLOYER FOR HIMSELF AND HIS FAMILY, IN CONNECTION WITH HIS PROCEEDING ON LEAVE TO ANY PLACE IN INDIA ; ( B ) FROM HIS EMPLOYER OR FORMER EMPLOYER FOR HIMSELF AND HIS FAMILY, IN CONNECTION WITH HIS PROCEEDING TO ANY PL ACE IN INDIA AFTER RETIREMENT FROM SERVICE OR AFTER THE TERMINAT ION OF HIS SERVICE, SUBJECT TO SUCH CONDITIONS AS MAY BE PRESCRIBED (I NCLUDING CONDITIONS AS TO NUMBER OF JOURNEYS AND THE AMOUNT WHICH SHALL BE EXEMPT PER HEAD) HAVING REGARD TO THE TRAVEL CONCESSION OR ASS ISTANCE GRANTED TO THE EMPLOYEES OF THE CENTRAL GOVERNMENT : PROVIDED THAT THE AMOUNT EXEMPT UNDER THIS CLAUSE SHALL IN NO CASE EXCEED THE AMOUNT OF EXPENSES ACTUALLY INCU RRED FOR THE PURPOSE OF SUCH TRAVEL. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'FAMILY', IN RELATION TO AN INDIVIDUAL, MEANS ( I ) THE SPOUSE AND CHILDREN OF THE INDIVIDUAL ; AND ( II ) THE PARENTS, BROTHERS AND SISTERS OF THE INDIVID UAL OR ANY OF THEM, WHOLLY OR MAINLY DEPENDENT ON THE INDIVIDUAL; 3. RULE 2B OF THE INCOME TAX RULES, 1961 LAYS DOWN THE CONDITIONS FOR THE PURPOSE OF SECTION 10(5) AND IT READS THUS: 2B. (1) THE AMOUNT EXEMPTED UNDER CLAUSE ( 5 ) OF SECTION 10 IN RESPECT OF THE VALUE OF TRAVEL CONCESSION OR ASSIST ANCE RECEIVED BY OR DUE TO THE INDIVIDUAL FROM HIS EMPLOYER OR FORME R EMPLOYER FOR HIMSELF AND HIS FAMILY, IN CONNECTION WITH HIS PROCEEDING, ( A ) ON LEAVE TO ANY PLACE IN INDIA; ( B ) TO ANY PLACE IN INDIA AFTER RETIREMENT FROM SERVICE OR AFTER THE TERM IN ATION OF HIS SERVICE, SHALL BE THE AMOUNT ACTUALLY INCURRED ON THE PERFOR MANCE OF SUCH TRAVEL SUBJECT TO THE FOLLOWING CONDITIONS, NA MELY : ( I ) WHERE THE JOURNEY IS PERFORMED ON OR AFTER THE 1ST DAY OF OCTOBER, 1997, BY AIR, AN AMOUNT NOT EXCEEDING THE AIR ECONOMY FARE OF THE NATIONA L CARRIER BY THE SHORTEST ROUTE ITA NOS. 2413 TO 2415/BANG/2019 PAGE 4 OF 15 TO THE PLACE OF DESTINATION; ( II ) WHERE PLACES OF ORIGIN OF JOURNEY AND DESTINATION A RE CONNECTED BY RAIL AND THE JOURNEY IS PERFORMED ON O R AFTER THE 1ST DAY OF OCTOBER, 1997, BY ANY MODE OF TRANSP ORT OTHER THAN BY AIR, AN AMOUNT NOT EXCEEDING THE AIR- CONDITIONED FIRST CLASS RAIL FARE BY THE SHORTEST R OUTE TO THE PLACE OF DESTINATION; AND ( III ) WHERE THE PLACES OF ORIGIN OF JOURNEY AND DESTINATI ON OR PART THEREOF ARE NOT CONNECTED BY RAIL AND THE JOUR NEY IS PERFORMED ON OR AFTER THE 1ST DAY OF OCTOBER, 1997, BETWEEN SUCH PLACES, THE AMOUNT ELIGIBLE FOR EXEMPT ION SHALL BE : (2) THE EXEMPTION REFERRED TO IN SUB-RULE (1) SHALL BE AVAILABLE TO AN INDIVIDUAL IN RESPECT OF TWO JOURNEYS PERFORMED IN A BLOCK OF FOUR CALENDAR YEARS COMMENCING FROM THE CALENDAR YE AR 1986 : [ PROVIDED THAT NOTHING CONTAINED IN THIS SUB-RULE SHALL APPL Y TO THE BENEFIT ALREADY AVAILED OF BY THE ASSESSEE IN R ESPECT OF ANY NUMBER OF JOURNEYS PERFORMED BEFORE THE 1ST DAY OF APRIL, 1989 EXCEPT TO THE EXTENT THAT THE JOURNEY OR JOURNEYS S O PERFORMED SHALL BE TAKEN INTO ACCOUNT FOR COMPUTING THE LIMIT OF TWO JOURNEYS SPECIFIED IN THIS SUB-RULE.] (3) WHERE SUCH TRAVEL