2011 (3) TMI 1030 - AT - Income Tax

Tribunal upholds cancellation of penalty under Income Tax Act for late filing citing reasonable cause

The Tribunal upheld the cancellation of the penalty imposed on the assessee under section 272A(2)(c) of the Income Tax Act for the assessment year ... Penalty u/s 272A(2)(c) - Tax deducted at source - Delay ranges from 733 days to 1031 days while furnishing the return - The quarterly TDS returns ultimately were filed by the assessee voluntarily without being prompted by any notice from the department - There is no revenue loss since the tax has been deducted and paid to the Government - Only the paper work was delayed, which is only a technical breach - Though the penalty order refers to section 206/206C, the default, as found by the CIT(A) and as explained before us, is u/s 200(3) of the Act - It may also be added that the penalty order seems to be in a cyclostyled form without referring even to the appropriate section - This may show non-application of mind - the assessee was not prevented by reasonable cause - Accordingly uphold the order of the CIT(A) cancelling the penalty and dismiss the appeal filed by the revenue with no order as to costs. Issues:Penalty cancellation under section 272A(2)(c) of the Income Tax Act, 1961 for the assessment year 2006-07.Analysis:The appeal by the revenue pertains to the cancellation of a penalty of Rs.2,14,550/- imposed on the assessee under section 272A(2)(c) of the Income Tax Act, 1961 for the assessment year 2006-07. The assessee, a private limited company, failed to furnish prescribed returns within the time limit set by the Income Tax Rules for the four quarters in the financial year 2005-06. The delay ranged from 733 days to 1031 days, resulting in the penalty imposition. The CIT(A) cancelled the penalty, leading to the revenue's appeal.The main issue to be determined was whether there existed a reasonable cause for the delay in filing the returns. The CIT(A) provided several findings to support the cancellation of the penalty. Firstly, it was noted that the relevant provision, section 200(3), was introduced in the first year after its enactment. Additionally, the assessee faced challenges in obtaining Permanent Account Numbers from small-time laborers due to the nature of the contract requiring labor contractors from unorganized sectors. Moreover, there were disruptions in the accounting department with the resignation of key personnel. Despite these difficulties, the assessee voluntarily filed the quarterly TDS returns without any departmental notice, ensuring no revenue loss as the taxes were duly paid to the Government.The Tribunal concurred with the CIT(A)'s findings, considering them as constituting reasonable cause for the delay in filing the returns. It was clarified that the default fell under section 200(3) of the Act, despite the penalty order referencing sections 206/206C. The Tribunal highlighted the lack of specific references in the penalty order, indicating a potential lack of application of mind. Nonetheless, based on the undisputed findings presented by the CIT(A), the Tribunal upheld the cancellation of the penalty, concluding that the assessee was genuinely impeded by reasonable cause. Consequently, the appeal by the revenue was dismissed with no order as to costs.In conclusion, the Tribunal's decision centered on the presence of a reasonable cause for the delay in filing the returns, ultimately leading to the cancellation of the penalty imposed on the assessee under section 272A(2)(c) for the assessment year 2006-07.