2008 (7) TMI 6 - HC - Income Tax

Penalty u/s 272A (2) (g) for default in depositing the tax deducted at source Once the explanation of delay in making the deposit has been accepted, there is no reason as to why the same cannot be used for the purposes of delay in the issuance of the TDS certificate - revenue plea that issuance of the TDS certificate is independent to the making of the TDS deposit, is rejected revenue appeal dismissed penalty not justified - No substantial question of law arises

Summary

Issues:
Appeal against Tribunal's order on penalty under Section 272A (2) (g) of the Income Tax Act, 1961 for assessment years 2000-2001 and 2001-02.

Analysis:

1. Penalty under Section 272A (2) (g):
The appeals were filed challenging the Tribunal's order regarding the penalty under Section 272A (2) (g) of the Income Tax Act, 1961. The revenue contended that the penalty imposed by the Assessing Officer should have been upheld by the Tribunal. It was argued that this penalty is distinct from penalties under Section 221 related to default in depositing tax deducted at source. The Tribunal previously found that the assessee was not in default under Section 201 (1) of the Act, which led to the conclusion that no penalty under Section 221 was applicable. The Tribunal reasoned that if the assessee was not in default under Section 201 (1), then imposing a penalty under Section 272A (2) (g) based on the same explanation would be unwarranted. The Tribunal also highlighted the interdependence of depositing TDS and issuing TDS certificates, ultimately accepting the assessee's explanation for the delay in compliance.

2. Interpretation of TDS Rules:
The Court examined Form 16-A, the TDS certificate issuance form under Rule 31 (1) (b) of the Income Tax Rules, 1962. It was observed that the TDS certificate can only be issued after the TDS amount is deposited with the Central Government, with details of the deposit required in the certificate. Therefore, the issuance of the TDS certificate is directly linked to the TDS deposit. Once the explanation for the delay in depositing TDS was accepted, it logically followed that the same explanation could be applied to delays in issuing TDS certificates. The Court found no error in the Tribunal's decision, concluding that no substantial legal question arose, leading to the dismissal of the appeals.

In summary, the High Court of Delhi upheld the Tribunal's decision regarding penalty under Section 272A (2) (g) of the Income Tax Act, 1961 for the assessment years 2000-2001 and 2001-02. The Court emphasized the interrelation between TDS deposit and TDS certificate issuance, accepting the assessee's explanation for delays and rejecting the revenue's argument for imposing penalties. The judgment clarified the legal interpretation of TDS rules and affirmed the Tribunal's findings, ultimately dismissing the appeals.