2014 (5) TMI 477 - AT - Income Tax

Tribunal upholds CIT(A)'s decision annulling penalty under incorrect tax law section

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to annul the penalty imposed under the incorrect section of the Income Tax ... Penalty for technical breach of law - Wrong mention of section 272A(2)(C) in place of 272A(2)(K) of the Act - Penalty u/s 272A(2)(c) - CIT(A) delete the penalty by observing that since the tax was deducted only in the last quarter of the year under consideration, the TDS return was also filed for the last quarter and hence there was no loss to revenue and default is only of technical nature – Held that:- The AO issued notice for levy of penalty u/s 272A(2)(c) of the Act - the AO was clear in his mind when he was initiating penalty proceedings - the AO imposed penalty u/s 272A(2)(c) of the Act - this is a case of oversight or wrong mentioning of the section - when the assessee carried the matter before the CIT(A), the AO did not cared to appear before the CIT(A) to bring to his notice that he has mentioned the section wrongly - the conduct of the AO clearly suggest that he intended to proceed u/s 272A(2)(c) of the Act and completed his proceedings under that very section itself - CIT(A) has very correctly mentioned that no penalty can be levied under this section 272A(2)(c) of the Act from A.Y. 2006-07 onwards - recourse Sec. 292B of the Act would also not help the case of the Revenue because the mistake cannot be said to be a pure technical objection – there is no reason to interfere with the findings of the CIT(A) – Decided against Revenue. Issues:1. Incorrect imposition of penalty under section 272A(2)(c) instead of section 272A(2)(k) of the Income Tax Act, 1961.2. Interpretation of section 292B of the Income Tax Act, 1961 regarding technical objections.3. Failure to file TDS returns within the prescribed due dates leading to penalty imposition.Analysis:1. The appeal involved a dispute regarding the imposition of a penalty under the incorrect section of the Income Tax Act, 1961. The Revenue contended that the penalty was wrongly levied under section 272A(2)(c) instead of the correct section 272A(2)(k). The CIT(A) observed that failure to furnish quarterly statements within due dates attracts penalty under section 272A(2)(k) from 1.4.2005 onwards. The CIT(A) annulled the penalty order based on legal grounds, stating that the AO's invocation of the wrong section was not a mere technical mistake. The Tribunal upheld the CIT(A)'s decision, emphasizing that the penalty could not be imposed under section 272A(2)(c) from the assessment year 2006-07 onwards.2. The interpretation of section 292B of the Income Tax Act, 1961 was crucial in this case. The CIT(A) highlighted that section 292B was intended to address technical objections without substance hindering the validity of assessment proceedings. However, in this instance, the AO's error in applying the incorrect section was deemed more than a technical mistake. The Tribunal agreed with the CIT(A) that section 292B could not salvage the Revenue's case due to the substantial nature of the mistake made by the AO.3. The case also revolved around the failure of the assessee to file TDS returns within the prescribed due dates, leading to penalty imposition. The AO initiated penalty proceedings under section 272A(2)(c) based on the findings of a survey conducted at the assessee's office premises. The CIT(A) correctly identified that the penalty should have been imposed under section 272A(2)(k) for not filing quarterly TDS returns in time. The Tribunal affirmed the CIT(A)'s decision to annul the penalty order, emphasizing the importance of applying the correct provisions of the Income Tax Act.In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the CIT(A)'s decision to annul the penalty imposed under the incorrect section of the Income Tax Act, 1961. The judgment underscored the significance of accurately applying the statutory provisions and highlighted the limitations of invoking section 292B in cases involving substantial errors rather than mere technicalities.