2017 (1) TMI 722 - AT - Income Tax

Penalty levied under section 272A(2)(k) - late filing of TDS statements / returns - e-TDS was made compulsory for the instant assessment year and where the software was not user-friendly and required amendments at the end of the Government itself from time to time and the compliance being a complex procedure introduced for the first time - can the provisions of section 273B of the Act be applied in order to decide the issue of levy of penalty under section 272A(2)(k) of the Act.? Held that - Section 272A(2) of the Act, since penalty has been levied for default in furnishing e-TDS returns under section 272A(2)(k) of the Act. Since section 273B of the Act covers the cases of levy of penalty under section 272A(2) of the Act, then in line with the provisions of said section in case a person establishes its case of reasonable cause for not complying with the provisions of said section, then the section provides that such a person shall not be liable to the penalty imposable for the said failure i.e. under section 272A(2) of the Act. The CIT(A) in the case of several assessee before us has wrongly come to the conclusion that the provisions of section 273B of the Act do not cover the defaults under section 272A(2)(k) of the Act. We reverse the finding of CIT(A) in this regard. The onus was upon the authorities to provide platform for easy compliance to newly introduced provisions of the Act. Where such facilities could not be provided by the authorities and the technical support not being available to small assessees, who are in appeal before us, then the delay in furnishing the e-TDS returns late should be liberally construed. Hence, there was practical difficulty on the part of assessee to comply with newly introduced requirement of e-TDS filing of TDS statements, being technical delay and not venial in nature, merits to be considered as reasonable cause for non levy of penalty as per the requirements of section 273B of the Act. We hold so. In this bunch of appeals, there are cases where the assessee has defaulted in not depositing tax deducted at source in time, in such cases, the returns were delayed because of default on behalf of the deductor. In such cases, penalty under section 272A(2)(k) of the Act is leviable. However, the same is to be restricted from the date of payment of TDS to the date of filing e-TDS statements since e-TDS statements cannot be filed without payment of TDS to the credit of Central Government. Also we direct the Assessing Officer to restrict the penalty leviable to first quarter which is in default and for the overlapping default, no penalty is to be levied under section 272A(2)(k) of the Act. We direct the Assessing Officer to verify the claim of assessee in this regard and work out the penalty accordingly.

Issues Involved:
1. Levy of penalty under section 272A(2)(k) of the Income-tax Act, 1961 for late filing of TDS statements.
2. Condonation of delay in filing appeals.
3. Applicability of section 273B for reasonable cause in non-compliance.
4. Overlapping defaults in quarterly TDS returns.

Detailed Analysis:

1. Levy of Penalty under Section 272A(2)(k):
The primary issue in these appeals is the levy of penalty under section 272A(2)(k) for late filing of TDS statements for the assessment year 2011-12. The Assessing Officer imposed penalties on various assessees for failing to file TDS returns within the prescribed time limits, as required under section 200(3) of the Act and Rule 31A of the Income Tax Rules, 1962. The penalty was levied at ?100 per day for the period of delay. For instance, in the case of M/s. Nav Maharashtra Vidyalaya, a penalty of ?40,200 was imposed for a delay of 402 days in filing Form No.24Q.

2. Condonation of Delay in Filing Appeals:
Several appeals were filed with delays ranging from 3 to 44 days. The Tribunal condoned these delays after considering the reasons provided by the respective assessees, allowing the appeals to be heard on merit.

3. Applicability of Section 273B for Reasonable Cause:
The assessees argued that the delays were due to reasonable causes such as lack of expert staff, non-availability of consultancy, and technical issues with the e-filing system. They cited section 273B, which provides that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the failure. The CIT(A) initially upheld the penalties, stating that section 273B does not apply to section 272A(2)(k). However, the Tribunal reversed this finding, stating that section 273B does indeed cover defaults under section 272A(2)(k), and reasonable cause should be considered.

4. Overlapping Defaults in Quarterly TDS Returns:
In cases where TDS returns for multiple quarters were filed on the same day, the assessees argued that penalties should be restricted to the default of the first quarter only, as subsequent delays were a continuation of the initial default. The Tribunal found merit in this argument and directed the Assessing Officer to restrict penalties accordingly.

Tribunal's Findings and Directions:

Condonation of Delay:
The Tribunal condoned the delays in filing appeals, allowing the cases to be heard on their merits.

Reasonable Cause and Section 273B:
The Tribunal acknowledged the reasonable causes presented by the assessees, such as technical difficulties and lack of expert staff, especially given that the assessment year 2011-12 was the first year of mandatory e-filing of TDS returns. The Tribunal held that these reasons constituted a reasonable cause under section 273B, and thus, penalties should not be imposed for these delays.

Overlapping Defaults:
For cases where TDS returns for multiple quarters were filed on the same day, the Tribunal directed that penalties should be restricted to the default of the first quarter only. The Assessing Officer was instructed to verify and adjust the penalties accordingly.

Technical Delays:
The Tribunal noted that the introduction of e-TDS filing in the assessment year 2011-12 came with several technical challenges and amendments. Given these complications, the Tribunal found that the delays in filing TDS returns were due to reasonable causes and should be liberally construed.

Conclusion:
The Tribunal allowed the appeals, directing the Assessing Officer to consider the reasonable causes and restrict penalties appropriately. The decision emphasized the importance of considering practical difficulties and technical challenges faced by assessees during the transition to mandatory e-filing of TDS returns.

Order Pronounced:
The order was pronounced on October 7, 2016, allowing the appeals as indicated.

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