This is appeal filed by assessee against order of CIT(A) dt. 21st Oct., 2004 on sole ground that learned CIT(A) was wrong in confirming penalty of Rs. 3,06,000 under s. 271C of IT Act, 1961. brief facts of case are that assessee-company is engaged in business of development of software. It entered into agreement on 1st April, 2001 with M/s FIITJEE Ltd. for introducing parties interested for becoming franchisees of M/s FIITJEE Ltd.. Since this was not main business of assessee, it entered into another agreement with M/s Vineet Estates (P) Ltd. and appointed said company as its sub-agent for rendering professional services for introducing parties interested in becoming franchisees of M/s FIITJEE Ltd.. assessee made payment of Rs. 30 lakhs as commission to M/s Vineet Estates (P) Ltd. which was credited in its account on 21st April, 2001 for professional services rendered by them. No tax was deducted at source from said payment of Rs. 30 lakhs. AO in proceeding initiated under s. 201(1) of Act determined liability of assessee towards TDS of Rs. 3,06,000 and interest under s. 201(1 A) of Rs. 57,375 and raised demand of Rs. 3,63,375- videorder dt. 29th Nov., 2002. assessee made payment of said demand of Rs. 3,63,375 on 30th Nov., 2002. Thereafter Joint CIT (IT) Range-49, New Delhi initiated penalty proceedings under s. 271C by issuing show-cause notice on 13th Aug., 2003. After considering reply dt. 7th Jan., 2004 of assessee-company learned Jt. CIT, Range-49 levied penalty of Rs. 3,06,000 vide order passed on 27th Feb., 2004. assessee filed appeal before learned CIT(A) wherein it was submitted that assessee-company has credited commission of Rs. 30 lakhs in its books of account in name of M/s Vineet Estates (P) Ltd. on 21st April, 2001 for professional services rendered by them for introducing parties interested in becoming franchisees of M/s FIITJEE Ltd.. assessee-company has not deducted tax at source at time of crediting commission of Rs. 30 lakhs as provisions of s. 194H was not applicable at relevant point of time as same came into force on 1st June, 2001. It was submitted that AO was of view that since payments were credited after 1st June, 2001 assessee-company was supposed to deduct tax at source under s. 194H. learned CIT(A) after taking into consideration submission made by assessee-company observed that learned Jt. CIT has passed impugned order after being satisfied that it was case of manipulation of books of account with motive to avoid applicability of provisions of s. 194H in consonance with findings of ITO. He noted that in terms of engagement letter for professional services dt. 1st April, 2001 stipulating payment terms, commission would become payable as soon as deal was finalized in principal. It was seen that no deal had been finalized before 1st June, 2001. In such circumstances, learned Jt. CIT has concluded that it was case of manipulation to books of account with motive to avoid applicability of provisions of s. 194H which was inserted w.e.f. 1st June, 2001. He further noted that entries made on 15th May, 2001 in books of M/s FIITJEE Ltd. can come to rescue of assessee unless they are backed by payments. assessee did not back his arguments with help of any independent evidences like bank payments. Prima facie entries made are all collusive because by making ante-dated entry all concerned have saved themselves from complying with provisions of s. 194H. He further observed that applicability of various judgments of various Courts presupposes existence of facts as these are portrayed and about which there is no dispute. Manipulation suggests absence of reasonable cause and confirms mens rea on part of colluders, especially assessee. Hence, he confirmed order of learned Jt. CIT levying penalty. learned Authorised Representative for assessee argued and submitted that learned CIT(A) has upheld finding of learned Jt. CIT about manipulation of books of account by assessee in order to avoid applicability of provisions of s. 194H. He argued and submitted that said allegation of manipulation of books of account made by learned Jt. CIT was without any material. He submitted that assessee made payment of Rs. 3,63,375 including interest of Rs. 57,375 under s. 201(1) and 201(1A), therefore, i t cannot be said that assessee was trying to avoid its liability under provisions of s. 194H by manipulating its books of account. He further submitted that it will be seen from penalty order passed by learned Jt. CIT that penalty was levied on assessee on ground that assessee had not contested order of AO before appellate authorities and has made payment of TDS of Rs. 3,06,000 and interest of Rs. 57,375 levied under s. 201(1) and 201(1 A) by AO. He submitted that there may be many reasons for assessee for not filing appeal against order of AO and paying tax levied in assessment made. He submitted that penalty proceedings are quasi-criminal proceedings and AO has to bring materials on record to show that default committed by assessee was intentional. Since AO has not made enquiries to that effect and has brought no material on record to show that default made in not deducting TDS from payments of commission to M/s Vineet Estates (P) Ltd. intentional and to defraud Revenue penalty as levied cannot be sustained in law and, therefore, requires to be deleted. learned Departmental Representative on other hand supported order of AO and CIT(A) and submitted that since payments were made after 1st June, 2001 by assessee on account of commission although same was credited to account of M/s Vineet Estates (P) Ltd. on 21st April, 2001 there was manipulation of books of account with intention to avoid compliance with provisions of s. 194H and, hence, penalty has been rightly levied and order of CIT(A) should be upheld. We have heard rival submissions and perused orders of both