2008 (6) TMI 333 - HC - Income Tax

Penalty under section 272A(2)(g), 203 Deduction at Source In this case Bombay High Court held that, Once there has been compliance with section 203 read with rules, no penalty could have been imposed considering the language of section 272A(2)(g).The appeal is dismissed. Decision in favor of assessee against the revenue

Summary

Issues:
- Appeal against order of Income-tax Appellate Tribunal
- Penalty under section 272A(2)(g) of the Income-tax Act, 1961
- Compliance with issuance of TDS certificates
- Interpretation of relevant sections and rules

1. Appeal against order of Income-tax Appellate Tribunal:
The Revenue appealed against the Income-tax Appellate Tribunal's decision dated May 7, 2007, where the appeal was dismissed, and the Commissioner (Appeals) order was upheld. The Commissioner (Appeals) had set aside the penalty imposed under section 272A(2)(g) of the Income-tax Act, 1961, based on the facts that the TDS amount was paid into the Government account with delay, but TDS certificates were issued promptly. The issue revolved around the penalty imposed for the delay in furnishing TDS certificates.

2. Penalty under section 272A(2)(g) of the Income-tax Act, 1961:
Section 272A(2)(g) stipulates a penalty for failing to furnish a certificate as required by section 203 of the Income-tax Act. The Revenue challenged the deletion of the penalty by the Tribunal. The court analyzed the provisions of section 272A(2)(g) and section 203(1) to determine the imposition of the penalty. It was highlighted that the penalty could be imposed if the certificate of deduction was not issued within the prescribed time, as per the facts of each case. Rule 31 mandates the issuance of certificates, and compliance with this rule is crucial in determining the imposition of penalties.

3. Compliance with issuance of TDS certificates:
The court emphasized that compliance with section 203 read with the relevant rules is essential in deciding whether a penalty under section 272A(2)(g) can be imposed. In this case, the TDS certificates were sent promptly by speed post to the entitled persons after the tax was deducted and deposited with the Government treasury. The court concluded that since there was compliance with the mandatory requirements of section 203 and the rules, no penalty could be imposed under section 272A(2)(g). The authorities were deemed to have acted without jurisdiction in setting aside the penalty.

4. Interpretation of relevant sections and rules:
The court interpreted the provisions of section 272A(2)(g) and section 203(1) to establish the conditions for imposing penalties related to the issuance of TDS certificates. It was clarified that the penalty under section 272A(2)(g) hinges on the timely issuance of certificates as per the prescribed requirements. The court's decision to dismiss the appeal was based on the finding that compliance with the statutory provisions regarding the issuance of TDS certificates negated the imposition of penalties under section 272A(2)(g).

In conclusion, the court upheld the decision to set aside the penalty under section 272A(2)(g) due to the timely issuance of TDS certificates in compliance with the provisions of the Income-tax Act and relevant rules.