penalty under section 271(1)(c)

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fak_ca (Querist)
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04 June 2009 my client is a corporate assessee in the course of assessment under section 143 for the a/y 2006-07 the a.o pointed out that the assessee has not deducted tds on paymment made to contract for trasportation charges,the fact put in front of the a.o was that this service was being provided by the contractor out of agreement and as such he was raising a debit note on the company for the transportation charges, he has also confirmed he was deducting tax and depositing with the authorites on the same amount for which he was raising the debit note,even after lot of pleading the a.o diallowed the amount,the amount of demand was deposited with the tax authorities, simultaneously the a.o has imposed penalty under section 271(1)(C).
I am preparing to file a appeal with cit(a) my question is

can this be sustainable in the office of cit(a) as i have got the confirmation copy of the contractor in which he has mentioned that he has deposited tax on the same amount for which he is raising the debit note,this copy was also submitted to the a.o during assessment proceeding .

i would be greatful to all of you,kindly help me out

ca fareed ahmad khan

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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05 June 2009 In the cited query, the principal liability for payment of income tax was of the contractor,who received income,and such contractor had paid incometax on income so received, even if technical default for not deducting tax at sorce continued with your client, ie contractee,such a default disappeared as soon as the contractor discharged this income tax liability.
Citation:- Munak Investment (p) Ltd Vs ITO (1995) 55 ITD 429 (Chd).
In view of the above and with the proof you had I feel that you will win the penalty case.

fak_ca

fak_ca (Querist)
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06 June 2009 sir,
the case of munak investment (p) ltd was related to non deduction of tds as the income of the payee was below taxable limit , but my case is different.

thanks

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