2018 (2) TMI 1089 - AT - Income Tax

Penalty levied u/s 272A(2)(k)/274 r.w.s. 200(3) - reasonable cause in not furnishing the said quarterly TDS return in time - whether the provisions of section 200(3) are applicable? - Held that - The case of the assessee before us is that the delay in submission of e-TDS return was because of strict requirement of e-filing of the statement and filing of such e-TDS return in this year PAN of person on whose behalf tax is collected were required mandatorily, otherwise e-return was not getting uploaded, hence the delay in filing quarterly TDS return late. We hold that the assessee had reasonable cause in not furnishing the same in time and in view of the provisions of section 273B of the Act, we hold that the assessee is not liable to levy of penalty under section 272A(2)(k) of the Act. Hence, the Assessing Officer is directed to delete the same. - Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of penalty under section 272A(2)(k) / 274 r.w.s. 200(3) of the Income-tax Act, 1961 for late filing of TDS returns.
2. Reasonable cause for delay in filing e-TDS returns.
3. Application of section 273B of the Act in waiving the penalty.
4. Overlapping defaults in filing quarterly returns and the corresponding penalty.

Detailed Analysis:

1. Levy of Penalty under Section 272A(2)(k) / 274 r.w.s. 200(3):
The assessee was penalized ? 45,500/- for a delay of 455 days in filing the quarterly TDS return for Q1 of FY 2010-11. The Assessing Officer initiated proceedings under section 200(3) of the Act, resulting in the penalty under section 272A(2)(k) / 274 r.w.s. 200(3).

2. Reasonable Cause for Delay:
The assessee contended that the delay was due to the mandatory requirement of e-filing TDS returns and the technical difficulties associated with it. The Tribunal recognized that the financial year 2010-11 was the first year for mandatory e-filing, which involved several amendments and technical issues. The Tribunal noted that the Government's system was not user-friendly and required multiple amendments, which constituted a reasonable cause for the delay.

3. Application of Section 273B:
Section 273B provides that no penalty shall be imposed if the assessee proves a reasonable cause for the failure. The Tribunal held that the CIT(A) wrongly concluded that section 273B does not cover defaults under section 272A(2)(k). The Tribunal reversed this finding, stating that the technical difficulties and the lack of technical support constituted a reasonable cause under section 273B, thus negating the penalty.

4. Overlapping Defaults in Filing Quarterly Returns:
The Tribunal addressed the issue of overlapping defaults, where the delay in filing the first quarter's return led to delays in subsequent quarters. The Tribunal directed that the penalty should be restricted to the first quarter only, and no penalty should be levied for the overlapping defaults in subsequent quarters. The Assessing Officer was instructed to verify and adjust the penalty accordingly.

Conclusion:
The Tribunal accepted the assessee's plea of reasonable cause due to technical difficulties in the initial year of mandatory e-filing. The Tribunal directed the deletion of the penalty under section 272A(2)(k) of the Act, emphasizing that the delay was not due to the assessee's fault but due to system failures and lack of technical support. The Tribunal also provided relief for overlapping defaults, restricting the penalty to the first quarter only.

Order:
The appeal of the assessee was allowed, and the Assessing Officer was directed to delete the penalty. The judgment was pronounced on February 9, 2018.