2018 (9) TMI 1614 - AT - Income Tax

Levy of penalty u/s 272A(2)(k) - delay in remittance of the TDS Amount in the Govt. Account - whether the explanation tendered by the appellant in support of delay in submission of quarterly returns can be considered to be plausible? - Held that - The explanation that the delay was caused on account of delayed remittance of tax deducted amount to the Govt. Account and the ignorance of the provisions of law on the issue as the company was newly set up can be considered to be reasonable having regard to the ratio laid down in the case of Budhan Singh & Sons 1983 (1) TMI 71 - ALLAHABAD HIGH COURT wherein it was held that when the assessee is in the first year of business operations, ignorance of provisions of law can be held to be reasonable cause for non-compliance of the provisions of law. Further the columns of Form 26Q also contains columns requiring the details as to the date of the deposit of the TDS Amount in the Govt. Account. Therefore, when there is a delay in remittance of the TDS Amount in the Govt. Account, this would constitute a reasonable cause for not filing the prescribed returns within the due date. The statute also prescribes different penal provisions for delay in remitting the TDS amount to the Govt account. The explanation tendered by the assessee cannot be termed as unreasonable or unplausible. Therefore we are of the considered opinion that the case on hand is not a fit case for levy of penalty u/s. 272A - 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 in Form 26Q.

Analysis:
1. Grounds of Appeal: The appellant challenged the order confirming the penalty, arguing that there was no default actionable under the Act and that there was a reasonable cause for the delay in submitting the quarterly statements. The appellant also contended that the penalty was excessive and should be reduced substantially.

2. Facts of the Case: The appellant, a partnership firm, failed to file prescribed quarterly returns of TDS on time, despite deducting TDS on rent payments and remitting the TDS amount belatedly to the government account. The delay was attributed to ignorance of the law and lack of qualified personnel. The Addl. CIT proposed to levy a penalty under clause (k) of sub-section (2) of Section 272A for the delay.

3. Judicial Pronouncements: The CIT (Appeals) confirmed the penalty, citing judicial pronouncements that upheld the imposition of penalties even when there was no loss to revenue. However, the law provides that if a reasonable cause for the failure to comply is established, no penalty should be imposed. The appellant's contradictory explanations were deemed insufficient to justify the delay in filing the quarterly statements.

4. Appellant's Arguments: The appellant argued that the delay was due to delayed remittance of the TDS amount and ignorance of the law as a newly established company. They cited relevant case law to support their position.

5. Department's Position: The Department contended that the penalty under Section 272A is mandatory, irrespective of revenue loss, citing case law to support their stance.

6. Decision: The Tribunal analyzed the facts and found that the delay was due to delayed remittance of TDS and ignorance of the law, which constituted a reasonable cause for the delay. Citing precedents, the Tribunal held that the appellant's explanation was plausible, and the penalty was not justified. Distinct penal provisions for delayed remittance of TDS were also considered. The Tribunal allowed the appeal, stating that the penalty under Section 272A was not applicable in this case.

7. Conclusion: The Tribunal allowed the appellant's appeal, emphasizing that the delay was justified by reasonable causes and the penalty under Section 272A was not warranted.

This detailed analysis highlights the legal arguments, factual background, judicial interpretations, and the final decision of the Appellate Tribunal in the case concerning the levy of penalty under Section 272A of the Income Tax Act, 1961.