CONCESSION OR ASSISTANCE IS N OT AVAILED OF BY THE INDIVIDUAL DURING ANY SUCH BLOCK OF FOUR CAL ENDAR YEARS, AN AMOUNT IN RESPECT OF THE VALUE OF THE TRAVEL CONCES SION OR ASSISTANCE, IF ANY, FIRST AVAILED OF BY THE INDIVID UAL DURING FIRST CALENDAR YEAR OF THE IMMEDIATELY SUCCEEDING BLOCK O F FOUR CALENDAR YEARS SHALL BE ELIGIBLE FOR EXEMPTION. EXPLANATION : THE AMOUNT IN RESPECT OF THE VALUE OF THE TRAVEL CONCESSION OR ASSISTANCE REFERRED TO IN THIS SUB-RU LE SHALL NOT BE TAKEN INTO ACCOUNT IN DETER-MINING THE ELIGIBILITY OF THE AMOUNT IN RESPECT OF THE VALUE OF THE TRAVEL CON-CESSION OR A SSISTANCE IN RELATION TO THE NUMBER OF JOURNEYS UNDER SUB-RULE ( 2).] ITA NOS. 2413 TO 2415/BANG/2019 PAGE 5 OF 15 [(4) THE EXEMPTION REFERRED TO IN SUB-RULE (1) SHAL L NOT BE AVAILABLE TO MORE THAN TWO SURVIVING CHILDREN OF AN INDIVIDUAL AFTER 1ST OCTOBER, 1998 : PROVIDED THAT THIS SUB-RULE SHALL NOT APPLY IN RESPECT OF C HILDREN BORN BEFORE 1ST OCTOBER, 1998, AND ALSO IN CASE OF MULTIPLE BIRTHS AFTER ONE CHILD. 4. THE ASSESSEE AS AN EMPLOYER WAS BOUND TO DEDUCT TAX AT SOURCE IN CASES WHERE THE LTA IS NOT EXEMPT I.E. IN A CASE WH ERE THE CONDITIONS LAID DOWN IN SEC.10(2) READ WITH RUE 2B OF THE RULES ARE NOT SATISFIED. THE ASSESSEE IN THESE APPEALS REIMBURSED LEAVE TRAVEL A LLOWANCES TO ITS EMPLOYEES IN RESPECT JOURNEY UNDERTAKEN OUT OF INDI A. IN RESPECT OF SUCH REIMBURSEMENT IT DID NOT DEDUCT TAX AT SOURCE. ACC ORDING TO THE BANK, IF THE DESTINATION IS INDIA, IRRESPECTIVE OF THE ENROUTE J OURNEY, IT NEED NOT DEDUCT TAX AT SOURCE AS THE REIMBURSEMENT OF LTA WAS EXEMP T U/S.10(5) OF THE ACT. 5. A SURVEY WAS CONDUCTED U/S.133A OF THE ACT IN TH E BUSINESS PREMISES OF THE ASSESSEE AND IT WAS NOTICED THAT TH E ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON LTA REIMBURSEMENT EVEN WHEN THE TRAVEL WAS OUT OF INDIA TO A DESTINATION IN INDIA THROUGH A LONG C IRCUITOUS ROUTE. THE ACT MANDATES THAT A SPECIFIED PERCENTAGE OF TAX IS REQU IRED TO BE DEDUCTED BY THE PAYER AT THE TIME OF MAKING CERTAIN PAYMENTS TO THE PAYEE. THE REQUIREMENT TO DEDUCT TAX IS THERE FOR PAYMENTS SUC H AS PAYMENT OF COMMISSION, INTEREST, SALARY, ROYALTY, CONTRACT PAY MENT, BROKERAGE ETC. THE NON-EXEMPT LTA WILL BE IN THE NATURE OF SALARY AND THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE AND THE ASSESSEE FAILED TO DO SO UNDER THE IMPRESSION THAT IF THE DESTINATION IS INDIA, IRRESP ECTIVE OF THE FACT THAT ENROUTE THE JOURNEY IS OUT OF INDIA, THE ENTIRE LTA IS EXEMPT. THE DEPARTMENT HOWEVER TOOK A CONTRARY VIEW AND HELD TH AT WHEN THE TRAVEL IS ITA NOS. 2413 TO 2415/BANG/2019 PAGE 6 OF 15 OUTSIDE INDIA IRRESPECTIVE OF THE FACT THAT THE ULT IMATE DESTINATION IS INDIA, TAX OUGHT TO HAVE BEEN DEDUCTED AT SOURCE. THE ASS ESSEE WAS ACCORDINGLY PROCEEDED U/S.200(1) & 200(1A) OF THE A CT FOR FAILURE TO DEDUCT TAX AT SOURCE AND WAS HELD TO BE AN ASSESSEE IN DEF AULT IN RESPECT OF TAXES NOT DEDUCTED AT SOURCE AND ALSO LIABLE FOR INTEREST ON SUCH TAX NOT DEDUCTED AT SOURCE AND PAID TO THE