2013 (8) TMI 599 - HC - Income Tax

Failure to obtain PAN and Qutore PAN of deductees as provided u/s 139-A(5B) - TDS returns / certificates - Penalty u/s 272B - Relied u/s 273B - reasonable cause - Respondent-assessee has not mentioned Permanent Account Number in Form-16-A issued to contractors Held that - A bare reading of Section 272B, 273-B and section 139A(5A) and 139A (5B) of the Act itself makes it clear that the penalty under section 272-B will not ordinarily be imposed unless the assessee has either acted deliberately in defiance of law or was guilty of conduct which is contumacious, dishonest or acted in conscious disregard to its obligation. The penalty under section 272B cannot be imposed merely because it is lawful to do so. It can be imposed for failure to perform statutory obligation. The imposition of penalty for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially, after considering the explanation of reasonable cause submitted by the assessee and on a consideration of all the relevant circumstances. Law laid down by the Hon ble Supreme Court in the case of Hindustan Steels Ltd. Vs. State of Orissa 1969 (8) TMI 31 - SUPREME Court . is applicable looking to the provisions of Section 272-B read with Section 273B of the Act There is no revenue loss and mere technical breach, clearly satisfies the test of reasonable cause under section 273B of the Act Decided against the Revenue.

Summary

Issues Involved:

1. Justification of penalty deletion under Section 272-B.
2. Applicability of the Hindustan Steels Ltd. Vs. State of Orissa decision.

Issue-wise Detailed Analysis:

1. Justification of Penalty Deletion under Section 272-B:

The appeal was filed by the revenue against the ITAT's decision to delete a penalty of Rs.34,30,000/- under Section 272-B of the Income Tax Act, 1961, for the assessment year 2003-04. The respondent-assessee, a public sector undertaking, deducted and deposited tax at source as per Sections 194-C and 194-J but failed to mention the PAN of 350 contractors in Form-16A. The Additional Commissioner imposed a penalty, which was upheld by the CIT (Appeals) but reduced for defaults prior to the introduction of Section 272-B. The ITAT, however, deleted the penalty, noting that the assessee had complied with other statutory requirements and that the omission was due to contractors not providing their PANs, which constituted a technical error. The High Court upheld the ITAT's decision, emphasizing that Section 272-B is discretionary and can be waived if reasonable cause is shown, as per Section 273-B.

2. Applicability of the Hindustan Steels Ltd. Vs. State of Orissa Decision:

The revenue contended that the Supreme Court's decision in Hindustan Steels Ltd. Vs. State of Orissa was inapplicable. However, the High Court found that the principles from Hindustan Steels Ltd. were relevant. The Supreme Court had held that penalties should not be imposed for technical or venial breaches or when the breach arises from a bona fide belief. The High Court noted that the respondent-assessee had no contumacious or fraudulent intent, and the omission did not result in any revenue loss. Therefore, the penalty was not justified, aligning with the Supreme Court's stance that penalties should be imposed judiciously and not merely because it is lawful to do so.

Conclusion:

The High Court concluded that the ITAT's order did not suffer from any legal or factual errors. The deletion of the penalty was upheld, and both questions of law were answered in favor of the assessee and against the revenue. The appeal was dismissed without any order as to costs.