2016 (6) TMI 97 - AT - Income Tax

Tribunal cancels penalty under Income-tax Act for late TDS return, citing reasonable cause

The Tribunal set aside the penalty imposed on the assessee under section 272A(2)(k) of the Income-tax Act for the assessment year 2008-09. Despite ... Levy of penalty under section 272A(2)(k) - TDS return not filed within time - Held that:- The assessee explained that since most of the clients of the assessee -bank did not intimate permanent account number on time, therefore, TDS return could not be filed as per rule which provides that 70 per cent. to 85 per cent. permanent account numbers should be quoted in the e-return for filing the TDS return. Therefore, there appears reasonable cause in favour of the assessee for failure to file TDS return within time. It may also be noted here that penalty order has been passed on September 25, 2012, and, according to the second proviso to section 272A(2), no penalty shall be levied under this section for failure referred to in clause (k), if such failure relates to a statement referred to in section 200(3) or the proviso to section 206C(3) which is to be delivered or caused to be delivered for tax deposited at source or tax collected at source, as the case may be, on or after July 1, 2012. Thus, no penalty is leviable after July 1, 2012, as is specified in the second proviso to the aforesaid section. Since the levy of penalty is not mandatory in each and every case and depends upon facts of the case, therefore, considering the explanation of the assessee in the light of above order in the case of State Bank of Bikaner and Jaipur (2015 (10) TMI 1396 - ITAT CHANDIGARH) and reasonable cause in favour of the assessee, we set aside the orders of authorities below and cancel the penalty. - Decided in favour of assessee Issues:Challenge against levy of penalty under section 272A(2)(k) of the Income-tax Act, 1961 for assessment year 2008-09.Analysis:1. The appeal was filed by the assessee against the penalty order imposed for not filing quarterly return of TDS in Form 26Q as required by law. The Assessing Officer levied a penalty of Rs. 1,44,222 due to non-filing of the return within the stipulated period.2. The assessee, a branch of a nationalized bank, explained that it faced challenges in filing the TDS return on time due to the unavailability of permanent account numbers of many depositors. Despite deducting and depositing the TDS on time, the bank was unable to file the return within the specified period, leading to the penalty imposition.3. The Commissioner of Income-tax (Appeals) upheld the penalty, stating that it is leviable if the statement is not delivered within the specified time under the Income-tax Act. However, the Tribunal found a reasonable cause in favor of the assessee for the delay in filing the TDS return, considering the peculiar circumstances faced by the branch located in a semi-rural area.4. Referring to a similar case involving State Bank of Bikaner and Jaipur, where the penalty was canceled due to a reasonable cause for delay in filing the TDS return, the Tribunal ruled that since the Revenue did not suffer any loss and the delay was technical in nature, the penalty was not justified. Citing the decision of the Punjab and Haryana High Court, the Tribunal emphasized that penalty imposition is not mandatory in every case and must be based on the facts and circumstances.5. Consequently, the Tribunal set aside the penalty imposed on the assessee, considering the explanation provided, the precedent set by the State Bank of Bikaner and Jaipur case, and the absence of any revenue loss due to the delay in filing the TDS return.6. In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the levy of penalty is not automatic and must be assessed based on the specific facts and reasonable causes presented by the taxpayer.