26 Sections 200, 201 and 221 – Penalty – DS – A.Y. 2009-10 – Foreign company Expatriate employees – Failure to deposit tax deducted at source with Central Government within prescribed time – Penalty – Delay in depositing amount on account of lack of proper understanding of Indian tax laws and compliance required thereunder – Tax deducted at source deposited with interest before issuance of notice – Sufficient and reasonable cause shown by assessee – Deletion of penalty proper

26. Penalty – TDS – Sections 200, 201 and 221 – A.Y.
2009-10 – Foreign company Expatriate employees – Failure to deposit tax
deducted at source with Central Government within prescribed time – Penalty –
Delay in depositing amount on account of lack of proper understanding of Indian
tax laws and compliance required thereunder – Tax deducted at source deposited
with interest before issuance of notice – Sufficient and reasonable cause shown
by assessee – Deletion of penalty proper

Principal
CIT(TDS) vs. Mitsubishi Heavy Industries Ltd.; 397 ITR 521(P&H):

The assessee was a company
registered in Japan. For the F. Y. 2008-09, it deducted tax at source u/s. 200
of the Act, on the salaries paid to its employees sent on secondment to India.
The assessee failed to deposit the amount of tax deducted at source within the
prescribed time limit as laid down under rule 30 of the Income-tax Rules, 1962.
A notice u/s. 201 r.w.s. 221(1) was issued to the assessee for failure to
comply with the provisions of Chapter XVIIB. The assessee, inter alia,
submitted that the delay in depositing the amount was on account of lack of
proper understanding of Indian tax laws and the compliance required thereunder.
It further submitted that the tax deducted at source had been deposited along
with interest on 05/06/2009, before the issuance of the notice. By an order
dated 10/08/2010, the Assessing Officer held that the assessee is deemed to be
an “assessee in default” u/s. 201 and imposed penalty u/s. 221. The
Commissioner (Appeals) cancelled the penalty and held that there was sufficient
and reasonable cause before the Department for the assessee’s non-compliance
with the provisions of tax deducted at source as the deduction of tax at source
involved complexities and uncertainty and that therefore, the order passed by
the Assessing Officer imposing penalty was unsustainable. The Appellate
Tribunal upheld the decision of the Commissioner (Appeals).

On
appeal by the Revenue, the Punjab and Haryana High Court upheld the decision of
the Tribunal and held as under:

The Department had not
been able to show any illegality or perversity in the findings recorded by the
Commissioner (Appeals) which had been affirmed by the Appellate Tribunal. No
question of law arose.