GOVERNMENT, FROM THE DATE ON WHICH IT OUGHT TO HAVE BEEN DEDUCTED AND PAID TO THE GOVERNMENT TILL THE DATE ON WHICH THE SAME IS PAID TO THE CREDIT OF THE CENTRAL GOVERNMEN T. OVER AND ABOVE THE OBLIGATION U/S.200 OF THE ACT, THE ASSESSEE IS ALSO LIABLE FOR IMPOSITION OF PENALTY U/S.271-C OF THE ACT FOR THE FAILURE TO DED UCT TAX AT SOURCE. THE PROVISIONS OF SEC.271-C READS THUS: SECTION: 271C. 1) IF ANY PERSON FAILS TO A) DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQU IRED BY OR UNDER THE PROVISIONS OF CHAPTER XVIIB; OR B) PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRE D BY OR UNDER I. SUB-SECTION (2) OF SECTION 115-O; OR II. THE SECOND PROVISO TO SECTION 194B, THEN, SUCH PERSON SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT OR PAY AS AFORESAID. 2) ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1) SHAL L BE IMPOSED BY THE JOINT COMMISSIONER. 6. HOWEVER, SECTION 273B OF THE ACT PROVIDES THAT I N CASE THE PAYER PROVES TO THE REVENUE DEPARTMENT THAT THERE WAS SOM E REASONABLE CAUSE FOR THE FAILURE TO DEDUCT TAX THEN THE PENALTY UNDE R SECTION 271C IS WAIVED OFF. SEC.273-B READS THUS:- ITA NOS. 2413 TO 2415/BANG/2019 PAGE 7 OF 15 SECTION 273B - PENALTY NOT TO BE IMPOSED IN CERTAI N CASES, CAN BE READ AS FOLLOWS: 273B. NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF CLAUSE (B) OF SUB-SECTION (1) OF SECTION 271, SECTI ON 271A, SECTION 271AA, SECTION 271B , SECTION 271BA, SECTION 271BB, SECTION 271C, SECTION 271CA, SECTION 271D, SECTION 271E, SE CTION 271F, SECTION 271FA, SECTION 271FB, SECTION 271G, SECTION 271H, CLAUSE (C) OR CLAUSE (D) OF SUB SECTION (1) OR SUB- SECTION (2) OF SECTION 272A, SUB-SECTION (1) OF SECTION 272AA OR S ECTION 272B OR SUBSECTION (1) OR SUBSECTION (1A) OF SECTION 272 BB OR SUB- SECTION (1) OF SECTION 272BBB OR CLAUSE (B) OF SUB- SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUBSECTION (2) OF SECTI ON 273, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASS ESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE C AUSE FOR THE SAID FAILURE. 7. THERE IS NO DEFINITION FOR THE TERM REASONABLE C AUSE AND IT HAS TO BE DECIDED UPON THE FACTS OF EACH CASE. THE HON'BLE SU PREME COURT OF INDIA MADE THE FOLLOWING OBSERVATION IN THE CASE OF COMMI SSIONER OF INCOME TAX, NEW DELHI VS. M/S ELI LILLY & COMPANY (INDIA) PVT. LTD. & ORS., CIVIL APPEAL NO. 5114/2007, ORDER DATE 25TH MARCH, 2009, WITH REGARDS TO REASONABLE CAUSE FOR FAILURE TO DEPOSIT TDS:- (IV) ON THE SCOPE OF SECTION 271C READ WITH SECTIO N 273B: 35. SECTION 271C INTER ALIA STATES THAT IF ANY PERS ON FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY THE PROVISIONS OF CHAPTER XVII-B THEN SUCH PERSON SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT. IN THESE CASES WE ARE CONCERNED W ITH SECTION 271C(1)(A). THUS SECTION 271C(1)(A) MAKES IT CLEAR THAT THE PENALTY LEVIABLE SHALL BE EQUAL TO THE AMOUNT OF TA X WHICH SUCH PERSON FAILED TO DEDUCT. WE CANNOT HOLD THIS PROVIS ION TO BE MANDATORY OR COMPENSATORY OR AUTOMATIC