2018 (3) TMI 145 - AT - Income Tax

Levy of penalty u/s. 272A(2)(k)/274 r.w.s. 200(3) - delay of 380 days in filing of quarterly return of TDS - furnishing e-TDS for first quarter in Financial Year 2010-11 belatedly - Held that - The reasonable cause for filing belated return of levy of penalty u/s. 272A(2)(k) of the Act can be considered u/s. 273B of the Act. Nothing has been brought on record before us by the Department that in the subsequent quarters of Financial Year 2010-11 the assessee has furnished e-TDS return belatedly. Thus, in the facts of the case and the decision of Co-ordinate Bench in Nav Maharashtra Vidyalaya Vs. Addl. Commissioner of Income Tax (TDS) Range, Pune 2017 (1) TMI 722 - ITAT PUNE the penalty levied u/s. 272A(2)(k) is deleted and the appeal of assessee is allowed.

Issues Involved:
1. Levy of penalty under section 272A(2)(k) for delay in filing quarterly TDS return.
2. Applicability of section 273B for waiving penalty due to reasonable cause.
3. Consideration of technical difficulties and system failures as reasonable cause.
4. Overlapping defaults and penalty restriction to the first quarter.

Issue-wise Detailed Analysis:

1. Levy of penalty under section 272A(2)(k) for delay in filing quarterly TDS return:
The assessee faced a penalty of ?38,000 for a 380-day delay in filing the quarterly TDS return for the first quarter of the Financial Year 2010-11. Despite receiving a show cause notice from the Assessing Officer, the assessee did not respond, leading to an ex-parte order. The Commissioner of Income Tax (Appeals) upheld the penalty, rejecting the assessee’s claim of unfamiliarity with the new e-filing system.

2. Applicability of section 273B for waiving penalty due to reasonable cause:
The Tribunal considered whether the penalty under section 272A(2)(k) could be waived under section 273B if the assessee demonstrated a reasonable cause. The Tribunal referred to a precedent case, Nav Maharashtra Vidyalaya Vs. Addl. Commissioner of Income Tax, where it was established that section 273B does cover defaults under section 272A(2)(k). The Tribunal reversed the CIT(A)'s conclusion that section 273B does not apply to section 272A(2)(k).

3. Consideration of technical difficulties and system failures as reasonable cause:
The Tribunal acknowledged that the financial year 2010-11 was the first year for mandatory e-TDS filing, which faced multiple amendments and technical issues. It was argued that small taxpayers, without technical guidance, faced practical difficulties in complying with the new system. The Tribunal held that these technical delays should be considered reasonable cause under section 273B, thus exempting the assessee from the penalty.

4. Overlapping defaults and penalty restriction to the first quarter:
The Tribunal also addressed the issue of overlapping defaults, where penalties for subsequent quarters should not be levied if the delay in the first quarter caused delays in subsequent quarters. The Tribunal directed the Assessing Officer to restrict the penalty to the first quarter and verify the claims of the assessee, ensuring no penalties for overlapping defaults.

Conclusion:
The Tribunal concluded that the reasonable cause for the delay in filing the e-TDS return justified the waiver of the penalty under section 273B. The penalty levied under section 272A(2)(k) was deleted, and the appeal of the assessee was allowed. The Tribunal emphasized that technical difficulties and system failures during the initial implementation of e-TDS filing constituted reasonable cause, and overlapping defaults should not attract multiple penalties.

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