2002 (10) TMI 83 - HC - Income Tax

Failure To Deduct Tax penalty - we are satisfied that the interest of justice will serve in case this appeal is disposed of in terms that the recovery of the amount of penalty imposed shall remain stayed for six months or till the date the application of the appellant is decided by the Chief Commissioner of Income-tax Rajasthan Jaipur whichever is later. - The officers of the State Government who are responsible for filing of the TDS returns are to be informed and made known that in case the delay is made in the submission thereof and the penalty is levied for their act or omission they shall be personally liable for the payment of amount of the penalty. It cannot be and shall not be the burden of the State Government. The State Government is not in any manner responsible for this delay. Where delay is there certainly it would have been as a result of negligence carelessness inaction and omission on the part of its officer which cannot be taken to be an act in discharge of his official duty and thus the State Government cannot be vicariously made liable. The Chief Secretary of the State of Rajasthan is expected to make it clear to the officers of the State Government by issuing an appropriate circular order or direction as the case may be.

Summary

Issues:
Appeal under section 260A of the Income-tax Act, 1961 against the order of the Income-tax Appellate Tribunal for the assessment year 1990-91; Condonation of delay in filing the appeal; Challenge of two different orders of the Tribunal in a single appeal; Consideration of amendments in section 278A of the Act, 1961; Imposition of penalty for non-filing of TDS returns by the State Government officer; Applicability of provisions of sections 273A and 273B of the Act, 1961; Dispute resolution between State and Central Government; Stay on recovery of penalty; Liability of State Government officers for penalty.

Analysis:
The appeal before the High Court of Rajasthan was filed by the State of Rajasthan against the order of the Income-tax Appellate Tribunal for the assessment year 1990-91, regarding the imposition of a penalty for non-filing of TDS returns. The court first addressed the issue of delay in filing the appeal and allowed the condonation of the ten-day delay, considering the satisfactory explanation provided by the appellant and the non-opposition by the Revenue counsel. The court then observed that the appeal challenged two different orders of the Tribunal, directing the appellant to file separate appeals for each order. The appellant complied by amending the appeal to focus only on one of the orders.

Regarding the substantive issues, the court considered the amendments in section 278A of the Act, 1961, and the provisions of sections 273A and 273B. The court noted that the State Government officer's default in filing the TDS returns did not warrant the penalty imposed, suggesting that the matter should have been referred to the Chief Commissioner of Income-tax for waiver of the penalty. The court emphasized the importance of considering reasonable causes for failures and the provision for reduction or waiver of penalties under sections 273A and 273B.

Furthermore, the court highlighted the need for dispute resolution mechanisms between State and Central Government entities without resorting to court litigation, citing a Supreme Court decision. The court directed that the recovery of the penalty imposed on the State Government should remain stayed for six months or until the Chief Commissioner of Income-tax decides on the waiver application. The court also emphasized that State Government officers responsible for TDS filings should be personally liable for penalties, not the State Government itself, and recommended issuing appropriate directives to clarify this.

In conclusion, the court did not award costs in this case, emphasizing the importance of adhering to statutory provisions and resolving disputes through appropriate channels to avoid unnecessary litigation and burdens on the court system.