2015 (12) TMI 1175 - AT - Income Tax

Levy of penalty u/s 221 - Delay in the remittance of TDS to the Government (TDS) Account - Held that - In the instant case, in these appeals, the plea of the assessee all along was there was a genuine cash crunch because of the fact that most of the payments were received under several schemes after a gap of two to six months, whereas the assessee has to make some urgent payments for the purpose of running its day-to day business on account of which the assessee could not have sufficient liquid cash to make the payment, which is evident from the fact that all the three bank accounts of the assessee together had a total cash balance of ₹ 6 lakhs only. These facts were not disputed by the Learned Departmental Representative. In other words, the explanation of the assessee that on account of cash crunch, remittance of TDS into Government account could not be made has not been rebutted. Under these circumstances, we do not find any infirmity in the order passed by the learned CIT(A). We therefore, uphold the same and dismiss these appeals of the Revenue - Decided in favour of assessee

Summary

Issues:
1. Delay in remittance of TDS leading to penalty imposition for assessment years 2012-13 and 2013-14.

Analysis:
The appeals filed by the Revenue against the common order passed by the Commissioner of Income-tax(Appeals) 8, Hyderabad were related to the delay in remittance of TDS for the financial years 2011-12 and 2012-13. The Assessing Officer imposed penalties on the assessee for delayed remittance of TDS amounts, citing the default in payment and levying penalties under Section 221 of the Act based on interest calculations under Section 201(1A). The Assessing Officer referred to precedents to support the imposition of penalties even if the tax was deposited belatedly after the due date.

In response, the assessee argued before the CIT(A) that the delay was due to a severe cash flow problem caused by delayed payments from insurance companies and government entities, leading to a struggle to meet regular operating expenses. The assessee highlighted that the Department collected TDS dues by attaching bank accounts when the company was facing a severe cash crunch. The assessee also argued that penalty imposition for non-payment of interest was not justified as tax and interest are distinct, citing relevant legal decisions supporting this argument.

The CIT(A) considered the assessee's explanations and relied on legal precedents to conclude that there was a genuine financial crunch preventing timely tax remittance. The CIT(A) emphasized that penalties should not be levied if the assessee had acted in good faith, especially when the outstanding amount was related to interest only. Consequently, the CIT(A) deleted the penalties imposed by the Assessing Officer for both years.

The Revenue appealed the CIT(A)'s decision, arguing that a mere cash crunch was not a valid reason to avoid penalty under Section 221 of the Act. The Revenue cited a Bombay High Court decision to support the imposition of penalties even if the tax had been paid before penalty proceedings. However, the assessee's counsel maintained that the cash crunch was genuine and supported by evidence, and the CIT(A)'s decision was justified.

After considering the submissions and records, the Tribunal upheld the CIT(A)'s decision, noting that the genuine cash crunch faced by the assessee was evident from the limited cash balance in the bank accounts. The Tribunal found no fault in the CIT(A)'s order and dismissed the Revenue's appeals, thereby affirming the deletion of penalties for delayed TDS remittance.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the genuine financial constraints faced by the assessee and dismissing the Revenue's appeals against the penalty imposition for delayed TDS remittance.