Penalty for late TDS return filing is not routine; bona fide delay and timely tax deposit may justify only nominal penalty.

Penalty for failure to file the annual TDS return under section 272A(2)(c) is not automatic and must be imposed only after a judicious assessment of all relevant circumstances. Where tax was deducted and deposited on time and the delay was found to be for reasonable cause, a bona fide breach or inadvertent office mistake may justify only a nominal penalty rather than a routine penal levy. The authority should also give an opportunity to comply through notice or reminder before proceeding with penalty where appropriate. On the facts found, the token penalty was upheld and the issue was answered in favour of the respondent and against the Revenue.

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Issues: Whether penalty for failure to file the annual return of tax deducted at source under section 272A(2)(c) of the Income-tax Act, 1961 could be sustained where the tax had been deducted and deposited in time and the delay was found to be for reasonable cause.

Analysis: Penalty under section 272A(2)(c) is not to be imposed in a routine manner. The discretion under the provision must be exercised judiciously in light of all relevant circumstances. A bona fide breach does not warrant penalty, and where the default is attributable to negligence or an inadvertent office mistake, only a minimum or nominal penalty may be justified. The decision also recognises that the authority should first afford an opportunity to comply through notice or reminder before visiting the default with penalty in appropriate cases.

Conclusion: The levy of token penalty was justified on the facts found, and the question was answered in favour of the respondent and against the Revenue.

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