STATE BANK OF INDIA LOCAL HEAD OFFICE CHANDIGARH,CHANDIGARH V. ADDL COMMISSIONER OF INCOME TAX(TDS) CHANDIGARH, CHANDIGARH

ITA 991/CHANDI/2025

AI Insights

The case involves the State Bank of India (SBI), which appealed against the penalty imposed by the Additional Commissioner of Income Tax (TDS), Chandigarh, for failing to deduct tax at source on LTC/LFC payments made to employees for foreign travel during the assessment year 2016-17. The Assessing Officer (AO) treated SBI as an assessee in default under sections 201(1) and 201(1A) of the Income Tax Act for non-deduction of tax, leading to a demand for tax and interest. The CIT(A) upheld the penalty, rejecting SBI's claims that the interim stay from the Madras High Court and other arguments constituted reasonable cause for non-compliance. The Tribunal, referencing a Supreme Court decision, agreed that the exemption under section 10(5) of the Act does not apply to foreign travel, thus affirming the penalty.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835348 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2016-2017
• Appeal Filed On: 07-08-2025
• Other Referred Cases: Hon'ble Supreme Court judgment on LTC exemption
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Keywords: Reasonable cause; TDS; Non-deduction of tax
• Section: 133(6); 201(1); 273B

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 991/Chd/ 2025 िनधाŊरण वषŊ / Assessment Year : 2016-17 State Bank of India Local Head Office Chandigarh Sector 17B, Chandigarh-160017 बनाम The Addl. CIT(TDS) Chandigarh ˕ायी लेखा सं./PAN NO: AAACS8577K अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : None राजˢ की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 09/02/2026 उदघोषणा की तारीख/Date of Pronouncement : 11/02/2026 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 11/06/2025 for the Assessment Year 2016-17. 2. In the present appeal Assessee has raised the following grounds: 1. The impugned order is both against facts and erroneous in law. 2. On the facts and circumstances of the case the Ld.CIT(Appeals) NFAC has erred in having confirmed the order of the Ld.AO imposing penalty of Rs.17,23,630/- u/s 271C of the Income Tax Act. 3. On the facts and circumstances of the case the Ld.CIT(Appeals) NFAC has erred in having held that the assessee/appellant has not shown any reasonable cause that prevented it from deducting TI)S on the LTC/LFC payments. 4. On the facts and circumstances of the case the Ld.CIT(Appeals) NFAC has erred in having confirmed the penalty order passed by the Ld.AO as there was no specific charge of failure either to deduct or to deposit the tax deducted at source. 5. On the facts and circumstances of the case the Ld.CIT(Appeals) NFAC has erred in having relied upon the case laws which were not applicable to the facts of present case as all these judgements were distinguishable on facts. 6. The assessee craves leave to add to, alter or amend the above grounds of appeal before the same is heard or disposed off. Printed from counselvise.com 2 lt. is prayed that penalty of Rs.17,23,630/- may kindly be deleted. 3. Briefly the facts of the case are that the assessee is a banking company engaged in the business of banking and is responsible for deduction of tax at source on salary payments under section 192 of the Income-tax Act, 1961. For the assessment year 2016-17, the Assessing Officer conducted TDS verification proceedings and issued notice under section 133(6) seeking details of Leave Travel Concession/Leave Fare Concession (LTC/LFC) payments made to employees. On examination of the details furnished, it was noticed that the assessee had reimbursed LTC/LFC expenses to its employees involving foreign travel and no tax was deducted at source on such payments. 3.1 The Assessing Officer was of the view that exemption under section 10(5) of the Act is available only in respect of travel to any place in India and not for foreign travel. Accordingly, the assessee was treated as an assessee in default under sections 201(1) and 201(1A) of the Act for non-deduction of tax at source, resulting in demand of tax and interest. Subsequently, the Addl. Commissioner of Income Tax (TDS), Chandigarh initiated penalty proceedings under section 271C of the Act and levied penalty equal to the amount of tax allegedly not deducted. Aggrieved by the levy of penalty, the assessee carried the matter in appeal before the CIT(A). 