2015 (10) TMI 1396 - AT - Income Tax

Penalty under section 272(2)(k) - assessee has failed to file e-TDS returns for first and second quarter with delay of 252 days and 160 days - Held that - In this case, the assessee explained that there was a reasonable cause for failure to comply with the requirement because it was not aware of the fact that a return was to be filed at the branch level. It is admitted fact that the TDS amount was deducted on time and paid to the Revenue Department and the necessary return was also filed later on, therefore, no loss of revenue had occurred on account of late filing of the return. Thus, the penalty was merely technical in nature because the Revenue has not suffered any loss on account of late filing of the return. The issue, therefore, would be covered by the decision of the hon ble Punjab and Haryana High Court in the case of H.M. T. Ltd. Tractors Division v. CIT 2004 (8) TMI 50 - PUNJAB AND HARYANA High Court - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing appeal before the Tribunal.
2. Levy of penalty under section 272A(2)(k) of the Income-tax Act, 1961.
3. Reasonable cause for failure to file TDS returns on time.
4. Interpretation of section 273B of the Income-tax Act regarding penalty imposition.
5. Application of precedent set by the Punjab and Haryana High Court in a similar case.

Condonation of Delay:
The appeal was filed 208 days late, and the assessee sought condonation of delay. The branch manager of the bank where the assessee held an account submitted an affidavit stating that the delay was due to the assessee's belief that no appeal could be filed against the Commissioner's order. The Tribunal, after considering both parties' submissions, condoned the delay as the assessee had a genuine belief that no appeal could be filed earlier.

Levy of Penalty:
The assessee failed to file quarterly TDS returns on time, leading to a penalty under section 272A(2)(k) of the Act. The Commissioner upheld the penalty citing non-filing of returns by the due date. However, the Tribunal noted that the TDS amount was paid on time, and the returns were filed after clarification from the head office. The Tribunal found no loss of revenue due to the delay and decided to cancel the penalty.

Reasonable Cause for Failure:
Section 273B of the Income-tax Act exempts penalty if a reasonable cause for failure is proved. The assessee explained that the failure to file returns on time was due to a lack of awareness regarding the branch's responsibility and was a technical error. The Tribunal agreed that the penalty was technical in nature, as no revenue loss occurred, and the necessary actions were taken promptly after realizing the mistake.

Interpretation of Section 273B:
The Tribunal interpreted section 273B to determine if the penalty was imposable in this case. Since the TDS amount was paid on time, and the delay did not result in any revenue loss, the Tribunal concluded that the penalty was not justified. The provision of section 273B was applied to exempt the assessee from penalty due to a reasonable cause for the delay.

Application of Precedent:
The Tribunal referred to a precedent set by the Punjab and Haryana High Court in a similar case involving late issuance of tax deduction certificates. The High Court ruled that penalties cannot be imposed for technical errors that do not result in revenue loss. Citing this precedent and considering the facts of the case, the Tribunal set aside the lower authorities' orders and canceled the penalty imposed on the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the penalty was not mandatory in every case and should be based on the specific circumstances and facts of the case.