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Penalty order passed U/S 271C for non-deduction of TDS, beyond period of 6 months from date of reference for imposition of penalty would be barred by limitation

Recently, ITAT Jaipur Bench in M.D.S. Universityvs. Assistant Commissioner of Income-tax held that, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated whichever period expires later, the penalty U/S 271C cannot be imposed.

Facts of the case:

Penalty during the course of TDS survey, it was found that the assessee had not made TDS out of mobilization advance paid to M,’s Rajasthan State Road Development Corporation Ltd. The ITO (TDS), Ajmer on.19th March, 2000, held the assessee deductor as defaulter and raised a demand of TDS. This was brought to the notice of Addl. CIT, Udaipur, who issued a notice under s. 274/271C of the Act to show cause as to why penalty under s. 271C should not be imposed in its case for default of not making TDS U/S194C of the Act while making advances to M/s Rajasthan State Road Development Corporation Ltd. (RSRDCL).

The assessee submitted in its reply that it did not make any TDS on the payments made to RSRDCL on the impression that the TDS provisions were not applicable in view of s. 196 of the Act. It was further submitted that the assessee-deductor had deposited the entire payment raised by ITO (TDS) within a stipulated time. However, the AO did not find merit in the submissions of the assessee and levied penalty U/S 271C of the Act vide order dt. 18th Aug., 2010.

Being aggrieved, the assessee carried the matter to the learned CIT (A), who confirmed the penalty stating that the argument of the appellant that tax is to be deducted on the income component of the payment is not acceptable.

Hence, an appeal was made by the assesse.

It was held that:

Learned counsel for the assessee submitted that the penalty levied by the AO was barred by limitation as per the provisions contained in s. 275(l)(c) of the Act which provides that “no penalty can be imposed after expiry of financial year in which proceedings, in the course of which action for imposition of penalty has been initiated are completed”. It was contended that in this case, the relevant proceedings were commenced on 19th March, 2009 and the financial year ends on 31st March, 2009. It was further stated that the penalty could not have been imposed from the end of the month, in which action for imposition of penalty was initiated, which in the present case was on 24th Dec., 2009. Therefore, the penalty could have been levied before 30th June, 2010, however, in this case it was levied on 18th Aug., 2010, so, it was barred by limitation.

Thus it was held that, the penalty U/S 271C levied in the case was not justified and liable to be set aside. Considering the totality of the facts the ITAT was of the view that the learned CIT(A) was not justified in confirming the penalty order passed by the AO under s. 271C of the Act.

Source: Mr. Alok Patnia, founder of 


CBDT Issues Instructions to Its Field Offices Regarding Endeavour Towards a Non-Adversarial Tax Regime

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
7th November, 2014 

CBDT Issues Instructions to Its Field Offices Regarding Endeavour Towards a Non-Adversarial Tax Regime; Emphasis on Cleanliness, Punctuality, Timeliness in Appointment, Avoiding Unnecessary Adjournments Among Others.

In its constant endeavour towards a non-adversarial tax regime, the Central Board of Direct Taxes (CBDT) has issued instruction dated 7th November, 2014 to its field offices. Emphasis has been laid on cleanliness in office, punctuality, timeliness in appointment and avoiding unnecessary adjournments. Though less that 1% of returns filed are selected for scrutiny, this area of work has often drawn adversarial comments. Supervisory officers, have been directed to play a more pro-active role in monitoring and guiding assessments towards ensuring that high-pitched assessments without proper basis are not made and that lengthy questionnaires or summons without due application of mind are avoided. They have been directed to ensure Inspections and Reviews in accordance with guidelines issued to enable capacity building within the Department and accountability of the officers.

In limited scrutiny cases selected on the basis of AIR/CIB/26AS information, the enquiries will ordinarily be restricted to such information. Refunds are to be granted in accordance with instructions already issued which provide for grant of credit of TDS on the basis of evidence submitted by the assessee. Instructions dealing with recovery/stay of demand and grant of instalments have been reiterated to ensure that no coercive action is undertaken without disposal of applications for stay.

Senior officers have been directed to ensure that appeals are filed only on the merits thereof and not merely on the tax effect involved. Cases have separately been brought to the attention of the officers wherein Tribunals / Courts have commented adversely on frivolous filing of appeals. It has also been decided that in multi-CCIT Charges, the decision to file a Reference before the High Court would be taken by two CCsIT.

All supervisory authorities have been directed to enable an effective grievance redressal system in their jurisdictions and also that the timelines prescribed under the Citizen’s Charter, the CPGRAMS, etc. for redressing grievances should be invariably followed.

(Dr. B.K. Sinha)



CBDT noticed 5,09,898 taxpayers have not filed ITR for AY 2014-15

CBDT has noticed that 5,09,898 taxpayers who have submitted an e-return for AY 2011-12 or 2012-13 or AY 2013-14 (Upto 20th October 2014) with returned Income of More than 10 Lakh or paid self assessment tax of more than / equal to one lakh (as per ITR)  have not filed ITR for AY 2014-15.

In this regard, Joint Director of Income tax Systems has issued a letter dated 29.10.2014. The board has desired that CCsIT should personally monitor these cases.

Click here to view the issued letter.


Request for download of Conso File will not be accepted in case there are unmatched challans in the selected statement

An important message has been displayed for the deductors on the TRACES website regarding downloading of conso file. 

The displayed message has been given below: 

Attention Deductors: Your request for download of Conso File will not be accepted in case there are unmatched challans in the selected statement. Please match all challans through Online Correction before submitting request for Conso File. 

This means that if there are any unmatched challans in the TDS statement filed by the deductor, the correction statement for that TDS statement cannot be filed for such regular statement for errors such as PAN Error, Short deduction due to incorrect reporting of certificates, interest and late fee payments etc. The correction statement will be filed only when all the challans in the statement are matched. 

This may arise a question that how will the unmatched challans be matched in absence of download of conso files for correction of statements. 

For this purpose, CPC (TDS) has provided an utility called Online Challan Correction through which any mismatch in challans in the statements filed by the deductors can be corrected through the online mechanism on the CPC (TDS) website itself. 

Click here to view the e- Tutorial for Online Challan Correction.

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