2010 (1) TMI 1177 - AT - Income Tax

Tribunal upholds decision to delete penalty for late TDS returns under Income-tax Act

The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision to delete the penalty imposed under Section 272A(2)(k) of the Income-tax Act, ... Penalty for failure to furnish TDS statements - Duty to file quarterly TDS statements - Reasonable cause under section 273B - Ignorance of law as reasonable cause - Venial or technical breach not attracting penaltyPenalty for failure to furnish TDS statements - Reasonable cause under section 273B - Ignorance of law as reasonable cause - Venial or technical breach not attracting penalty - Duty to file quarterly TDS statements - Whether penalty levied under section 272A(2)(k) for delayed filing of quarterly TDS statements (Form Nos.24Q and 26Q) can be deleted where TDS was deducted and deposited within time and the assessee showed lack of knowledge of the filing requirement as reasonable cause under section 273B. - HELD THAT: - The Tribunal accepted the finding of the Commissioner (Appeals) that the assessee deducted tax and deposited it to the credit of the Central Government within the prescribed time but filed the quarterly statements belatedly. The delay therefore constituted a default attracting penalty under section 272A(2)(k) unless a reasonable cause under section 273B was shown. On the facts, Revenue did not produce material to rebut the CIT(A)'s finding that the delay was due to lack of knowledge of the filing requirement by the company's directors and employees. The Tribunal noted that the requirement to furnish quarterly statements was introduced w.e.f. 1-4-2005 and observed that, given timely payment of tax and absence of any loss to revenue, there was no deliberate or contumacious conduct warranting penalty. Reliance was placed on the principle that penalty is not ordinarily imposed for a venial or technical breach and on precedent recognizing that ignorance of law may, in some circumstances, constitute a reasonable cause. In those circumstances the Tribunal found no error in the deletion of penalty and declined to interfere with the CIT(A)'s order. [Paras 15]Penalty under section 272A(2)(k) deleted as the delay in filing Form Nos.24Q and 26Q was a venial breach and the assessee showed a reasonable cause under section 273B; Revenue's appeal dismissed.Final Conclusion: The Tribunal upheld the deletion of the penalty imposed for late filing of quarterly TDS returns where tax was deducted and deposited in time, the delay arose from lack of knowledge of the filing requirement, no loss to revenue was shown, and the facts constituted a reasonable cause under section 273B; Revenue's appeal dismissed. Issues Involved:1. Validity of penalty levied under Section 272A(2)(k) of the Income-tax Act, 1961.2. Reasonable cause for delay in filing quarterly TDS returns.3. Interpretation of Section 273B of the Income-tax Act, 1961.4. Application of judicial precedents regarding penalty imposition.Detailed Analysis:1. Validity of Penalty Levied under Section 272A(2)(k) of the Income-tax Act, 1961:The Revenue filed an appeal against the order of the Commissioner of Income-tax (Appeals) who deleted the penalty of Rs. 4,47,200/- levied by the Assessing Officer under Section 272A(2)(k) of the Income-tax Act, 1961. The penalty was imposed due to the assessee's default in filing Form No.24Q and 26Q for 2583 and 1889 days, respectively. The Assessing Officer found the assessee's explanation for the delay unsatisfactory and levied a penalty of Rs. 100/- per day for the total days of default.2. Reasonable Cause for Delay in Filing Quarterly TDS Returns:The Commissioner of Income-tax (Appeals) observed that the assessee had deposited the tax deducted at source within the stipulated time and the default was only related to the late submission of forms. The Commissioner noted that the penalty was imposed routinely without establishing that the default was without reasonable cause. The assessee claimed a bona fide belief that filing Form No.24Q and 26Q was not required once the tax was deposited. The Commissioner agreed, considering this belief as a reasonable cause under Section 273B of the Act.3. Interpretation of Section 273B of the Income-tax Act, 1961:Section 273B states that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the default. The Commissioner of Income-tax (Appeals) referenced the Supreme Court's ruling in Hindustan Steel Ltd. vs. State of Orissa, which emphasized that penalties should not be imposed for technical or venial breaches of the law or when the default is due to a bona fide belief. The Commissioner also cited the Gujarat High Court's decision in Harsiddh Construction (P) Ltd. vs. CIT, which held that penalties are not mandatory for venial breaches when there is no loss of revenue.4. Application of Judicial Precedents Regarding Penalty Imposition:The Departmental Representative argued that the assessee's duty to file quarterly returns is mandatory under Section 200(3) and that ignorance of law is not a valid defense. However, the Commissioner of Income-tax (Appeals) found that the assessee's lack of knowledge about the requirement to file quarterly statements constituted a reasonable cause. The Tribunal noted that the provisions for quarterly statements were introduced by the Finance (No.2) Act, 2004, effective from 1-4-2005, and the Revenue failed to show that the assessee was aware of this requirement earlier.The Tribunal also referenced the Supreme Court's decision in Motilal Padampat Sugar Mills Co. Ltd. vs. State of UP, which held that there is no presumption that everyone knows the law. The Madras High Court in CIT vs. K P V S Mohammad Rowther & Co. also held that ignorance of law can be a reasonable cause for failure and justified the deletion of the penalty.Conclusion:The Tribunal upheld the order of the Commissioner of Income-tax (Appeals), concluding that the delay in filing quarterly statements was a technical or venial breach of law. The Tribunal found no error in the Commissioner's findings and dismissed the Revenue's appeal, affirming that the penalty was not justified under the circumstances. The order was signed, dated, and pronounced in court on 08-01-2010.