2021 (12) TMI 446 - AT - Income Tax

Penalty u/s 272A(2)(k) - assessee did not file its quarterly TDS returns within the prescribed time limit and there was a delay in filing quarterly statement of TDS u/s 200(3) as provided under Rule 31A of the Income Tax Rules - Reasonable cause of delay - As submitted Assessee paid the TDS payable subsequent to the survey conducted by the Department. The assessee complied with the directions of the Department but failed to file the relevant TDS quarterly returns due to non-availability of party wise details - HELD THAT - The imposition of penalty u/s 272A falls u/s 273B, as per which no penalty shall be imposable for any failure if the assessee proves that there was reasonable cause for the said failure. In the given case, the assessee did not assess the liability under TDS provisions and subsequent to the survey, he blindly followed the instructions of the officers and remitted the liability in cash through SBI without taking any details of determination of liability. Subsequently, the assessee could not comply with the filing of quarterly returns and made to pay the same amount again. The above situation clearly proves the reasonable cause. Further, the Ld. CIT(A) observed that in view of malafide intention on the part of the appellant as per the facts mentioned in the preceding paragraphs, appellant does not deserve any mercy. We failed to understand this observation when the assessee had followed the instruction of the officer by remitting the TDS dues immediately and also paid the same amount twice and also demonstrated the intricacies in collecting information from Department as well as from suppliers of Karnataka area. In our view, the assessee has proper reasonable cause in this issue of failures to comply in filing the quarterly returns. Therefore, we direct the AO to delete the penalty imposed u/s 272(2)(k) of the Act. - Decided in favour of assessee.

Issues Involved:
1. Delay in filing quarterly TDS returns.
2. Imposition of penalty under Section 272A(2)(k) of the Income Tax Act, 1961.
3. Reasonable cause for delay in filing TDS returns.
4. Financial and health hardships faced by the assessee.
5. Prosecution proceedings dropped by the Department.

Detailed Analysis:

1. Delay in Filing Quarterly TDS Returns:
The assessee did not file its quarterly TDS returns within the prescribed time limits, resulting in delays ranging from 600 to 935 days for different quarters of the financial year 2008-09. The delay in filing these returns led to the imposition of penalties by the Additional Commissioner of Income Tax (TDS).

2. Imposition of Penalty Under Section 272A(2)(k):
The Addl. CIT(TDS) levied a penalty of ?1,69,107 under Section 272A(2)(k) of the Income Tax Act, 1961, due to the delay in filing TDS returns. The CIT(A) upheld this penalty, emphasizing the importance of timely filing of e-TDS statements to facilitate the processing of returns and prevent tax evasion.

3. Reasonable Cause for Delay:
The assessee argued that the delay was due to several reasonable causes:
- Survey and Payment of TDS: During a survey conducted on 04.02.2009, the assessee paid TDS as directed by the Department but did not have the necessary details to file the returns.
- Bonafide Belief: The assessee believed that all TDS liabilities were settled following the Department's instructions.
- Practical Difficulties: The business operations were in Karnataka, while accounts were maintained in Maharashtra, leading to difficulties in collecting PAN details and accounting data.
- Lack of Technical Expertise: The assessee's staff lacked the technical expertise to file e-returns, and there was no online banking facility available.
- Double Payment of TDS: The assessee paid TDS twice due to a lack of clarity on the liability, once during the survey and again on 02.02.2011, including interest.

4. Financial and Health Hardships:
The assessee faced significant financial hardships, with a drastic fall in business turnover and initiation of recovery proceedings by creditors. Additionally, the assessee suffered health issues, including hospitalization due to severe diabetes, asthma, and blood pressure problems.

5. Prosecution Proceedings Dropped:
The Department dropped the prosecution proceedings against the assessee, recognizing the reasonable cause for the delay and the hardships faced.

Judgment:
The Tribunal considered the rival submissions and the material on record. It noted that the assessee complied with the Department's directions during the survey but failed to file the TDS returns due to non-availability of party-wise details. The Tribunal acknowledged the reasonable cause for the delay, including the financial and health hardships and the double payment of TDS. It also noted that the imposition of penalty under Section 272A(2)(k) falls under Section 273B, which exempts penalties if reasonable cause is proven. The Tribunal found the CIT(A)'s observation of malafide intention unfounded, given the assessee's compliance with the Department's instructions and the demonstrated difficulties in collecting information. Consequently, the Tribunal directed the AO to delete the penalty imposed under Section 272A(2)(k).

Conclusion:
The appeal filed by the assessee was allowed, and the penalty imposed under Section 272A(2)(k) of the Income Tax Act, 1961, was deleted. The judgment emphasized the reasonable cause for the delay and the hardships faced by the assessee, leading to the conclusion that the penalty was not justified.

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