Penalty 272A(2)(k)-Accountant left services was reasonable cause. If TDS + interest paid and return filed though belatedly there was no loss to Revenue

Penalty 272A(2)(k)-Accountant left services was reasonable cause. If TDS + interest paid and statements filed though belatedly there was no loss to Revenue – ITAT

Penalty 272A(2)(k)-Accountant left services was reasonable cause

ABCAUS Case Law Citation:
ABCAUS 1257 (2017) (05) ITAT

The Grievance:
The appellant assessee was aggrieved by the order passed by the Commissioner of Income Tax  (Appeals) [CIT(A)] confirming the penalty imposed by the Additional Commissioner of income Tax (TDS) [AO]u/s 272A(2)(k) of the Income Tax Act, 1961 (‘the Act’).

Assessment Year : 2010-11
Date/Month of Pronouncement: May, 2017

Important Case Laws Cited/relied upon:
Hindustan Steel Ltd, Vs State of Orissa (SC)
CIT Vs Eli Lilly and Co. India Private Limited (SC )
CIT Vs. Harsidh Construction Private Limited (Gujarat HC)
Acquafil Polymers Co. Private Limited (ITAT)
Kiri Industries Ltd. Vs. ACIT (ITAT)
Br. Manager, State Bank of India Vs. ACIT
ACIT Vs. Lok Prakashan Ltd. [ITAT)

Brief Facts of the Case:
The assessee was a private limited company. The Assessing Officer (‘AO’) noticed that the assessee, for the financial year 2009-10, failed to furnish the quarterly TDS returns within time prescribed under section 200(3) of the Act read with Rule 31 of Income Tax Rules.

The delay in furnishing the TDS quarterly return was as under:


Due date of filing statements

Date of filing the return

Delay in days

26Q-Q1 15/07/2009 29/07/2010 544
26Q-Q2 15/10/2009 29/07/2010 422
26Q-Q3 15/01/2009 29/07/2010 356
26Q-Q4 15/06/2010 29/07/2010 209

The AO issued a show cause notice u/s 272 A(2)(k) to the assessee. The assessee filed his reply. In the reply of assessee contended that reasons for late filing of returns of TDS was that their experienced accountant who used to compile the data for quarterly TDS return left services from July 2009 and the new accountant who was employed thereafter was not well-verse with the procedure of filing of the returns. The directors of the assessee were not well versed either with the computer operation or in handling the accounts and were dependent upon the accountants. The assessee admit that returns were filed late, however TDS was paid from time to time and there was some delay in payment of TDS. The assessee received intimation from the Department about the short deduction for few payments and the demand was raised including the interest on such short payments, upon receipt of such intimation and demand notice the assessee paid the balance amount of Rs. 6,940/-. The assessee further contended that there was unintentional compliance in furnishing the statement of the TDS. The assessee also contended that there was no malafide intention on the part of assessee. The assessee never defaulted on earlier occasions or in subsequent years.

However, the contention of assessee was not accepted by the Assessing Officer. The AO concluded that it was statutory obligation of the assessee to deduct tax wherever deductible and paid to the accounts of the government, the assessee had to ensure timely submission of TDS statement. The excuse made by the assessee for getting skilled staff etc, are not tenable and reasonable cause to see the benefit under section 273B of the Act. The AO further concluded that there was a clear-cut laxity on the part of assessee which cannot be now put forth as a reasonable cause for not filing statement in time. The Assessing Officer on the basis of number of delays in furnishing the return levied penalty @ Rs.100/- per day for each quarterly statement.

On appeal before Commissioner (Appeals) the penalty was sustained.

Aggrieved by the order of Learned Commissioner (Appeals), the assessee was in present appeal before the ITAT.

Observations made by the Tribunal:
It was observed that there was no dispute that assessee had deposited the amount of TDS in every quarter. The assessee had paid interest for delay in deposit of TDS. The contention of assessee throughout the proceedings was that not furnishing the statement/ returns within statutory period was neither intentional nor deliberate. The delay in furnishing the statement was due to the reasons that the person who was looking after for furnishing the statement of TDS returns left employment of assessee. The assessee made their effort to bring the employee back in their employment.

It was noted that the Tax authorities had not given any finding that non-furnishing of TDS returns was deliberate or the assessee got any benefit due to delay in furnishing the statement.

The Tribunal observed the following Law laid down by the Hon’ble Courts/Tribunals:

Supreme Court
“An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of authority to be exercised judiciously and on the consideration of all relevant circumstances even if minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, where there is technical or venial breach of the provision of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statue.”

Supreme Court
“Section 273B states that notwithstanding anything contained in section 271C, no penalty shall be imposed on the person or the assessee for failure to detect tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy penalty can be fastened only on only on the person who do not have a good case and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who does not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason.”

Ahmedabad Tribunal
“When assessee has paid the tax with interest and TDS statements are already filed, though belatedly there is no loss to the revenue.”

The ITAT found that the assessee had given sufficient explanation for delay in furnishing the statement of TDS within the prescribed period. In view of the decision of Hon’ble Supreme Court, when there was no contemptuous or dishonest act on behalf of assessee in view of the explanation offered by assessee, the Tribunal accepted the explanation offered by the assessee.

The appeal was allowed and the AO was directed to delete the entire penalty levied under section 272A(2)(k) of the Act.

Penalty 272A(2)(k)-Accountant left services

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