2018 (8) TMI 261 - AT - Income Tax

Levy of penalty under clause (k) of sub-section (2) of section 272A read with section 200(3) - whether section 273B of the Act which speaks of reasonable cause for any defaults, does not include clause (k) of sub-section (2) of section 272A? - Held that - In identical facts of the case in the case of CIT v. Accounts Officer, Telecom 2005 (5) TMI 22 - ALLAHABAD HIGH COURT held that the delay in filing the prescribed returns are only technical nature and since there is no loss to the Revenue, the default is of only technical nature and the delay due to the ignorance of the appellant was accepted by the hon ble High Court. Similarly, in the case of CIT (TDS) v. Executive Engineer 2009 (8) TMI 643 - PUNJAB & HARYANA HIGH COURT and CIT v. Superintending Engineer, PWD 2002 (5) TMI 13 - RAJASTHAN HIGH COURT in the cases involving identical facts, held to the similar effect. The hon ble apex court in the case of Hindustan Steel Ltd. v. State of Orissa 1969 (8) TMI 31 - SUPREME COURT observed that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The apex court further observed that penalty will not also be imposed merely because it is lawful to do so. The powers are to be exercised judiciously. - Decided in favour of assessee

Summary

Issues:
Levy of penalty under clause (k) of sub-section (2) of section 272A of the Income-tax Act, 1961 for delay in submission of quarterly returns.

Analysis:

1. Grounds of Appeal:
The appellant contested the penalty imposed under section 272A(2)(k) read with section 200(3) of the Income-tax Act, 1961. The appeal challenged the confirmation of the penalty by the Commissioner of Income-tax (Appeals) based on the absence of 'reasonable cause' provision in clause (k) of sub-section (2) of section 272A. The appellant argued that section 273B's 'reasonable cause' provision should apply to all defaults under the Income-tax Act, including clause (k) of section 272A(2).

2. Facts of the Case:
The appellant, a wealth management advisory services company, deducted TDS on salary payments during the financial year 2011-12 but failed to submit quarterly TDS returns on time. The delay was attributed to the resignation of the managing director and the sudden departure of the accountant. Despite remitting TDS amounts to the government, the appellant was penalized for late filing of returns.

3. Legal Interpretation:
The Commissioner of Income-tax (Appeals) upheld the penalty under clause (k) of section 272A(2), emphasizing the mandatory nature of filing quarterly statements within the specified due date. The provision of section 273B, which allows for a 'reasonable cause' defense, was deemed inapplicable to clause (k) of section 272A(2). The decision highlighted the infirmity in imposing penalties under clause (k) due to the absence of reasonable cause provision.

4. Appellate Tribunal Decision:
The Appellate Tribunal considered the appellant's argument that the delay in filing returns was due to a change in accountants who were unfamiliar with TDS provisions. Citing legal precedents, including judgments from various High Courts and the Supreme Court, the Tribunal concluded that the delay was a technical nature default with no loss to the Revenue. The Tribunal held that a reasonable cause existed for the delay, thereby directing the deletion of the penalty imposed under section 272A.

5. Conclusion:
The Appellate Tribunal allowed the appellant's appeal, ruling that the penalty under clause (k) of section 272A was not justified due to the reasonable cause for the delay in filing returns. The decision emphasized the discretionary nature of imposing penalties for statutory obligations and the need for judicious exercise of such powers. The Tribunal directed the Assessing Officer to cancel the penalty of ?1,43,108 imposed under section 272A of the Income-tax Act.