ITAT: Deletes Income Tax Penalty for Cash Bonus Paid to Employees

The Chandigarh Bench of the Income Tax Appellate Tribunal ( ITAT ), Judicial Member Diva Singh ruled in favor of the taxpayer and set aside the order refusing the levied penalty.

There were 2 kinds of payments that the taxpayer has incurred for which the current action would be invoked. Related to it the same was furnished that the same shall mention that majority of these payments would be incurred for the repair and maintenance of the machinery on the basis of the breakdowns and others while the left payments would be incurred as bonus payments to the employees.

The taxpayer, Lakhwinder Singh Panag, has been involved in the business of sand mining and running crushers, and others opposed the payments being made on holidays, Saturdays, or Sundays.

The taxpayer indeed mentioned that he was not a regular offender. The payment incurred was being provided and were real payments for the business and the taxpayer manages to confirm that the payments incurred for the breakdown or others of the machinery would be accepted via banks.

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The council shows that on the other side they laid on the impugned order, provided that the penalty might be confirmed.

Seeing that “the explanation offered cannot be outrightly discarded in the penalty proceedings, the urgent need to clear payments by an assessee functioning outside residential/commercial areas in the peculiar facts by itself, no doubt, may not have been a valid explanation as far as the quantum proceedings are concerned,” but the need of the penalty provisions under Section 271(1)(c) of the Income Tax Act, 1961 was acknowledged and it was discovered via the single bench that the explanation should be permitted and held that the explanation was satisfactory on the same facts.

It made clear that the argument by the taxpayer that payments are genuinely for the intention of Section 40(A)(3) of the Income Tax Act has no applicability.

ITAT has cancelled the penalty proceedings setting aside the order of the Commissioner of Income Tax (Appeals) (CIT(A)), acknowledging the facts in the current way of cash payments of bonus which has been furnished to employees.