BECAUSE UNDE R SECTION 273B PARLIAMENT HAS ENACTED THAT PENALTY SHALL NOT BE IMPOSED IN CASES FALLING THEREUNDER. SECTION 271C FALLS IN THE CATEGORY OF SUCH CASES. SECTION 273B STATES THAT NOTWITHSTANDIN G ANYTHING ITA NOS. 2413 TO 2415/BANG/2019 PAGE 8 OF 15 CONTAINED IN SECTION 271C, NO PENALTY SHALL BE IMPO SED ON THE PERSON OR THE ASSESSEE FOR FAILURE TO DEDUCT TAX AT SOURCE IF SUCH PERSON OR THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. THEREFORE, THE LIABILIT Y TO LEVY OF PENALTY CAN BE FASTENED ONLY ON 44 THE PERSON WHO D O NOT HAVE GOOD AND SUFFICIENT REASON FOR NOT DEDUCTING TAX AT SOURCE. ONLY THOSE PERSONS WILL BE LIABLE TO PENALTY WHO DO NOT HAVE GOOD AND SUFFICIENT REASON FOR NOT DEDUCTING THE TAX. THE BU RDEN, OF COURSE, IS ON THE PERSON TO PROVE SUCH GOOD AND SUFFICIENT REASON. IN EACH OF THE 104 CASES BEFORE US, WE FIND THAT NON-DEDUCT ION OF TAX AT SOURCE TOOK PLACE ON ACCOUNT OF CONTROVERSIAL ADDIT ION. THE CONCEPT OF AGGREGATION OR CONSOLIDATION OF THE ENTI RE INCOME CHARGEABLE UNDER THE HEAD 'SALARIES' BEING EXIGIBLE TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 192 WAS A NASCENT IS SUE. IT HAS NOT BE CONSIDERED BY THIS COURT BEFORE. FURTHER, IN MOS T OF THESE CASES, THE TAX- DEDUCTOR-ASSESSEE HAS NOT CLAIMED D EDUCTION UNDER SECTION 40(A)(III) IN COMPUTATION OF ITS BUSINESS I NCOME. THIS IS ONE MORE REASON FOR NOT IMPOSING PENALTY UNDER SECT ION 271C BECAUSE BY NOT CLAIMING DEDUCTION UNDER SECTION 40( A)(III), IN SOME CASES, HIGHER CORPORATE TAX HAS BEEN PAID TO T HE EXTENT OF RS. 906.52 LACS (SEE CIVIL APPEAL NO. 1778/06 ENTIT LED CIT V. THE BANK OF TOKYO-MITSUBISHI LTD.). IN SOME OF THE CASES, IT IS UNDISPUTED THAT EACH OF THE EXPATRIATE EMPLOYEES HA VE PAID DIRECTLY THE TAXES DUE ON THE FOREIGN SALARY BY WAY OF ADVANCE TAX/SELF-ASSESSMENT TAX. THE TAX-DEDUCTOR-ASSESSEE WAS UNDER A GENUINE AND BONA FIDE BELIEF THAT IT WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAX AT SOURCE FROM THE HOME SA LARY PAID BY THE FOREIGN COMPANY/HO AND, CONSEQUENTLY, WE ARE OF THE VIEW THAT IN NONE OF THE 104 CASES PENALTY WAS LEVI ABLE UNDER SECTION 271C AS THE RESPONDENT IN EACH CASE HAS DIS CHARGED ITS 45 BURDEN OF SHOWING REASONABLE CAUSE FOR FAILU RE TO DEDUCT TAX AT SOURCE . 8. THE HON'BLE KARNATAKA HIGH COURT MADE THE FOLLOW ING OBSERVATION IN THE CASE OF THE COMMISSIONER OF INCOME TAX AND OTHE RS VS. THE RAJAJINAGAR CO-OPERATIVE BANK LIMITED ITA 86 OF 2006, ORDER DATE 20TH JULY, 201, WITH REGARDS TO REASONABLE CAUSE FOR FAILURE TO DE POSIT TDS:- 10. IN THE INSTANT CASE, THE ASSESSEE IS A COOPERATIVE BANK. CLAUSE 5 OF SUB-SECTION (3) OF SECTION 194A EXPRESS LY EXEMPTS ITA NOS. 2413 TO 2415/BANG/2019 PAGE 9 OF 15 THE BANK FROM DEDUCTING THE TAX AT SOURCE ON INTERE ST PAYABLE BY THE BANK TO ITS MEMBERS AND OTHER COOPERATIVE SO CIETIES. AS STATED BY THE ASSESSEE, THEY DID NOT PROPERLY CO NSTRUE THIS PROVISION. BY MIS-CONSTRUING THIS PROVISION THEY AL SO DID NOT DEDUCT TAX FROM THE INTEREST PAYABLE TO NONMEMBERS. THAT