2014 (9) TMI 759 - HC - Income Tax

Deletion of penalty u/s 271A(2)(g) late issuance of TDS Certificate - Reasonable cause for the failure - Held that - Rule 31 of the Income Tax Rules, 1962 which prescribes that a certificate of deduction of tax at source by any person deducting the tax shall be in Form 16, came to be substituted on a number of occasions and under the old provision, the requisite certificate was required to be issued by the Revenue Department on an application by the deductor, but later on, that rule was substituted the tribunal rightly found that in view of frequent amendments in rule 31 of the Income tax Rules, the assessee being a deductor was under a bona fide belief that the provisions have been followed - no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the provisions, if he proves that there was reasonable cause for the failure here, the assessee has proved that there was a reasonable cause for the failure in complying with the provisions of section 272A (2)(g) of the Act - Once reasonable cause has been established by the assessee, no penalty u/s 271A(2)(g) of the Act could have been imposed on the assessee the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Questioning deletion of penalty order under Section 272A(2)(g) of the Income Tax Act.
2. Assessment years 1993-94 and 1994-95.
3. Justification for late issuance of TDS certificates.
4. Interpretation of rule 31 of the Income Tax Rules, 1962.
5. Application of section 273B of the Income Tax Act.

Analysis:

1. The appellant revenue challenged the deletion of penalty orders under Section 272A(2)(g) of the Income Tax Act for the assessment years 1993-94 and 1994-95. The Commissioner of Income Tax (Appeals) and the Tribunal had both ruled in favor of the assessee, citing reasonable cause for the delay in issuing TDS certificates.

2. The penalty was imposed by the Assessing Officer for late issuance of TDS certificates, amounting to Rs. 17,95,800 and Rs. 49,09,700 for the respective years. The Commissioner (Appeals) overturned the penalty orders based on the Supreme Court and High Court decisions, finding the defaults to be technical or venial in nature.

3. The Tribunal, in alignment with the Commissioner (Appeals), upheld the deletion of penalties, emphasizing that the assessee had a bona fide belief that the certificates were to be issued after the close of the financial years. The Tribunal highlighted the changes in rule 31 of the Income Tax Rules, which led to confusion and justified the assessee's actions.

4. Rule 31 of the Income Tax Rules, 1962, underwent multiple substitutions, complicating the issuance of TDS certificates. The Tribunal noted the challenges faced by the deductor in complying with the changing rules and accepted the assessee's belief that they were following the provisions correctly.

5. Section 273B of the Income Tax Act provides that no penalty shall be imposed if there was a reasonable cause for the failure to comply with the relevant provisions. The Tribunal found that the assessee had established a reasonable cause for the delay in issuing TDS certificates, absolving them from the penalty under Section 272A(2)(g).

6. The Tribunal's decision was based on the assessee proving a reasonable cause for the delay, in accordance with section 273B of the Act. The appellant failed to disprove the reasonable cause established by the assessee, leading to the Tribunal's justification for upholding the deletion of penalties.

7. Ultimately, the High Court dismissed the appeals, stating that there was no substantial question of law to warrant interference. The impugned order passed by the Tribunal was found to be devoid of merit, and the deletion of penalties was upheld based on the established reasonable cause for the delay in issuing TDS certificates.