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2020 (12) TMI 113 - AT - Income TaxPenalty u/s 272A(2)(k) - delay in submitting the quarterly TDS Statement in Form 26Q - order passed by the AO u/s 154 after the penalty order passed u/s 272A(2)(k) - HELD THAT - CIT(A) has not even considered the fact that the penalty proceedings were initiated by the AO for default on the part of the assessee on account of non - filing of Form 26Q within the period specified u/s 200(3) read with proviso to section 206(3) of the Income Tax Act. Once the assessee has stated on the affidavit and given an undertaking that the assessee has not paid any amount or deducted any TDS on any sum during these assessment years which requires to submit in Form 26Q, the levy of penalty for default of delivering the From 26Q is invalid and consequently the penalty order passed by the AO is bad in law, ab initio. Once the initiation of the penalty is based on some wrong facts and wrong ground which is not an error or mistake due to any incorrect mentioning of provision of law but the very basis of initiation of the proceedings was misconceived by the AO being the TDS statement in Form 26Q was not delivered by the assessee within the specified time. AO has accepted that the assessee was not under any obligation to deduct TDS in respect of the alleged transaction but the assessee was under the obligation to collect the tax in respect of various amounts received by the assessee and consequently the assessee was required to submit the statements in Form No. 27EQ. Once the AO has accepted this fact that the assessee was not required to deduct TDS or submit Form 26Q then the initiation of the penalty by the AO for such a non- existing default renders the penalty order invalid. The invalid initiation of the penalty vitiates the entire proceedings and consequently the penalty orders passed u/s 272A(2)(k) based on absolutely non- existing grounds is not sustainable in law. The CIT(A) has summarily dismissed all the appeals of the assessee without even discussing the correct fact brought on record and accepted by the AO while passing 154 order. Hence the impugned penalty orders are not sustainable in law and liable to be quashed. - Decided in favour of assessee.
Issues Involved:
1. Legality of penalty imposed under Section 272A(2)(k) of the Income Tax Act. 2. Validity of the penalty proceedings initiated by the Assessing Officer (AO). 3. Obligation of the assessee to file TDS statements in Form 26Q. 4. Justification for raising demand for non-filing of Form 26Q. 5. Consideration of submissions and evidence by CIT(A). Detailed Analysis: 1. Legality of Penalty Imposed Under Section 272A(2)(k): The primary issue revolves around the penalty imposed under Section 272A(2)(k) for non-filing of TDS statements in Form 26Q. The assessee contended that there was no obligation to file Form 26Q as no TDS was deducted or deductible. The Tribunal noted that the AO initiated penalty proceedings based on an incorrect assumption that the assessee was required to file Form 26Q. The Tribunal found that the penalty was levied on a non-existing default, rendering the penalty order invalid and unsustainable in law. 2. Validity of the Penalty Proceedings Initiated by the AO: The Tribunal examined whether the initiation of penalty proceedings by the AO was valid. The assessee argued that the initiation was based on incorrect facts and was thus invalid. The Tribunal agreed, highlighting that the AO's initiation of penalty proceedings was misconceived as it was based on the incorrect belief that the assessee failed to file Form 26Q. The Tribunal emphasized that the AO's acceptance in a subsequent order under Section 154 that the assessee was not required to deduct TDS or file Form 26Q further invalidated the penalty proceedings. 3. Obligation of the Assessee to File TDS Statements in Form 26Q: The Tribunal considered the assessee's affidavit stating that no TDS was deducted or deductible during the relevant assessment years. The Tribunal found that the AO failed to acknowledge this fact and proceeded with the penalty order. The Tribunal concluded that since the assessee had no obligation to deduct TDS or file Form 26Q, the penalty for non-filing of Form 26Q was invalid. 4. Justification for Raising Demand for Non-Filing of Form 26Q: The Tribunal scrutinized the justification for raising a demand of ?2,03,578 for non-filing of Form 26Q. The assessee argued that the demand was incorrect and unlawful as there was no obligation to file Form 26Q. The Tribunal agreed, noting that the AO's penalty order was based on incorrect facts and thus the demand was unjustified. The Tribunal quashed the penalty orders, stating that the invalid initiation of penalty proceedings vitiated the entire process. 5. Consideration of Submissions and Evidence by CIT(A): The Tribunal criticized the CIT(A) for summarily dismissing the assessee's appeals without considering the correct facts and evidence. The CIT(A) failed to address the assessee's submissions and the AO's acceptance in the Section 154 order that the assessee was not required to file Form 26Q. The Tribunal found that the CIT(A) did not provide independent findings or observations, leading to an erroneous and arbitrary decision. Consequently, the Tribunal quashed the penalty orders and allowed the assessee's appeals. Conclusion: The Tribunal concluded that the penalty orders under Section 272A(2)(k) were invalid due to the incorrect initiation of penalty proceedings by the AO. The Tribunal emphasized that the assessee had no obligation to file Form 26Q, and the penalty was based on non-existing defaults. The Tribunal quashed the penalty orders and allowed the appeals, highlighting the importance of accurate facts and proper consideration of evidence in penalty proceedings.
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