SWATANTER KUMAR, J. - (1.) Challenge in this appeal under Section 260A of the Income Tax Act, 1961 (in short referred as 'the Act') is to the order passed by the Income Tax Appellate Tribunal dated 5th November, 2004 deleting the penalties under Section 271(C) and by accepting the appeal preferred by the assessee against the order of the Commissioner of Income Tax dated 10th October, 2000.
(2.) The finding of the Income Tax Appellate Tribunal that there was reasonable cause for not deducting Tax at Source (TDS) on the payments made by the Company to its employees overseas, for services rendered by them in India, on the ground that the said finding is erroneous and is contrary to law.
(3.) The Assessee-Company is a non-resident company incorporated in Japan. It has a liaison office in India as a permanent establishment. In the survey conducted by the Department under Section 133A at the liaison office at Delhi on 16th November, 1998, statement of certain persons were recorded, documents were found showing that the Company had utilised services of its expertise employees for rendering services in India, though they were paid their salary and perquisites outside India. According to the Revenue, the tax at source was not deducted and paid on the payments made by the assessee to its employees overseas in terms of Section 192 of the Act. While relying upon circular no. 685 and 686 dated 11th June, 1994 and 12th August, 1994 respectively, issued by the Central Board of Direct Taxes, a submission was made that the assessee was liable for imposition of penalties in terms of Section 271(C ) of the Act.;