2014 (4) TMI 526 - AT - Income Tax

Penalties under IT Act for TDS certificate delays deemed technical, not warranting punishment.

The penalties imposed under section 272A(2)(g) of the IT Act for Assessment Years 1993-94 and 1994-95 were deleted by the CIT(A) and upheld by the ITAT ... Penalty u/s 272A(2)(g) of the Act - Failure to furnish certificate of TDS u/s 203 of the Act – Whether the failure of the assessee to furnish the certificate in respect of tax deducted at source within the time prescribed under the relevant section 203 read with Rule 31 discloses an offence for the purpose of Section 272A(2)(g) of the Act - Held that:- The decision in CIT V. Harsiddh Construction Pvt. Ltd. [1999 (12) TMI 30 - GUJARAT High Court] followed - The failure to furnish the aforesaid certificate within the prescribed time is not an offence which is punishable under the provisions of the Section 272A(2)(g) - the default was committed under a bona fide belief that the certificate in question was to be issued after the close of the financial year - a consolidated certificate was issued to the deductee - instead of holding that it was merely a technical or default of a venial in nature, it has been held that the failure referred was because of a reasonable cause – thus, no penalty is imposable on the assessee u/s 272A(2)(g) of IT Act – Decided against Assessee. Issues:1. Penalty order passed under section 272A(2)(g) of the IT Act for Assessment Years 1993-94 and 1994-95.Analysis:1. The Revenue Department filed appeals against the deletion of penalty orders passed under section 272A(2)(g) of the IT Act for AY 1993-94 and 1994-95. The Assessing Officer (AO) imposed penalties for delays in issuing TDS certificates to contractors. The AO found the default to be punishable under section 272A(2)(g) for not issuing certificates within the prescribed time limit. The penalty amount was calculated based on the number of days of delay, resulting in penalties of Rs. 17,95,800 for AY 1993-94 and Rs. 49,09,700 for AY 1994-95.2. The CIT(A) deleted the penalties, stating that the failure to furnish TDS certificates within the prescribed time did not amount to an offense under section 272A(2)(g). The CIT(A) considered the delay in issuing certificates due to new forms and lack of availability as a reasonable cause. It was noted that there was no loss of revenue or grievances raised by contractors due to the delay. Citing the Hindustan Steel Ltd. case and legal precedents, the CIT(A) concluded that the default was technical and venial, warranting no penalty.3. The ITAT bench heard arguments from both sides and noted that similar penalties had been deleted by the Jurisdictional High Court in a related case. The AR highlighted the changing requirements of TDS certificates due to amendments in the law, leading to confusion for the deductor. The AR argued that the assessee acted in good faith based on previous rules and faced difficulties due to changing regulations. The ITAT held that the default was due to a reasonable cause and not deserving of a penalty under section 272A(2)(g), following the provisions of Section 273B.4. The Cross Objections raised by the respondent objected to the calculation of penalties levied, seeking restriction only to the amount of tax deducted. However, since the penalties were deleted, the Cross Objections were allowed for statistical purposes only. Consequently, the appeals of the Revenue Department were dismissed, and the Cross Objections did not survive.This detailed analysis of the judgment highlights the issues surrounding the penalty orders under section 272A(2)(g) for the assessment years in question and the rationale behind the deletion of these penalties by the CIT(A) and subsequently upheld by the ITAT bench.