2017 (1) TMI 1632 - AT - Income Tax

Penalty u/s 272A(2)(k) - penalty for technical default in delay in filing TDS returns - Held that -The assessee is around 66 years of age and is suffering from brain hemorrhage since May 2014 and he is unable to take care of himself. The Court order attached certifies the mental illness of the appellant and authorizes appellant s wife to act on behalf of the assessee. The assessee has been regular in filing its TDS returns in other assessment years and has also been regular in filing income tax returns in all the assessment years. The delay was only procedural and default, if any, was not deliberate and intentional. No deliberate intention of delaying the submission of TDS returns. This shows the bonafide of the assessee in complying with the provisions of law. Late filing of TDS returns is a technical default. One should not be penalized for technical default. There was only a technical and venial breach of the provision contained in rule 31A of the I.T. Rules, 1962, requiring the assessee to submit quarterly statements of deduction of tax under section 200(3) within the time prescribed. Such delay had not caused any loss to the Revenue. The Tribunal in Rajasthan Tribal Area Development Co Op. Federation Ltd. v/s ITO (1997 (4) TMI 123 - ITAT JAIPUR) held that for mere failure to furnish TDS returns, penalty was not justified as there was no default in deducting tax at source or in deposing the tax in government treasury. The Tribunal, Mumbai Bench, in Royal Metal Printers Pvt. Ltd. v/s ITO, 2010 (1) TMI 938 - ITAT, MUMBAI had categorically stated that the delay in filing the TDS returns even if they are characterized as negligence on the part of the assessee, can only be considered as a technical or venial breach of law for which penalty should not be levied automatically.- Decided in favour of assessee

Summary

Issues:

1. Penalty for delay in filing TDS return under section 272A(2)(k) of the Income Tax Act, 1961.

Analysis:

The appeal was against the order passed by the learned CIT(A) confirming the penalty imposed by the Assessing Officer for the delay in filing TDS returns. The assessee, an individual engaged in courier services, had deducted tax at source under various sections of the Act during the relevant financial year. Despite providing reasons for the delay and requesting leniency, the penalty was levied by the Assessing Officer under section 272A(2)(k).

Upon review, the Appellate Tribunal considered the submissions and material on record. It noted that the delay in filing the TDS returns was adequately explained by the assessee through letters to the Assessing Officer. Importantly, there was no loss to the Revenue due to the delay. Referring to a previous judgment by the Mumbai Bench, it was highlighted that such delays, even if due to negligence, should be viewed as technical breaches not warranting automatic penalties.

Additionally, the Tribunal observed that the assessee, aged around 66 and suffering from brain hemorrhage, was unable to manage affairs independently. The mental illness was certified by a court order, authorizing the appellant's wife to act on their behalf. It was noted that the assessee had a history of timely compliance with TDS and income tax returns in other assessment years, indicating the procedural delay was not deliberate or intentional. The Tribunal cited various judgments from different benches and High Courts emphasizing that technical defaults in filing TDS returns should not attract penalties, especially when there is no revenue loss.

Considering the circumstances and legal precedents, the Tribunal found no merit in imposing a penalty for the technical default of delayed TDS return filing. Consequently, the grounds raised by the assessee were allowed, and the appeal was upheld in favor of the assessee.

In conclusion, the Appellate Tribunal ruled in favor of the assessee, emphasizing the absence of revenue loss, the procedural nature of the delay, and the genuine efforts made to comply with tax regulations despite health challenges. The decision underscored the principle that penalties for technical defaults should be reserved for deliberate violations causing actual harm to the Revenue, aligning with established legal interpretations and judgments on similar cases.