2018 (10) TMI 494 - AT - Income Tax

Penalty u/s 272A(2)(k) - delay in filing of quarterly TDS returns in form no. 24Q beyond time prescribed by statute - reasonable cause for the delay - inconvenience in initial stage of switchover from manual to e-filing system of TDS returns - Held that - It is undisputed that the income-tax so deducted at source by the assessee on the salaries paid to employees was deposited in time to the credit of Central Government . The statement of income-tax deducted at source i.e. quarterly TDS return in form no. 24Q for all the four quarters of the financial year 2010-11 were filed late beyond time stipulated under law. We are fully aware that Hon ble High Court s have upheld the constitutional validity of late fee as prescribed u/s. 234E of the Act for delay in filing of TDS returns as it is a fee paid to Revenue for extra work been done in giving credit to those tax-payers who suffers because of non filing of TDS returns by the deductors in time. We cannot also ignore the fact that it was for the Revenue to have allowed smooth switchover from manual to e-filing system of filing TDS returns. The onus and burden was on revenue to provide necessary infrastructure so that tax-payer did not face any inconvenience in filing e-TDS returns. But as it is emerging from the historical factual matrix, the public at large faced lot of inconvenience in initial stage of switchover from manual to e-filing system of TDS returns due to several glitches. We have also noted the conduct of the assessee for subsequent periods wherein the TDS returns were e-filed in form no. 24Q, 26Q as well 27Q by the assessee mostly in time for financial year 2012-13, 2013-14 and 2014-15 and DR did not controvert the above filing of TDS such returns - Penalty not sustainable in the eyes of law as the assessee has shown a reasonable cause falling within parameters of Section 273B - Decided against revenue.

Issues Involved:

1. Confirmation of penalty of ?46,200/- by the CIT(A).
2. Reasonable cause for delay in filing TDS returns under section 200(3).
3. Technical nature of the default and no loss of revenue to the department.
4. Filing of future returns before the due date.
5. Applicability of Section 273B to Section 272A(2)(k) penalties.

Detailed Analysis:

1. Confirmation of Penalty of ?46,200/- by the CIT(A):

The assessee was penalized ?46,200/- under section 272A(2)(k) for failing to file quarterly TDS returns within the stipulated time for the financial year 2010-11. The CIT(A) confirmed this penalty, which was originally imposed by the AO. The AO's penalty was based on delays in filing Form 24Q for all four quarters, with delays ranging from 29 to 235 days.

2. Reasonable Cause for Delay in Filing TDS Returns Under Section 200(3):

The assessee argued that the delay was due to practical difficulties, such as collecting data from over 200 employees spread across various locations, non-availability of PANs, and the new e-filing system. The assessee submitted that these factors constituted a reasonable cause under Section 273B, which should exempt them from the penalty. The tribunal acknowledged these difficulties, noting that the transition to e-filing had several technical glitches and required multiple modifications by the Revenue.

3. Technical Nature of the Default and No Loss of Revenue to the Department:

The assessee contended that the delay was merely technical since the TDS was deposited with the government treasury on time. The tribunal agreed, emphasizing that no prejudice was caused to the Revenue because the taxes were paid within the prescribed time. The tribunal referred to similar cases where penalties were deleted due to the technical nature of the default and the absence of revenue loss.

4. Filing of Future Returns Before the Due Date:

The assessee demonstrated improved compliance in subsequent years, filing TDS returns mostly within the due dates for the financial years 2012-13, 2013-14, and 2014-15. The tribunal considered this as evidence of the assessee's bona fide intent to comply with the law, further supporting the argument for reasonable cause.

5. Applicability of Section 273B to Section 272A(2)(k) Penalties:

The tribunal examined several judicial precedents, including decisions by the Pune and Jaipur tribunals, which held that penalties under Section 272A(2)(k) should not be imposed if the assessee demonstrates a reasonable cause under Section 273B. The tribunal noted that the CIT(A) had wrongly concluded that Section 273B did not apply to Section 272A(2)(k) penalties. The tribunal found that the assessee had shown reasonable cause due to the initial difficulties with the e-filing system and the practical challenges in collecting data.

Conclusion:

The tribunal concluded that the penalty of ?46,200/- was not sustainable as the assessee had demonstrated a reasonable cause for the delay in filing TDS returns. The tribunal ordered the deletion of the penalty, allowing the assessee's appeal. The decision was based on the technical nature of the default, the timely payment of TDS, and the practical difficulties faced during the initial implementation of the e-filing system. The tribunal emphasized that the provisions of Section 273B, which allow for the waiver of penalties upon showing reasonable cause, were applicable in this case.

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