IS THE BONAFIDE MISTAKE WHICH THEY HAVE COMMITTED. THE IR BONFIDES IS DEMONSTRATED TO THE EFFECT THAT ONCE IN A SURVEY THE SAID MISTAKE WAS NOTICE AND POINTED OUT IMMEDIA TELY THEY HAVE PAID THE TAX WITH INTEREST. THEREFORE, IN THE LIGHT OF THIS UNDISPUTED FACTS OF THIS CASE, WHEN THE APPELLATE C OMMISSIONER AND THE TRIBUNAL HELD THAT THE SAME CONSTITUTES A R EASONABLE CAUSE AND WHEN THE SAME IS NOT SHOWN TO BE FALSE, THE ASS ESSEE HAS SATISFIED THE REQUIREMENT OF SECTION 273- B, IN WHI CH EVENT, NO PENALTY SHALL BE IMPOSABLE. THEREFORE THE ORDER PAS SED BY THE TRIBUNAL AND THE APPELLATE COMMISSIONER IS VALID AN D LEGAL AND DO NOT SUFFER FROM ANY LEGAL INFIRMITY WHICH CALLS FOR INTERFERENCE. ACCORDINGLY THE SUBSTANTIAL QUESTION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE. 9. IN THE PRESENT CASE, THE ASSESSEE WAS HELD TO BE AN ASSESSEE IN DEFAULT AND ORDERS U/S.200(1) & 200(1A) OF THE ACT BY THE AO AND THE CIT(A). 10. THE REVENUE AUTHORITIES PROCEEDED TO IMPOSE PENALTY U/S.271C ON THE ASSESSEE REJECTING THE PLEA OF THE ASSESSEE TH AT THE FAILURE TO DEDUCT TAX AT SOURCE WAS ON A REASONABLE BELIEF THAT IF THE DESTINATION IS INDIA, IRRESPECTIVE OF THE FACT THAT EN-ROUTE THE JOURNEY IS OUT OF INDIA, THE ENTIRE LTA IS EXEMPT. AGGRIEVED BY THE ORDERS OF THE CIT(A ) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THERE IS A DELAY RANGI NG FROM11 DAYS TO 56 DAYS IN FILING THESE APPEALS BY THE ASSESSEE WHICH HAS BEEN EXPLAINED IN AN AFFIDAVIT FILED BY THE ASSISTANT MANAGER OF THE RESPECTIVE APPELLANT BRANCHES STATING THAT THE DELAY OCCASIONED DUE TO G ETTING ADMINISTRATIVE APPROVAL FOR FILING APPEALS. THE DELAY IS NOMINAL AND THERE HAS BEEN NO WANT OF DILIGENCE ON THE PART OF THE APPELLANT. TH E DELAY IN FILING APPEALS IS THEREFORE CONDONED. ITA NOS. 2413 TO 2415/BANG/2019 PAGE 10 OF 15 11. AS FAR AS THE MERITS OF THE CASE RELATING TO IM POSITION OF PENALTY U/S.271C OF THE ACT, THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF STATE BANK OF INDIA VS. ACIT (2019) 101 TAXMANN.COM 61 (JAIPUR-TRIB.) WHEREIN ON IDENTICAL DEFAULT OF NON-DEDUCTION OF TAX AT SOURCE ON PERQUISITE NOT EX EMPT U/S.10(5) OF THE ACT AND IMPOSITION OF PENALTY FOR SUCH FAILURE U/S.271C OF THE ACT, THE ITAT JAIPUR DELETED PENALTY IMPOSED U/S.271C OF THE ACT, OBSERVING AS FOLLOWS:- 10. WE ALSO REFER TO HON'BLE SUPREME COURT DECISI ONS IN CASE OF CIT V. I.T.I. LTD . [2009] 183 TAXMAN 219 ( SC) AND CIT V. LARSEN & TOUBRO LTD . [2009] 181 TAXMAN 71 (SC) WHEREIN IT WAS HELD THAT THE BENEFICIARY OF EXEMPTION UNDER SECTION 10(5) IS AN INDIVIDUAL EMPLOYEE. THERE IS NO CIRCULAR OF CENTRAL BOARD OF DIRECT TAXES (CBDT) REQUIRING THE EMPLOYER UNDER SECTION 192 TO COLLECT AND EXAMINE THE SUPPORTING EVIDENCE TO THE DECLARATION TO BE SUBMITTED BY AN E MPLOYEE(S). THEREFORE, IT WAS HELD THAT AN ASSESSEE-EMPLOYER IS UNDER NO STATUTORY OBLIGATION UNDER THE INCOME-TAX ACT , 1961, AND/OR THE RULES TO COLLECT EVIDENCE TO SHOW THAT ITS EMPLOYEE (S) HAD ACTUALLY UTILIZED THE AMOUNT(S) PAID TOWARDS LEAVE TRAVEL CONCESSION(S)/CONVEYANCE ALLOWANCE. 