2018 (10) TMI 1224 - AT - Income Tax

Penalty levied u/s 272A(2)(k) r.w.s. 200(3) - late filing of TDS Returns - sub-contractors not having PAN, - whether appellant was prevented from reasonable cause for not filing the Returns in time - whether appellant had paid TDS along with interest, the default remained only a technical breach and there was no malafide intention for not filing the returns within specified time? - assessee pointed out that he had not received notice of hearing from the Assessing Officer and the order had been passed without providing opportunity of hearing to the assessee Held that - On perusal of record and the orders of authorities below, we find merit in the plea of assessee, wherein he has admitted to have filed TDS returns belatedly on the ground that he had not received PAN numbers of deductees. The assessee was a proprietor of his business and has deducted tax at source out of payments made to sub-contractors and also on account of rent and professional fees. The TDS return for the first quarter was due on 15.07.2010 and was filed on 22.02.2012. The TDS return for quarter No.2 in Form No.26Q was due to be filed on 15.10.2010 and for quarter No.3 by 15.01.2011 and for quarter No.4 by 15.05.2011, but all these TDS returns were filed on 26.02.2012. Referring to assessee s plea in view of peculiar circumstances of sub-contractors not having PAN, which were applied at a later date and hence, the delay in filing TDS returns late but the taxes were paid along with interest upto date we find merit in the plea of assessee, wherein under section 273B of the Act, if the assessee established its case of reasonable cause, which had resulted in failure of assessee to comply with the requirement of law, then penalty merits to be deleted in the hands of assessee. The facts of each case has to be seen independently and under such circumstances, reasoning of CIT(A) that the word used in section is shall and not may and hence, it was mandatory upon the assessee to comply with the provisions of the Act by filing the TDS return within prescribed time, cannot hold. Undoubtedly, in the said section, the word used is shall but thereafter, the provisions of section 273B of the Act are also provided in the Statute and reading two together would show that levy of penalty can be deleted in case the assessee fulfills the conditions of reasonable cause as provided in section 273B of the Act. Similar issue had arisen before the Tribunal in bunch of appeals with lead order in Nav Maharashtra Vidyalaya Vs. Addl. CIT (TDS) Range, Pune 2017 (1) TMI 722 - ITAT PUNE has decided the issue of levy of penalty under section 272A(2)(k) of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Levy of penalty under section 272A(2)(k) of the Income-tax Act, 1961 for late filing of TDS returns.
2. Reasonable cause for delay in filing TDS returns.
3. Applicability of section 273B of the Income-tax Act, 1961 for waiving penalties.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 272A(2)(k):
The appeal concerns the levy of a penalty of ?52,175/- under section 272A(2)(k) of the Income-tax Act, 1961 for the late filing of TDS returns. The Assessing Officer noted that the quarterly TDS returns were filed beyond the prescribed time and issued a show cause notice to the assessee. The penalty was calculated based on the number of days of default for each quarter, totaling ?1,57,106/-. However, the CIT(A) upheld the penalty, stating that the assessee failed to show efforts made to collect PAN from sub-contractors and emphasized the mandatory nature of the word 'shall' in the section.

2. Reasonable Cause for Delay:
The assessee contended that the delay was due to sub-contractors not having PANs, which were applied for later, and that taxes along with interest were paid before any show cause notice was issued. The assessee argued that the delay was beyond their control and due to the unorganized nature of their business sector. The CIT(A) rejected this argument, stating that the assessee was aware of TDS provisions and the delay was an afterthought to escape legal consequences.

3. Applicability of Section 273B:
The Tribunal found merit in the assessee's plea, noting that under section 273B, if the assessee establishes a reasonable cause for the delay, the penalty can be waived. The Tribunal referenced a similar case (Nav Maharashtra Vidyalaya Vs. Addl. CIT) where it was held that the penalty under section 272A(2)(k) could be waived if there was a reasonable cause. The Tribunal emphasized that technical delays due to system failures and the complexity of newly introduced e-TDS filing requirements constituted a reasonable cause.

Judgment:
The Tribunal directed the Assessing Officer to delete the penalty under section 272A(2)(k), acknowledging the practical difficulties faced by the assessee in complying with the new e-TDS filing requirements. The Tribunal also noted that overlapping defaults should only attract a penalty for the first quarter in default and not for subsequent quarters. The appeal of the assessee was allowed, and the penalty was ordered to be deleted.

Conclusion:
The Tribunal concluded that the delay in filing TDS returns was due to reasonable cause, including the lack of PANs for sub-contractors and the technical challenges of the new e-TDS system. The penalty under section 272A(2)(k) was deemed unjustified, and the appeal was allowed, directing the deletion of the penalty.