2002 (5) TMI 205 - AT - Income Tax

Summary

Issues:
1. Penalty under section 272A(2)(c) for late filing of TDS return.

Detailed Analysis:
The appeal before the Appellate Tribunal ITAT CALCUTTA-E was against the CIT(A)'s order sustaining a penalty under section 272A(2)(c) of the Income-tax Act, 1961. The solitary grievance of the assessee was regarding the penalty of Rs. 50,400 levied for not deducting tax at source under section 194-I and for late filing of the TDS return. The assessee, a social club, had not deducted tax at source when paying rent for hired premises but rectified the mistake by deducting and depositing the tax later. The club also filed the Annual TDS return but was still penalized for late filing. The dispute arose when the Assessing Officer imposed a penalty of Rs. 50,400 under section 272A(2)(c) for the delayed filing of the TDS return.

The assessee contended that there was no requirement to file the TDS return when no tax was deducted at source during the financial year. However, the DCIT rejected this argument, emphasizing that the obligation to deduct tax at source and file the return on time was statutory, irrespective of when the tax was actually deducted. The CIT(A) upheld the penalty, stating that the purpose of penal provisions for non-submission of returns would be defeated if penalties were not imposed for late filing, even when no tax was deducted at source.

The Appellate Tribunal noted that the filing of the TDS return usually follows the deposit of taxes deducted at source. Considering the peculiar facts of the case and the statutory duty to deduct and deposit taxes, the Tribunal found a reasonable cause for the delay in filing the TDS return. Referring to section 273B, the Tribunal concluded that the penalty under section 272A(2)(c) was not applicable in this scenario. The Tribunal also highlighted that the failure to deduct tax at source attracted separate penalties, which were not under consideration in this appeal.

Moreover, it was established that the offense of not deducting tax at source under section 194-I was complete when the tax was not deducted, and there was no further offense unless other taxes were involved. Drawing from a precedent by the Gauhati High Court, the Tribunal concluded that the CIT(A) erred in sustaining the penalty. The Tribunal emphasized that the imposition of penalties should be justified by law and circumstances, and in this case, the penalty was deemed unjustified and inherently bad in law. Consequently, the Tribunal allowed the appeal, directing the deletion of the penalty of Rs. 50,400 imposed under section 272A of the Income-tax Act, 1961.