Income Tax Appellate Tribunal (ITAT) Delhi in a recent judgment while quashing the penalty u/s 272B of the Income Tax Act, 1961 for quoting wrong PANs of deductees in TDS quarterly returns stated that t he assessee quoted the PAN numbers which were provided by the deductees, therefore mistake was not on account of the assessee and moreover those was rectified when the correct PAN numbers were furnished by the deductees.

Case Laws Referred:
CIT (TDS) Vs Superintendent of Police (2012) 349 ITR 550 (P&H)
ITO (TDS) Vs Executive Engineer (2015) 69 SOT 421 (Del- Trib.)
CIT and Another Vs GAIL (India) Ltd. (2013) 356 ITR 711 (All)
Om Prakash Subhash Kumar Vs ITO (2012) 144 TTJ 38 (Del-Trib.)

Case Details:
ITA Nos. 6491 to 6494/Del/2013 AY: 2010-11
Income Tax Officer, TDS (Appellant) vs The Executive Engineer, Panchayati Raj (Respondent)
Date of Order: 04-11-2015

Brief facts of the Case:
The Assessing Officer (AO) from the e-quarterly statement of TDS returns filed by the assessee noted that PAN in respect of 99 deductees were invalid/missing. Accordingly he initiated penalty proceedings u/s 272B and levied the penalty of Rs. 9,90,000/- for the four quarters and similar penalties amounting to Rs. 70,000/-, Rs.13,40,000/-, Rs. 15,60,000/- and Rs. 7,40,000/- were imposed for default in respect of 7, 134, 156 and 74 deductees. Being aggrieved the assessee contested the order before CIT(A) and submitted that:

1. It had deducted tax correctly and filed Form No. 24Q statements and as such there was sufficient compliance for the provisions of Section 139.
2. Quarterly returns were filed timely and there was only 18 invalid deductee PANs out of total 195 PANs
3. There was no element of “Mens Rea” nor there was a guilty mind, i.e.; it was not the intention of the assessee to derive any benefit whatsoever by filing the wrong PANs.
4. Invalid PANs were corrected after ascertaining the same from the respective deductees.

The assessee placed reliance on the Supreme Court judgment in the case of Hindustan Steel Ltd. Vs State of Orissa (1972) 83 ITR 26.

CIT(A) deleted the penalties by observing that:
1. The appellant filed TDS correction statement immediately on receipt of show cause notice.
2. The appellant received the final show cause notice of penalty beyond the specified date of compliance.
3. invalid/missing PANs had been made good by filing correction statements well before the issue of final penalty notice.

Contention(s) of the assessee:
That the assessee furnished the statement of tax deducted at source in Form No. 24Q timely and the tax was deducted correctly, so there was no mistake of the assessee because the PAN number which were supplied by the deductees were mentioned and where inspite of best efforts the PAN number could not be got the same could not be furnished but it was beyond the control of the assessee. Therefore, there was no malafide mistake and penalty u/s 272B was not leviable.

Contentions of the Revenue:
That the assessee either did not furnish the PAN or furnished the incorrect PAN in respect of the deductees. Therefore, the penalty u/s 272B of the Act was rightly levied by the AO

Held:
ITAT observed that the assessee deducted the tax correctly and deposited the same in time. The assessee also filed the return in Form No. 24Q in time, so there was a sufficient compliance by the assessee and the mistake in respect of the PAN of the deductees which was noted by the AO, was rectified whenever the assessee received the information about the correct PAN. In the present case, the PAN collected by the assessee were those which the deductees informed, so there was no fault of the assessee and there was also no failure to comply with the provisions of Section 139A of the Act. The assessee quoted the PAN numbers which were provided by the deductees, so if there was any mistake in the PAN numbers that was not on account of the assessee and moreover the mistake was rectified when the correct PAN numbers were furnished by the deductees

Important Excerpt from ITAT Judgment:

On a similar issue the Hon’ble Jurisdictional High Court in the case of CIT (TDS) Vs Superintendent of Police (2012) 349 ITR 550 held as under:

“ The assessee quoted invalid permanent account numbers for 196 deductees. The error was due to wrong quoting of permanent account numbers by the deductees to the assessee. The assessee rectified the mistake by furnishing the correct permanent account numbers as soon as it came to its notice. The revised permanent account numbers and the revised statement were filed. The tax was deducted and deposited in time in the Government treasury. ”

It has been further held as under:

“ That there was nothing to show that the findings recorded by the Commissioner (Appeals) and the Tribunal were erroneous in any manner. On appreciation of the entire matter, the Commissioner (Appeals) and the Tribunal examined the explanation of the assessee and came to the conclusion that there was sufficient cause shown which would be a question of fact in the given facts and circumstances. Thus, there was no substance in the argument raised by the Revenue that there was no reasonable cause on the part of the assessee to furnish inaccurate permanent account numbers in Form 24Q. ”

On a similar issue the Hon’ble Allahabad High Court in the case of CIT & Another Vs GAIL (India) Ltd. (2013) 356 ITR 711 held as under:

“The penalty under section 272B of the Income-tax Act, 1961, will not ordinarily be imposed unless the assessee has either acted deliberately in defiance of law or was guilty of conduct which is contumacious, dishonest or acted in conscious disregard to its obligation. The penalty under section 272B cannot be imposed merely because it is lawful to do so. It can be imposed for failure to perform statutory obligation. The imposition of penalty for failure to perform a statutory obligation. The imposition of penalty for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially, after considering the explanation of reasonable cause submitted by the assessee and on a consideration of all the relevant circumstances.”

It has further been held as under:

“ That it was the statutory obliteration of the contractors, who received certain amounts from the assessee, from which tax was deducted under the provisions of Chapter XVII-B, to intimate their permanent account numbers to the assessee. It is the specific stand of the assessee that certain contractors had not intimated their permanent account numbers and for that reason they could not be mentioned in Form 16A issued to such contractors. Section 139A(5B) makes it obligatory for every person deducting tax under Chapter XVII-B to quote the permanent account number of the person to whom such sum or income or amount has been paid by him. Thus, reading both the provisions together, namely, section 139(5A) and section 139A(5B) the deductor may be at fault under section 139A(5B) if he does not quote the permanent account number of the persons to whom the amount has been paid, despite the intimation of permanent account number by such person to the deductor under section 139A(5A). There was nothing on record to show that the contractors to whom certain amounts were paid by the assessee, had intimated their permanent account number to the assessee as required under section 139A(5A). Therefore, the assessee had explained with reasonable cause under section 273B as to why the assessee could not satisfy the provisions of section 272B. ”

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