lower authorities and materials available on record. We find that assessee has credited commission of Rs. 30 lakhs in its books of account in name of M/s Vineet Estates (P) Ltd. on 21st April, 2001. We also find that assessee paid TDS and interest of Rs. 3,63,375 under s. 201(1) and 201(1 A) of Act levied by AO and had not challenged said finding before higher authorities in appeal. We further observe that learned Jt. CIT has imposed penalty of Rs. 3,06,000 for not deducting tax at source from payment of commission of Rs. 30 lakhs made to M/s Vineet Estates (P) Ltd.) for reason that assessee had not challenged order of AO in appeal before appellate authorities. In our considered opinion there may be many reasons for assessee not to challenge order of AO in further appeal before appellate authorities. This alone cannot be ground for imposition of penalty appellate authorities. This alone cannot be ground for imposition of penalty on assessee. penalty proceedings are quasi-criminal proceedings and before levy of penalty AO has to bring on record some material to show that assessee has done this intentionally. Hon ble Supreme Court in case of K.C. Builders vs. Asstt. CIT (2004) 186 CTR (SC) 721: (2004) 265 ITR 562 (SC) has observed to quote as under: " Concealment inherently carries with it element of mens rea. fact that some figure or some particulars have been disclosed, even if it takes out case from non-disclosure, would not by itself take case out of purview of furnishing inaccurate particulars. Mere omission from return of item of receipt amounts neither to concealment nor to deliberate furnishing of inaccurate particulars of income, unless and until there is some evidence to show or circumstances are found from which it can be gathered that omission was attributable to intention or desire on part of assessee to hide or conceal income so as to avoid imposition of tax thereon." Further Hon ble Delhi High Court in Woodward Governor India (P) Ltd. vs. CIT (2001) 168 CTR (Del) 394: (2002) 253 ITR 745 (Del) held that levy of penalty under s. 271C is not automatic. Before levying of penalty concerned officer is required to find out that even if there was no failure referred to in concerned provision same was without reasonable cause. Further Hon ble Chandigarh Bench of Tribunal in case of Punjab State Electricity Board vs. ITO (2004) 88 TTJ (Chd) 450: (2002) 121 TAXMAN 367 (Chd)(Mag) held that reasonable belief that one is not obliged to deduct tax or surcharge at source can be treated as good and sufficient cause for not deducting tax or surcharge at source. Hon ble Delhi Bench of Tribunal in case of Janta Wine Store vs. ITO (1984) 10 ITD 348 (Del) has held that merely because assessee does not challenge addition it cannot be inferred that assessee was guilty of concealment of income. In instant case, we find that provision of s. 194H was brought on statute w.e.f. 1st June, 2001. assessee s contention is that since commission income of Rs. 30 lakhs was credited in books of account of assessee on 21st April, 2001 when provisions of s. 194H was not on Statute assessee did not deduct tax at source at time of crediting of income to account of assessee. provisions of s. 194H reads as under: Any person, not being individual or HUF, who is responsible for paying, on or after 1st day of June, 2001, to resident, any income by way o f commission (not being insurance commission referred to in s. 194D) or brokerage, shall, at time of credit of such income to account of payee or at time of payment of such income in cash or by issue of cheque or draft or by any other mode, whichever it earlier, deduct income-tax thereon at rate of five per cent: bare reading of said section goes to show that assessee was required to deduct tax at source from commission payment either at time of credit of such income to account of payee or at time of payment whichever was earlier. Since assessee credited commission income to account of payee on 21st April, 2001 according to mercantile system o f account followed, which was before introduction of s. 194H on statute w.e.f. 1st June, 2001, assessee was having bona fide belief that it was not required to deduct tax at source from such commission payment. No material could be brought on record by Revenue to show that assessee had manipulated its accounts by crediting commission income on 21st April, 2001 or to show that it was not legally permissible to company to pass such entries of credits before 1st June, 2001. above bona fide belief of assessee shows that there was reasonable cause for not deducting and depositing such tax earlier and hence in circumstances in our considered opinion levy of penalty could not be sustained. Still further, assessee s explanation is that commission income of Rs. 41 lakhs approx. for services rendered by assessee-company was paid to assessee-company by M/s FIITJEE on 15th May, 2001 and services for which commission was paid to Vineet Estates (P) Ltd. by assessee-company was finalized to satisfaction of principal company, i.e., M/s FIITJEE Ltd. on or before 15th May, 2001 which was prior to 1st June, 2001, date of applicability of provisions of s. 194H of income tax Act, 1961. Further, assessee-company was required to pay M/s Vineet Estates (P) Ltd. consolidated commission of 12 per cent of gross amount received as initial payment from franchisees introduced through him. No material could be brought on record by Revenue to show that payment from M/s .FIITJEE Ltd. was not received by assessee on 15th May, 2001. Therefore, in our considered opinion learned . Jt. CIT was not justified i n levying penalty of Rs. 3,06,000 on assessee. Hence, we set aside order of AO and CIT(A) and delete levy of penalty of Rs. 3,06,000. In result, appeal of assessee is allowed. *** B.T. TECHNET LTD. v. JOINT COMMISSIONER OF INCOME TAX