2019 (5) TMI 282 - AT - Income Tax

Levy of penalty u/s 272A(2)(k) - failure to deliver quarterly TDS returns as required to be filed under the provisions of section 200(3) - delay in filing return in Form No.24Q for all the four quarters by 940 days and in Form No.26Q for all the quarters by 1324 number of days - delay of 2264 number of days cumulatively - reasonable cause on the part of the assessee for delayed deposit of the TDS and non-furnishing of the TDS returns HELD THAT - Bank account of the assessee was declared as NPA and public notices were given. The assessee company has drastically reduced its number of offices and had retrenched certain employees due to the financial crisis that it had undergone. The development project was also dropped because of financial crisis and liquidity crunch. There is also default on the part of the assessee to adhere to the one time settlement of its secured loan outstanding. All these facts indicate that there was some problem going on in the financial affairs of the assessee company. Under these circumstances, we are of the considered opinion that there was a reasonable cause on the part of the assessee for delayed deposit of the TDS and non-furnishing of the TDS returns in Form No.24Q and 26Q for all the four quarters during F.Y. 2010-11. As relying on JCL INFRA LTD. C/O. M/S. DEEPAK JAIN CO. 2018 (7) TMI 1315 - ITAT DELHI and M/S. AQUAFIL POLYMERS CO. PVT. LTD., 2016 (2) TMI 1079 - ITAT AHMEDABAD there was a reasonable cause on the part of the assessee for non submission of the TDS returns in Form No.24Q and 26Q for F.Y. 2010-11 within the meaning of provisions of section 273B - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 272A(2)(k) for delayed filing of TDS returns.

Analysis:
The appeal was against the penalty imposed under section 272A(2)(k) for delayed filing of TDS returns for the assessment year 2011-12. The assessee failed to file quarterly TDS returns on time, resulting in delays ranging from 76 to 476 days. The JCIT imposed a penalty of ?2,26,400, which was upheld by the CIT(A). The main contention was whether there was a reasonable cause for the delay in filing the TDS returns.

The assessee argued that financial difficulties, including being declared an NPA by the bank, retrenchment of employees, and dropping a development project due to a liquidity crisis, were valid reasons for the delay. The assessee also highlighted efforts to settle outstanding loans and reduce expenses. Citing section 273B of the IT Act, the assessee claimed there was a reasonable cause for the delay. The assessee presented cases where penalties were deleted under similar circumstances.

The Revenue contended that the delay was willful and that financial hardship cannot justify non-compliance with statutory provisions. They emphasized the impact of the delay on deductees and the need to credit tax deductions to the Central Government promptly.

The Tribunal noted the financial challenges faced by the assessee, including being declared an NPA and other liquidity issues. Relying on precedents where penalties were deleted due to severe financial crises being considered a reasonable cause, the Tribunal held that there was a reasonable cause for the delayed TDS filings. Consequently, the penalty was canceled, and the appeal by the assessee was allowed.

The Tribunal's decision highlighted the importance of considering the circumstances leading to delays in statutory compliance. The judgment emphasized the need to assess whether genuine financial difficulties constituted a reasonable cause for non-compliance with TDS filing deadlines. By referencing relevant legal provisions and precedents, the Tribunal provided a detailed analysis supporting the cancellation of the penalty imposed on the assessee.