11. WE THUS FIND THAT THERE IS NOTHING SPECIFIC WH ICH HAS BEEN PROVIDED BY CBDT IN ITS CIRCULAR ISSUED UNDER SECTION 192 FOR THE RELEVANT FINANCIAL YEAR. WHAT HAS BEEN REITERAT ED IS ADHERENCE TO THE PROVISIONS AS CONTAINED IN SECTION 10(5) READ WITH RULE 2B. SIMILARLY, THE HON'BLE SUPREME COURT HAS ALSO H ELD THAT AN ASSESSEE EMPLOYER IS UNDER NO STATUTORY OBLIGATION UNDER THE INCOME-TAX ACT , 1961, AND/OR THE RULES TO COLLECT EVIDENCE TO SHOW THAT ITS EMPLOYEES HAD ACTUALLY UTILIZED TH E AMOUNT PAID TOWARDS LEAVE TRAVEL CONCESSION. EVEN THOUGH THE SA ME IS NOT REQUIRED AS PER DECISION REFERRED SUPRA, IN THE INS TANT CASE, THE ASSESSEE BANK HAS BEEN DILIGENT, AND HAS COLLECTED AND BROUGHT ON RECORD EVIDENCE TO SHOW THAT ITS EMPLOYEES HAD ACTU ALLY UTILIZED THE AMOUNT PAID TOWARDS LEAVE TRAVEL CONCESSION. 12. AT THE SAME TIME, IN TERMS OF ADHERENCE TO THE PROVISIONS AS CONTAINED IN SECTION 10(5) READ WITH RULE 2B, WE FIND THAT THE ASSESSEE BANK HAS ALLOWED EXEMPTION TO ALL ITS EMPL OYEES WHO ITA NOS. 2413 TO 2415/BANG/2019 PAGE 11 OF 15 HAVE SUBMITTED LFC CLAIM. THE REVENUE HAS NOT DISPU TED THE LFC CLAIM IN RESPECT OF THESE EMPLOYEES EXCEPT IN R ESPECT OF 12 EMPLOYEES. THESE 12 EMPLOYEES, WHO HAVE TRAVELLED T O FOREIGN COUNTRIES AS PART OF THEIR TRAVEL ITINERARY WITH DE SIGNATED PLACE OF TRAVEL IN INDIA, AND IN RESPECT OF WHICH THEY HAVE SUBMITTED THEIR LFC CLAIM, HAS BEEN DISPUTED BY THE REVENUE AS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 10(5) IN RESPECT OF AMOUNT REIMBURSED TOWARDS FOREIGN LEG OF THEIR TRAVEL. THE EXPLANATIO N OF THE ASSESSEE BANK IS THAT WHILE CALCULATING THE TAX LIA BILITY OF ITS EMPLOYEES, THE FIGURE OF LFC WAS ALWAYS EXEMPTED AN D THIS RULE WAS BEING FOLLOWED SINCE MANY YEARS, BEING IN A NAT URE OF THUMB RULE AND TDS EXEMPTION OF LFC WAS THUS ALLOWED ALMO ST MECHANICALLY YEAR AFTER YEAR. TO OUR MIND, IT IS IM PORTANT TO BE CONSISTENT BUT AT THE SAME TIME, ONE NEEDS TO BE MI NDFUL OF WHAT BEEN SUBMITTED BY THE EMPLOYEES TOWARDS THEIR LFC C LAIMS. IT APPEARS THAT THE ASSESSEE BANK HAS LOOKED AT THESE 12 EMPLOYEES' CLAIM BROADLY, AS IN OTHER CASES, IN TERMS OF ACTUA L TRAVEL BEING UNDERTAKEN, THE DESIGNATED PLACE BEING IN INDIA AND THE AMOUNT OF CLAIM NOT EXCEEDING THE ECONOMY FARE OF THE NATIONA L CARRIER BY THE SHORTEST ROUTE TO THE PLACE OF DESTINATION. HOW EVER, THE REVENUE'S CASE IS THAT WHAT THE ASSESSEE BANK HAS F AILED TO CONSIDER IS THAT THE TRAVEL PLAN INCLUDES THE FOREI GN LEG OF TRAVEL AND CORRESPONDING TRAVEL EXPENSES WHICH IS NOT ELIG IBLE FOR EXEMPTION UNDER SECTION 10(5) OF THE ACT. HOWEVER, THE ASSESSEE'S BANK EXPLANATION TO THIS EFFECT IS THAT SECTION 10(5) AND RULE 2B DOESN'T PLACE A BAR ON TRAVEL TO A FOR EIGN DESTINATION DURING THE COURSE OF TRAVEL TO A PLACE IN INDIA AND THERE IS NOTHING EXPLICIT PROVIDED THEREIN TO PROHI BIT SUCH TRAVEL IN ORDER TO DENY THE EXEMPTION. