2009 (8) TMI 643 - HC - Income Tax

High Court upholds decision on penalty deletion under Income-tax Act for delayed TDS certificates

The High Court upheld the decision to delete the penalty under section 272A(2)(g) of the Income-tax Act, 1961, for the assessment year 2004-05. The Court ... Penalty- assessee is a Department of the Haryana Government. It committed default in issuing tax deducted at source certificates under section 203 of the Act. The Assessing Officer initiated penalty proceedings and levied penalty under section 272A(2)(g) of the Act. The stand of the assessee was that it was under bona fide belief that tax deducted at source certificates were to be issued and submitted with the annual return. The Commissioner (Appeals) accepted the explanation of the assessee and deleted the penalty. it also affirmed by Tribunal. Held that- the basis for imposing penalty was a mere technical violation and having regard to facts and circumstances, the Commissioner (Appeals) as well as Tribunal found the explanation for the technical violation valid. No substantial question of law arose.Dismiss the appeal. Issues:- Appeal against deletion of penalty under section 272A(2)(g) of the Income-tax Act, 1961.- Justification for deleting the penalty based on technical violation and absence of loss to Revenue.Analysis:1. The appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal, Delhi Bench 'B,' regarding the deletion of penalty under section 272A(2)(g) of the Income-tax Act for the assessment year 2004-05. The primary issue raised in the appeal was whether the Tribunal was justified in deleting the penalty considering the nature of the default committed by the assessee.2. The assessee, a department of the Haryana Government, had failed to issue tax deducted at source certificates under section 203 of the Act, leading to penalty proceedings initiated by the Assessing Officer. The assessee contended that the delay in issuing certificates was due to a bona fide belief that they were to be submitted with the annual return, causing no loss to the Revenue as the tax had already been deducted. The Commissioner of Income-tax (Appeals) accepted this explanation and deleted the penalty, a decision upheld by the Tribunal.3. The Tribunal emphasized that the tax was duly deducted and paid on time, ensuring no financial loss to the Revenue. The delays in issuing certificates were deemed technical and venial, with a satisfactory explanation provided for the default. Notably, the payee did not express any dissatisfaction with the situation, further supporting the view that the default was minor and did not warrant a penalty.4. Upon review, both the Commissioner of Income-tax (Appeals) and the Tribunal found the explanation provided by the assessee to be valid for the technical violation. The basis for imposing the penalty was considered a mere technical breach, and in light of the circumstances, no substantial question of law was deemed to arise.5. Consequently, the High Court dismissed the appeal, affirming the decision to delete the penalty under section 272A(2)(g) based on the absence of substantial loss to the Revenue and the satisfactory explanation provided for the technical default. The judgment underscores the importance of considering the specific circumstances and impact on Revenue before imposing penalties for technical violations under the Income-tax Act.