2011 (12) TMI 362 - AT - Income Tax

Tribunal cancels Rs. 30,000 penalty for incorrect PAN quoting in TDS statements

The Tribunal canceled the penalty of Rs. 30,000 imposed on the appellant under section 272B of the Income-tax Act for incorrect PAN quoting in TDS ... Penalty under section 272B - Obligation to quote PAN under section 139A(5B) - Reasonable cause under section 273B - Venial or technical breach and mitigation of penaltyPenalty under section 272B - Obligation to quote PAN under section 139A(5B) - Whether non compliance in quoting correct PAN in Form 24Q by a tax deductor attracts penalty under section 272B read with section 139A(5B). - HELD THAT: - The Tribunal examined the statutory scheme and the practical purpose of mandatory e filing and correct PAN quoting for TDS credit. It noted that section 139A(5B) casts an obligation on the deductor to quote the PAN of deductees in statements like Form 24Q and that the penal provision in section 272B(1) can be invoked for failure to comply with provisions of section 139A. While the learned CIT(A) had upheld penalty on this basis, the Bench recognised that earlier orders addressing different sub sections of section 139A (such as clauses dealing with banks and Form 60) were not directly on point. The Tribunal therefore treated non compliance in quoting PAN under section 139A(5B) as within the ambit of section 272B(1) in principle, but proceeded to consider whether, on the facts, penalty should be sustained. [Paras 5]In principle, failure by a deductor to quote correct PAN under section 139A(5B) falls within the penal ambit of section 272B(1), but applicability must be tested against facts and surrounding circumstances.Reasonable cause under section 273B - Venial or technical breach and mitigation of penalty - Whether the penalty of Rs.30,000 (as reduced by CIT(A) from Rs.50,000) was sustainable on the facts of the case or required cancellation in view of reasonable cause/venial error. - HELD THAT: - On the facts, the assessee had quoted incorrect PANs for three deductees (appearing in five records) due to single character typographical errors. The assessee asserted that the PAN particulars were supplied by the deductees and that it attempted to file corrected returns which were rejected by the TIN facilitation centre because of data mismatch. The Tribunal applied principles that penalties should not be levied for mere venial or technical breaches where there is no evidence of willful intent to supply false PAN or of prejudice to the revenue; it relied on established tests of 'reasonable cause' as requiring an honest belief founded on reasonable grounds and noted authority that discretion to impose penalty should be exercised having regard to bona fides and the nature of the breach. The Tribunal observed that there was nothing to show willful or fraudulent intent, the errors were minor, and the assessee had attempted remediation; consequently, the imposition of penalty was unjustified on the facts. [Paras 5, 7]Penalty cancelled as the incorrect PAN entries arose from technical/venial errors and the assessee demonstrated circumstances entitling it to relief under the concept of reasonable cause; appeal allowed.Final Conclusion: The appeal is allowed; the penalty levied under section 272B (as upheld by the CIT(A) to the extent of Rs.30,000) is cancelled on the facts as constituting venial/technical errors and reasonable cause for relief. Issues Involved:1. Imposition of penalty under section 272B of the Income-tax Act, 1961 for incorrect quoting of PAN in quarterly TDS statements.2. Applicability of section 273B regarding reasonable cause for failure to comply with section 139A.Detailed Analysis:1. Imposition of Penalty under Section 272B:The primary issue revolves around the imposition of a penalty of Rs. 30,000/- on the appellant for incorrect quoting of PAN in the quarterly TDS statement (Form 24Q) for the financial year 2008-09. The Assessing Officer (AO) identified that the appellant had furnished incorrect PANs for five tax-deductees, leading to the issuance of a show cause notice under section 272B of the Income-tax Act, 1961. Despite multiple notices, the appellant failed to provide a satisfactory explanation or correct the PANs, resulting in the AO imposing a penalty of Rs. 50,000/- (Rs. 10,000/- per default).Upon appeal, the learned CIT(A) upheld the penalty but reduced it to Rs. 30,000/- considering the repeated mistakes for two deductees. The CIT(A) emphasized that the legal obligation to quote correct PANs lies with the deductor, and failure to comply attracts penalties under section 272B(1). The CIT(A) also referred to the legislative intent behind section 139A(5B) and the necessity of quoting correct PANs to ensure proper credit for TDS and smooth processing of returns.2. Applicability of Section 273B (Reasonable Cause):The appellant argued that the penalty should not be imposed as the incorrect PANs were due to typographical errors and not willful defaults. The appellant cited a previous case (Packraft Container India Pvt. Ltd.) where a similar penalty was quashed. However, the CIT(A) distinguished the present case by highlighting that the errors were not inadvertent but due to negligence, and the appellant failed to provide a reasonable cause for the mistakes.The Tribunal, upon reviewing the case, noted that the incorrect PANs were due to apparent inadvertence either by the appellant or the deductees. The Tribunal emphasized that the term 'reasonable cause' implies an honest belief based on reasonable grounds. The Tribunal referenced the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which stated that penalties should not be imposed for technical or venial breaches of procedural laws. The Tribunal concluded that the appellant attempted to correct the mistakes upon being informed and there was no evidence of willful intent to quote false PANs.Conclusion:The Tribunal vacated the findings of the CIT(A) and canceled the penalty of Rs. 30,000/-. The Tribunal held that the appellant's actions were not willfully negligent and the errors were technical and venial, thus entitling the appellant to relief from the penalty under section 272B. The appeal was allowed, and the penalty was canceled.Order Pronounced:The appeal was allowed, and the penalty levied by the AO and upheld by the CIT(A) to the extent of Rs. 30,000/- was canceled.