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND FACTS ON RECORD, WE ARE OF THE OPIN ION THAT THE ASSESSEE BANK HAS UNDERTAKEN REASONABLE STEPS IN TE RMS OF VERIFYING THE ASSESSEE'S CLAIM TOWARDS THEIR LFC CL AIMS AND IS AWARE OF EMPLOYEES TRAVELLING TO FOREIGN COUNTRIES AS PART OF THEIR TRAVEL ITINERARY BUT AT THE SAME TIME, THERE IS AN ERROR OF JUDGMENT ON PART OF THE ASSESSEE BANK IN UNDERSTANDING AND A PPLYING THE PROVISIONS OF SECTION 10(5) OF THE ACT. THEREFORE, WE ARE UNABLE TO ACCEPT THE REVENUE'S CONTENTION THAT THE ASSESSE E BANK HAS NOT DEDUCTED THE TAX INTENTIONALLY, FULLY KNOWING THAT THE LFC IS APPLICABLE FOR TRAVEL IN INDIA ONLY AND NO FOREIGN TRAVEL IS ALLOWABLE AS IT IS A CASE OF ERROR OF JUDGMENT AND NO MALAFIDE CAN BE ASSUMED ON PART OF THE BANK. FURTHER, NOTHING HA S BEEN ITA NOS. 2413 TO 2415/BANG/2019 PAGE 12 OF 15 BROUGHT ON RECORD WHICH IN ANY WAYS SUGGEST CONNIVA NCE ON PART OF THE ASSESSEE BANK OR FORGED CLAIMS SUBMITTED BY THE EMPLOYEES AND WHICH HAS BEEN DISCOVERED BY THE REVENUE DURING THE COURSE OF ITS EXAMINATION. AS FAIRLY SUBMITTED BY THE ASSE SSEE BANK, WHILE CALCULATING THE ESTIMATED TAX LIABILITY OF IT S EMPLOYEES, IT ALWAYS CONSIDER LFC CLAIM AS EXEMPT UNDER SECTION 10(5) AND THE SAME POSITION, BEING FOLLOWED AND ACCEPTED CONS ISTENTLY IN THE PAST YEARS, WAS FOLLOWED IN THE CURRENT FINANCI AL YEAR AS WELL. HOWEVER, FOR THE FIRST TIME, AFTER THE SURVEY BY TH E TAX DEPARTMENT, THIS ISSUE AROSE FOR CONSIDERATION AND AFTER THE JUDGMENT OF THE TRIBUNAL, THE MATTER GOT CLARIFIED AND THE ASSESSEE BANK HAS DULY COMPLIED AND DEPOSITED THE OUTSTANDIN G DEMAND ALONG WITH INTEREST AND HAS TAKEN CORRECTIVE STEPS IN SUBSEQUENT YEARS AS WELL. 13. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THERE WAS REASONABLE CAUSE IN TERMS OF SECTION 273B OF THE ACT FOR NOT DEDUCTING TAX BY THE ASSESSEE BANK. IN THE RESULT, THE PENALTY SO LEVIED UNDER SECTION 271C IS HEREBY DIRECTED TO BE DELETED. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN THE HONBLE HIGH COURT ADMITS AN APPEAL AGAINST THE ORD ER I N QUANTUM PROCEEDINGS, NO PENALTY CAN BE LEVIED ON THE ASSESS EE. IT WAS SUBMITTED THAT WHEN THE HIGH COURT ADMITS SUBSTANTIAL QUESTIO N OF LAW ON AN ADDITION, IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES NO PENALTY CAN BE LEVIED U/S 271C. IN THIS REGARD THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DEC ISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANKITA ELECTRONICS PVT. LTD. 379 ITR 50 (KAR) WHEREIN IT WAS HELD THAT THE ADMISSION OF SUBSTANT IAL QUESTION OF LAW BY THE HIGH COURT LENDS CREDENCE TO THE BONA FIDES OF THE ASSESSEE IN HIS ACTION AND HENCE NO PENALTY CAN BE IMPOSED ON SUCH ADDITIONS/DEFAULTS. ITA NOS. 2413 TO 2415/BANG/2019 PAGE 13 OF 15 13. THE LEARNED DR RELIED ON THE ORDER OF CIT(A) AN D FURTHER DREW OUR ATTENTION TO A DECISION OF ITAT BANGALORE BENCH IN THE CASE OF SYNDICATE BANK IN ITA NO.532 TO 536/BANG/2019 ORDER DATED 12. 