2003 (7) TMI 636 - AT - Income Tax

Summary

Issues:
- Penalty under section 272(2)(c) for financial year 1988-89
- Default under section 272A(2)(c) read with section 206 of Income-tax Act
- Filing of TDS return and penalty imposition

Analysis:
1. The appeal was filed against the penalty imposed under section 272(2)(c) for the financial year 1988-89. The Assessing Officer initiated penalty proceedings due to the assessee's failure to submit the TDS return for tax deducted at source on interest other than securities. The Assessing Officer levied a penalty of Rs. 2,87,400 based on the default period of 1437 days at Rs. 200 per day of default.

2. The assessee contended that the total tax deducted at source was Rs. 22,676, deposited into the Central Government account, and the return under section 206 was filed on time. However, the Assessing Officer rejected this explanation as there was no evidence of filing the TDS return by the due date. The CIT(A) reduced the penalty to Rs. 1,23,800, considering the default period from a later date based on the evidence of filing Form No. 26A.

3. The Tribunal noted that the TDS return for the financial year 1988-89 was prepared and filed during the penalty proceedings. It highlighted the legislative amendment in 1991 requiring timely delivery of the return, which was not applicable to the case's period. The Tribunal emphasized that penalty provisions must be strictly construed, and penalties are leviable only for specified defaults. Citing relevant case laws, the Tribunal concluded that the penalty was not justified in this technical and venial default.

4. The Tribunal further emphasized that the assessee had deducted and deposited the tax, and the TDS return was prepared within the prescribed time, even though evidence of filing was lacking. Considering the bona fide conduct of the assessee, the Tribunal held that the default was minor and technical, warranting cancellation of the penalty. It highlighted the importance of discretion in imposing penalties for statutory obligations and referred to a relevant High Court decision supporting the cancellation of the penalty in this case.

5. In conclusion, the Tribunal canceled the penalty imposed by the CIT(A) and allowed the appeal of the assessee, emphasizing the technical nature of the default, the timely tax deduction and deposit, and the absence of evidence of filing the TDS return.