2009 (9) TMI 164 - HC - Income Tax

Imposition of penalty for failure to file statement of tax deducted at source within time - Whether, Tribunal was legally justified in upholding the decision of the Commissioner of Income-tax (Appeals) in reducing the penalty under section 272A (2)(c) from Rs. 99,500 to Rs. 2,337 for the assessment year 1989-90 whereas the relevant amendment made to this section came into effect with effect from October 1, 1991, only. - It is not in dispute that Form No. 26A was filed on January 20, 1992 - Therefore, law which was applicable on the date when the form was filed would be applicable which in the present case is January 20, 1992. The proviso to sub-section (2) of section 272A of the Act was on the statute book having been inserted with effect from October 1, 1991. The maximum amount of penalty, therefore, cannot exceed the amount of tax deductible, i.e., Rs. 2,337 in the present case. - We, therefore, do not find any illegality in the order of the Tribunal. The appeal fails and is dismissed.

Summary

Issues:
Appeal against order reducing penalty under section 272A (2)(c) for assessment year 1989-90.

Analysis:
The appeal was filed under section 260A of the Income-tax Act, 1961 challenging the order of the Income-tax Appellate Tribunal, Delhi, reducing the penalty under section 272A (2)(c) from Rs. 99,500 to Rs. 2,337 for the assessment year 1989-90. The main question of law was whether the Tribunal was legally justified in reducing the penalty amount considering the relevant amendment to the section came into effect from October 1, 1991, while the case pertained to the assessment year 1989-90. The respondent-assessee had failed to file Form No. 26A by June 30, 1989, resulting in penalty proceedings initiated in 1992. The assessing authority imposed a penalty of Rs. 99,500, which was later reduced to Rs. 2,337 by the Income-tax (Appeals) and upheld by the Tribunal.

The counsel for the Revenue argued that the proviso to section 272A(2) inserted in 1991 restricted the maximum penalty amount for non-furnishing of returns or prescribed forms. However, the Tribunal's decision to reduce the penalty to the amount of tax deductible, i.e., Rs. 2,337, was challenged. The court held that the law applicable at the time of filing Form No. 26A, which was January 20, 1992, should be considered. As the proviso to section 272A(2) was already in effect from October 1, 1991, the maximum penalty amount could not exceed the tax deductible amount. Therefore, the court found no illegality in the Tribunal's decision and dismissed the appeal.

In conclusion, the court upheld the Tribunal's decision to reduce the penalty under section 272A (2)(c) to Rs. 2,337 for the assessment year 1989-90, based on the relevant law in effect at the time of filing the required form. The appeal challenging the reduction of penalty amount was dismissed, emphasizing the application of the law at the time of the offense.