Penalty u/s 271C not maintainable in absence of contumacious conduct by assessee – SC

Brief of the Case

Supreme Court held In the case of CIT vs. Bank of Nova Scotia that there is no substantial question of law, the facts and law having properly and correctly been assessed and approached by the CIT (A) as well as by the ITAT that for levy of penalty u/s 271C, it is necessary to establish that there was contumacious conduct on the part of the assessee. Hence, penalty u/s 271C is not maintainable.

Facts of the Case

The issue pertains to the assessment of penalty under Section 271C which imposed for failure to deduct tax at source. Against the order of Assessing Officer, the petitioner took up the matter in appeal and the CIT (A ) deleted the levy of penalty. On appeal with ITAT by the revenue, the ITAT deleted the penalty. Further High court rejected the appeal only on the ground that no substantial question of law arises in the matter.

Held by ITAT

ITAT deleted the penalty. It was held that for levy of penalty u/s 271C, it is necessary to establish that there was contumacious conduct on the part of the assessee. Further on similar facts Hon’ble Delhi High Court have deleted levy of penalty u/s 271C in the case of M/s. Itochu Corporation, reported in 268 ITR 172 (Del) and in the case of CIT Vs. Mitsui & Company Ltd. reported in 272 ITR 545.

Held by Supreme Court

Supreme Court held that we are convinced that there is no substantial question of law, the facts and law having properly and correctly been assessed and approached by the CIT (A) as well as by the ITAT. Thus, we see no merits in the appeal and it is accordingly dismissed.

Accordingly appeal of the revenue dismissed.