Revenue's penalty appeals dismissed as section 272A(2)(g) penalty orders exceeded six-month limitation period under section 275(1)(c)

ITAT Delhi dismissed Revenue's appeals regarding penalty under section 272A(2)(g) for delayed TDS certificate issuance. The tribunal held penalty orders dated 29.9.2009 and 27.5.2016 were barred by limitation under section 275(1)(c), as they exceeded the prescribed six-month period from penalty initiation. Following precedent in Sunil Dandriyal case, limitation period commenced from AO's initiation of penalty proceedings in assessment order, not from subsequent show cause notices. On merits, tribunal relied on Dhir Global Industries judgment, noting TDS certificates can only be issued after deposit with government, making certificate delay dependent on deposit timing. Penalty deleted entirely.

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Issues Involved:
1. Justification of penalty under Section 272A(2)(g) of the Income-tax Act, 1961.
2. Limitation period for passing the penalty order under Section 275(1)(c) of the Income-tax Act, 1961.

Issue 1: Justification of Penalty under Section 272A(2)(g) of the Act

The primary issue in this appeal is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in confirming the levy of penalty under Section 272A(2)(g) of the Income-tax Act, 1961. The penalty in question is imposed for not issuing the TDS certificate in Form 16A to the deductees within the stipulated time. The appellant argued that due to financial crunch, there was a delay in remitting the TDS amounts to the Central Government, which subsequently delayed the issuance of Form 16A. The fact that the assessee was facing financial difficulties was not disputed by the revenue. It was also noted that no adverse action was taken against the assessee for the delayed remittance of TDS with interest. Given that the TDS remittance details and challan numbers must be reflected in Form 16A, the delay in issuing the certificates was due to a reasonable cause.

Issue 2: Limitation Period for Passing the Penalty Order under Section 275(1)(c) of the Act

A crucial aspect of the case is whether the penalty order passed on 27.05.2016 by the Joint Commissioner of Income Tax (JCIT) was barred by limitation as per Section 275(1)(c) of the Act. The dispute revolves around whether the limitation period should be reckoned from 02.06.2015 (the date of reference by the Assistant Commissioner of Income Tax (ACIT) to JCIT) or from 30.11.2015 (the date of issuance of the show-cause notice by JCIT). The appellant contended that the penalty order should have been completed by 31.01.2016, while the respondent argued that the order passed on 27.05.2016 was within the statutory time limit when reckoned from 30.11.2015.

This issue was addressed by referring to a precedent set by the Tribunal in the case of Sunil Dandriyal vs JCIT, which established that the limitation period should be reckoned from the date the ACIT made the reference to the JCIT, not the date of issuance of the show-cause notice. According to Section 275(1)(c), the penalty order should be passed within six months from the end of the month in which the penalty proceedings were initiated. In this case, the reference was made on 02.06.2015, making the deadline for passing the penalty order 30.11.2015. Therefore, the penalty order passed on 27.05.2016 was barred by limitation.

Conclusion:

In light of the above observations and judicial precedents, the Tribunal held that the penalty order passed on 27.05.2016 was barred by limitation and thus quashed it. Additionally, on merits, the issue was covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs Dhir Global Industries (P) Ltd, which stated that the issuance of the TDS certificate is dependent on the deposit of TDS amounts. Since the delay in depositing TDS was accepted, the delay in issuing the TDS certificate was also justified. Consequently, the penalty levied under Section 272A(2)(g) was deleted, and the appeal of the assessee was allowed. The order was pronounced in the open court on 13/02/2024.

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