3.2 The Assessing Officer held that the assessee failed to deduct tax at source on LTC/LFC payments made to employees who had undertaken foreign travel. According to the AO, the provisions of section 10(5) of the Act clearly restrict exemption to travel within India and therefore the entire reimbursement constituted taxable salary. The AO observed that the obligation to deduct tax under section 192 is absolute and the assessee, being the employer, was required to ensure correct deduction of tax at source. Printed from counselvise.com 3 3.3 The AO rejected the assessee’s contention that deduction of tax was not made due to interim stay granted by the Hon’ble Madras High Court, holding that the statutory provisions override such claims. It was concluded that the assessee failed to fulfill its statutory obligation under Chapter XVII-B of the Act and therefore penalty under section 271C was leviable. Accordingly, penalty of Rs.17,23,630/- being equal to the tax not deducted was imposed. 4. Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The CIT(A) upheld the levy of penalty under section 271C of the Act. The CIT(A) observed that it is an admitted fact that no tax was deducted at source on LTC/LFC payments involving foreign travel and that exemption under section 10(5) is not available for foreign travel. Reliance was placed on the judgment of the Hon’ble Supreme Court in the assessee’s own case, wherein it was categorically held that LTC exemption does not extend to foreign travel and tax was required to be deducted at source. 4.1 The CIT(A) further held that penalty under section 271C is a civil liability and mens rea is not required for its imposition. It was observed that the burden to establish reasonable cause under section 273B lies entirely on the assessee and that the assessee failed to demonstrate any reasonable cause which prevented it from deducting tax at source. The plea based on interim orders of the Hon’ble Madras High Court was rejected on the ground that statutory obligation under section 192 remained unchanged. Accordingly, the CIT(A) confirmed the penalty levied under section 271C and dismissed the appeal. 5. Against the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal. 6. During the course of the hearing, none appeared on behalf of the assessee. 7. Per contra, the Ld. DR supported the orders of the AO and the Ld. CIT(A), NFAC and submitted that the penalty under section 271C has been Printed from counselvise.com 4 rightly levied. It is an admitted fact that the assessee failed to deduct tax at source on LTC/LFC payments relating to foreign travel. 7.1 The DR contended that section 10(5) of the Act clearly restricts exemption to travel within India and, therefore, reimbursement of foreign travel expenses constitutes taxable salary. The assessee, being a banking company with adequate tax expertise, was statutorily bound to deduct tax under section 192. 7.2 It was argued that reliance on interim orders of the Hon’ble Madras High Court does not amount to reasonable cause under section 273B, as interim relief cannot override clear statutory provisions. The Hon’ble Supreme Court, in the assessee’s own case, has conclusively held that LTC exemption is not available for foreign travel. 7.3 The DR further submitted that penalty under section 271C is a civil liability and does not require mens rea. The assessee failed to establish any reasonable cause for non-deduction of tax. The contention regarding vague charge is merely technical and does not invalidate the penalty. 7.4 Accordingly, the Ld. DR prayed that the order of the Ld. CIT(A), NFAC confirming the penalty under section 271C be upheld and the appeal of the assessee be dismissed. 8. We have heard the rival submissions and perused the material available on record. We find that the issue involved in the present appeal, namely levy of penalty under section 271C of the Act for failure to deduct tax at source on LTC/LFC payments relating to foreign travel, is squarely covered by the decision of the Hon’ble Supreme Court in the assessee’s own case, which has been duly relied upon by the Ld. CIT(A), NFAC while passing the impugned order. 8.1 The Hon’ble Supreme Court has conclusively held that exemption under section 10(5) of the Act is available only in respect of travel within India and not for foreign travel, and consequently, tax was required to be Printed from counselvise.com 5 deducted at source on such payments under section 192 of the Act. After the said judgment of the Hon’ble Supreme Court, we do not find any change either in the facts of the case or in the legal position which would warrant a different view. 8.2 In the absence of any distinguishing facts or subsequent change in law, and respectfully following the binding decision of the Hon’ble Supreme Court as relied upon by the Ld. CIT(A), we find no infirmity in the order passed by the Ld. CIT(A), NFAC confirming the penalty under section 271C of the Act. Accordingly, the appeal filed by the assessee is dismissed. 9. In the result, appeal filed by the Assessee is dismissed. Order pronounced in the open Court on 11/02/2026 Sd/- Sd/- क ृणवȶ सहाय लिलत क ुमार (KRINWANT SAHAY) (LALIET KUMAR) लेखा सद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟ /JUDICIAL MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "