2021 (4) TMI 246 - AT - Income Tax

Penalty u/s. 272A(2)(K) - non filing of TDS returns within the prescribed time - HELD THAT - There is no rebuttal from the departmental side to the clinching fact that since the TDS deductees had not furnished or made available their respective PANs to the assessee/deductor, it was prevented by reasons beyond its control from filing the prescribed TDS returns well within the time prescribed. The fact also remains that their lordships have further observed that full waiver of penalty could not be accepted in the given facts and circumstances. We thus respectfully follow their lordships latter observation and restrict the impugned penalties to the extent of ₹ 25,000/- each in the interest of justice. Necessary computation to follow as per law.

Summary

Issues:
Appeals against penalty under Section 272A(2)(K) of the Income Tax Act, 1961 for AYs 2007-08 & 2008-09.

Analysis:
1. The appeals arose from the CIT(A)-II, Hyderabad's orders dated 15-07-2013 concerning penalty proceedings under Section 272A(2)(K) of the Income Tax Act, 1961. The tribunal noted that the delay in filing TDS returns was due to non-availability of PAN numbers of deductees, as mandated by TDS provisions. The Assessing Officer imposed penalties for non-compliance, which the CIT(A) upheld despite the assessee's explanations about deducting and remitting TDS promptly but facing delays in filing returns due to various reasons.

2. The assessee argued that there was no loss caused by the delay in filing the TDS returns, attributing it to non-availability of PAN numbers. The tribunal considered judicial precedents, including the Lucknow Bench and Chandigarh Bench decisions, where penalties were deleted due to timely TDS deposits and absence of revenue loss. The tribunal found a justified reason for the delay in filing returns and deleted the penalties imposed by the Assessing Officer, allowing the assessee's appeals.

3. The Revenue filed appeals before the high court challenging the tribunal's decision to delete the penalties. The high court admitted the appeals, questioning whether the tribunal was correct in law in waiving the penalties entirely. The high court observed that full waiver of a significant penalty amount could not be accepted without further discussion on the peculiar facts and circumstances. The court directed the tribunal to reconsider and decide the matter within three months.

4. In the subsequent proceedings before the tribunal, it was acknowledged that the TDS deductees' failure to provide PAN numbers had hindered the timely filing of returns. Considering the high court's observations on penalty waiver, the tribunal restricted the penalties to ?25,000 each, in line with the interest of justice. The tribunal partially allowed the assessee's appeals, modifying the penalties imposed.

In conclusion, the tribunal's decision was based on the justifiable reasons for the delay in filing TDS returns and the high court's directive to reconsider the penalty imposition. The penalties were reduced to ?25,000 each, balancing the need for compliance with the Income Tax Act and the unique circumstances faced by the assessee.