2022 (6) TMI 1200 - AT - Income Tax

Levy of penalty u/s 271C - assessee failed to pay the deducted tax within the stipulated time - HELD THAT - From the perusal of the penalty order, it can be seen that the Assessing Officer proceeded on the basis that the assessee failed to pay the deducted tax within the stipulated time but from the perusal of the submissions of the assessee before the Assessing Officer it is seen that except the TDS on the interest payment to two parties the assessee has paid the TDS before the survey proceedings conducted at their premises as there was death of a person who was looking after the Income Tax matter of the Company which is mentioned in paragraph no.3 of the penalty order. These crucial facts were totally ignored by the AO as well as by the CIT(A) - payment of delayed TDS to the Government Treasury was not a negligent act on the part of the assessee but due to unavoidable circumstances. Therefore, Section 271C of the Act is not properly invoked. The ratio laid down in CIT vs. Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT is applicable in the present case though the Section mentioned in that decision is Section 271(1)(c) - CIT(A) has simplicitor confirmed the penalty without looking into the aspect that the levy of penalty was in excess of the default. Thus, the reasoning given by the CIT(A) is not just and proper. Hence, penalty levied under Section 271C of the Act needs to be deleted. Levy of penalty under Section 272A(2)(g) - assessee made default by not filing quarterly returns in Form No.24Q and 26Q and by not issuing certificates of TDS in time - assessee submitted that the assessee company suffered from liquidity crash due to slow-down of the business and there was a delay in payment of TDS due to non-availability of funds and thus this cannot be treated as wilful default - Penalty was imposed without taking cognisance of the reasons given by the assessee which was genuine reason and cannot be strictly adhered to. The delay in issuance of certificate within the stipulated time was due to the non-availability of financial advise/concerned person who dealt with the tax matters of the company (death of Manish Shah). Thus, the CIT(A) totally ignored crucial aspect of the case and imposed penalty without application of mind. Hence, appeal of the assessee allowed.

Summary

Issues:
- Appeal against penalty under Section 271C for A.Y. 2015-16
- Appeal against penalty under Section 272A(2)(g) for A.Y. 2015-16
- Similar grounds raised for A.Y. 2016-17 in ITA Nos.1817/Ahd/2018 & 1818/Ahd/2018

Analysis:

Issue 1: Appeal against penalty under Section 271C for A.Y. 2015-16
The appellant contested the penalty of Rs.51,83,473 under Section 271C of the Income Tax Act for A.Y. 2015-16. The Assessing Officer found the appellant liable for not depositing the deducted tax into the Government account. The appellant argued that the penalty should not have been confirmed as the delay in payment was due to reasons beyond their control and financial constraints. The CIT(A) dismissed the appeal. During the hearing, the appellant did not appear despite notices. The Tribunal observed that the Assessing Officer did not consider crucial facts, such as the death of the person handling tax matters for the company, leading to delayed TDS payments. The Tribunal found the penalty imposition unjust and excessive, citing the case law of CIT vs. Reliance Petroproducts Pvt. Ltd. The penalty under Section 271C was deemed inappropriate, and the appeal was allowed.

Issue 2: Appeal against penalty under Section 272A(2)(g) for A.Y. 2015-16
In this issue, the appellant challenged the penalty of Rs.85,800 under Section 272A(2)(g) for A.Y. 2015-16. The Assessing Officer imposed the penalty for delays in filing quarterly returns and issuing TDS certificates. The appellant explained that the liquidity crisis and business slowdown caused the delays, which were not wilful defaults. The CIT(A) upheld the penalty without considering the genuine reasons provided by the appellant. The Tribunal noted that the delay was due to the unavailability of the person handling tax matters after their demise. The penalty imposition lacked proper consideration of the circumstances, leading to the allowance of the appeal.

Issue 3: Similar grounds raised for A.Y. 2016-17
For A.Y. 2016-17, similar grounds were raised in ITA Nos.1817/Ahd/2018 & 1818/Ahd/2018, mirroring the issues faced in A.Y. 2015-16. The Tribunal allowed both appeals, emphasizing the unjust imposition of penalties without due consideration of the extenuating circumstances.

In conclusion, the Tribunal allowed all four appeals filed by the assessee, highlighting the importance of considering genuine reasons and circumstances before imposing tax penalties. The judgments underscored the need for a fair and just application of tax penalty provisions in line with the principles of natural justice and legal precedents.