Did you fail to deduct TDS at source, or deposit the income tax correctly or made a mistake filing the return? Under the provisions of Income Tax Act, while an Assessee is supposed to pay regular income tax due, he is also made to pay penalty for such default.

If such default is bonafide, you need not pay any penalty. This is essence of a recent case as decided by Hon’ble High Court of Delhi in the case of Commissioner of Income-tax vs Fourways International. In the given case, Assessee had made certain payments for fabrication charges but had not deducted tax at source.  Assessee explained that it was not advised by its chartered accountant that it was liable to deduct tax at source under section 194C.

Assessee had started a new business and the partner was matriculate and, therefore, depended entirely on advice given by chartered accountant.  Tribunal having found assessee’s explanation to be bona fide, and cancelled penalty levied under section 271C.

On an appeal by revenue in the High court, it too held the decision of the Tribunal as justified.