7.2019, WHEREIN THIS TRIBUNAL REMANDED THE QUESTION OF IMPOSITION OF PEN ALTY TO THE CIT(A) FOR FRESH CONSIDERATION TO SEE PARITY OF FACTS BETWEEN THE CASE OF THE ASSESSEE AND THE DECISION OF ITAT JAIPUR BENCH IN THE CASE O F STATE BANK OF INDIA (SUPRA). 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE FACTS OF THE CASE OF THE ASSESSEE IN THESE APPEALS IS IDENTI CAL TO THE CASE DECIDED BY THE JAIPUR BENCH OF ITAT IN THE CASE OF STATE BA NK OF INDIA(SUPRA) AND THEREFORE THE RATIO LAID DOWN THEREIN WILL SQUARELY APPLY TO THE FACTS OF THE ASSESSEES CASE AND THEREFORE FOLLOWING THE RATIO L AID DOWN THEREIN, THE PENALTY IMPOSED IS LIABLE TO BE CANCELLED. THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF ANKITA ELECTRONICS PVT. LTD. (SUPRA) HAD AN OCCASION TO DEAL WITH ISSUE WHETHER PENALTY CAN BE LEVIED WHEN QUANTUM PROCEEDINGS ARE PENDING IN THE HONBLE HIGH COURT AND SUBSTANTI AL QUESTION OF LAW IS FRAMED FOR CONSIDERATION BY THE HIGH COURT ON THE D EFAULT WHICH IS THE BASIS FOR INITIATING PENALTY PROCEEDINGS. THE HONBLE CO URT HELD THAT WHEN THE ADDITIONS IN RESPECT OF WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED, ARE CHALLENGED IN APPEAL BEFORE HIGH COURT AND WHEN HIGH COURT HAS ADMITTED FOR CONSIDERATION THE CORRECTNESS OF S UCH ADDITION THEN IT MEANS THAT THE ADDITIONS MADE WERE DEBATABLE AND WO ULD LEAD CREDENCE TO THE BONAFIDES OF THE ASSESSEE AND IN SUCH CIRCUMSTA NCES IMPOSITION OF PENALTY WAS NOT PROPER AND WAS RIGHTLY DELETED BY T HE TRIBUNAL. IN THE LIGHT OF THE AFORESAID DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE ARE OF THE VIEW THAT LEVY OF PENALTY U/S.271C OF THE ACT, IN THE GIVEN FACTS AND ITA NOS. 2413 TO 2415/BANG/2019 PAGE 14 OF 15 CIRCUMSTANCES OF THE CASE, CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE DELETED. 15. AS FAR AS THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF SYNDICATE BANK (SUPRA) IS CONCERNED, WE ARE OF THE VIEW THAT IN THE AFORESAID DECISION, THE QUESTION WHETHER PENALTY CA N BE IMPOSED WHEN THIS ISSUE IN RESPECT OF WHICH PENALTY IS IMPOSED IN TH E QUANTUM PROCEEDINGS ARE PENDING IN THE HONBLE HIGH COURT AND SUBSTANTI AL QUESTION OF LAW IS FRAMED FOR CONSIDERATION BY THE HIGH COURT ON THE D EFAULT WHICH IS THE BASIS FOR INITIATING PENALTY PROCEEDINGS, PENALTY CAN BE LEVIED WAS NEITHER RAISED NOR CONSIDERED. SINCE THE IMPOSITION OF PENALTY U/ S.271C FAILS ON THIS GROUND, WE ARE OF THE VIEW THAT THERE IS NO NECESSI TY TO REMAND THE ISSUE TO CIT(A) FOR CONSIDERATION AFRESH, AS WAS DONE BY THE TRIBUNAL IN THE CASE REFERRED TO BY THE LEARNED DR. WE THEREFORE HOLD T HAT THE IMPOSITION OF PENALTY IN THE FACTS AND CIRCUMSTANCES OF THE CASE CANNOT BE JUSTIFIED AND THE SAME IS DIRECTED TO BE CANCELLED. 16. IN THE RESULT, THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF FEBRUARY, 2020. SD/- SD/- ( A.K.GARODIA ) ( N V VA SUDEVAN ) ACCOUNTANT M EMBER VICE PRESIDENT BANGALORE, DATED, THE 12 TH FEBRUARY, 2020. / DESAI S MURTHY / ITA NOS. 2413 TO 2415/BANG/2019 PAGE 15 OF 15 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT( A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.