Delay in filing TDS returns due to the non furnishing of PAN by deductees is reasonable cause

By | November 28, 2015

IN THE ITAT HYDERABAD BENCH ‘A’ (SMC)

Assistant Commissioner of Income-tax (TDS), Circle 1 (1), Hyderabad

v.

Greater Hyderabad Municipal Corporation

P.M. JAGTAP, ACCOUNTANT MEMBER

IT APPEAL NOS. 155 TO 160 (H) OF 2015
[ASSESSMENT YEAR 2011-12]

AUGUST  12, 2015

Prabhat Kumar Gupta for the Appellant. S. Rama Rao for the Respondent.

ORDER

1. These six appeals filed by the Revenue are directed against the common order of Ld. CIT(A)-II, Hyderabad dated 14.11.2014 whereby he cancelled the penalties imposed by the A.O. under section 272A(2)(k) in the case of all the six assessees.

2. The assessees in the present case are the Head Office and Zonal Offices of the Greater Hyderabad Municipal Corporation (in short “GHMC”). As noticed by the A.O., there was a failure on the part of the assessees to file the quarterly returns of TDS in Form 24Q and 26Q for the year under consideration within the stipulated time as required by sub-section (3) of section 200 read with Rule 31A(2) of the I.T. Rules, 1962. He therefore, initiated penalty proceedings and issued notices under section 274 requiring all the six assessees to show cause as to why penalty under section 272A(2)(k) should not be imposed for their failure to file the TDS returns within the stipulated time. In response to the said notices, the following explanation was offered by the assessee.

“(a) That the deductees did not submit the required information in time to GHMC.
(b) That each Zone has several Circles and there has been delay in receiving information from one or the other Circle.
(c) That GHMC was busy in attending to several other Government programs like pension to old age people, submission of reports to Government etc.,
(d) That shortage of manpower is one of the main reasons for delay in filing TDS returns.
(e) That GHMC, being a local body, being a Government organization, does not have any malafide intention in late filing of TDS returns. As such the tax was deducted and paid to Government account. There is no revenue loss to the Income Tax Department nor there is any revenue gain to GHMC in late filing of TDS returns. Therefore, it was requested not to levy penalty u/s.272A(2)(k).”

2.1. The above explanation offered by the assessees was not found acceptable by the Assessing Officer. According to him, there was no reasonable cause highlighted by the assessees for the delay on their part in filing the relevant TDS returns and in the absence of such reasonable cause put-forth by the assessees they were liable to pay penalties under section 272A(2)(k) of the Act. Accordingly, penalties under section 272A(2)(k) were imposed by the A.O. on all the six assessees under section 272A(2)(k) as under :

GHMC (HO) F.Y. 2010-2011 Total Penalty (in Rs.)
Form 26Q 24,100
Form 24Q 3,94,100
Total 4,18,200
GHMC (East Zone) F.Y. 2010-11 Total Penalty (in Rs.)
Form 26Q 68,000
Form 24Q 3,43,900
Total 4,11,900
GHMC (Central Zone) F.Y. 2010-2011 Total Penalty (in Rs.)
Form 26Q 47,900
Form 24Q 4,35,200
Total 4,83,100
GHMC (North Zone) F.Y. 2010-2011 Total Penalty (in Rs.)
Form 26Q 32,400
Form 24Q 63,000
Total 95,400
GHMC (West Zone) F.Y. 2010-2011 Total Penalty (in Rs.)
Form 26Q 27,500
Form 24Q 3,99,500
Total 4,27,000
GHMC (South Zone) F.Y. 2010-2011 Total Penalty (in Rs.)
Form 26Q 61,200
Form 24Q 71,500
Total 1,32,700

2.2. The penalties imposed by the A.O. under section 272A(2)(k) were challenged by all the six assessees in the appeals filed before the Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), the following submissions were made on behalf of the assessees in support of their cases that the penalties imposed by the A.O. under section 272A(2)(k) were not sustainable.

“(a) The assessee was not supported by the competent staff having the required expertise and knowledge of filing the online Quarterly eTDS Returns.
(b) The assessee could not get the PAN details of the deductees in spite of all its efforts.
(c) The delay caused in filing of the e- TDS Returns was purely beyond the control of the assessee and there was no intention whatsoever to delay the filing of the quarterly returns, when the TDS was very much remitted from time to time.
(d) Learning Assessing Officer has ignored the fact that in the present case Levy of penalty under s.272A(2)(k) is not justified for mere failure to file the TDS returns within the prescribed time owing to ignorance of statutory provisions as the appellant did not derive any benefit whatsoever by not filing the quarterly TDS statements in time, and wherein the appellant who is’ a Local body (Public Office) had discharged its obligation by deducting tax at source and deposited it within the Central Govt. Exchequer.”

3. After considering the submissions made on behalf of the assessees and keeping in view the various judicial pronouncements cited on behalf of the assessees, the Ld. CIT(A) held that all the assessees being Government organization, there was no malafide intention in filing TDS returns belatedly. He also held that the tax at source having been deducted and paid by the assessees as per the relevant provisions of the Act, the delay in filing the TDS returns was only a technical default and there being no loss to the revenue or any monetary gain to the assessees, the penalties imposed by the A.O. under section 272A(2)(k) in case of all the six assessees were not justified. Accordingly, the penalties imposed by the A.O. under section 272A(2)(k) in case of all the six assessees were cancelled by the Ld. CIT(A). Aggrieved by the order of the Ld. CIT(A), the Revenue has preferred these appeals before the Tribunal.

4. The learned D.R. contended that there was no reasonable cause established by the assessees for the delay on their part in filing the relevant TDS returns. He contended that this vital aspect however was completely overlooked by the Ld. CIT(A) and the penalties imposed by the A.O. under section 272A(2)(k) were cancelled by him on the ground that the assessees having deducted and paid the tax as per the relevant provisions of the Act, the delay in filing the TDS returns was only a technical default. He contended that the requirement of filing the TDS returns itself is a technical requirement involving no revenue implication and if the basis given by the Ld. CIT(A) for cancelling the penalties is accepted, the relevant provisions of section 272A(2)(k) would become redundant. He contended that the impugned order passed by the Ld. CIT(A) cancelling the penalties imposed by the A.O. under section 272A(2)(k) in case of all the six assessees thus is not well founded and the same is liable to set aside.

5. The Ld. Counsel for the assessee, on the other hand, strongly supported the impugned order of the Ld. CIT(A) cancelling the penalties imposed by the A.O. under section 272A(2)(k) in case of all the six assessees. Besides relying strongly on the basis given by the Ld. CIT(A) in her impugned order for cancelling the penalties, he also raised a two fold contention. Firstly, he relied on the second proviso to section 272A to contend that no penalty can be levied under clause (k) of sub-section (2) to section 272A on or after 1st day of July, 2012 for the failure on the part of the assessees to deliver or caused to be delivered a copy of the statement within the time specified in sub-section (3) of section 200. Secondly, he contended that the reasonable cause which prevented the assessees from filing the relevant TDS returns within the stipulated time was pleaded by the assessees before the A.O. as well as before the Ld. CIT(A) by pointing out that there was a delay on the part of the deductees in furnishing their PAN details which resulted in the delay in filing the TDS returns by the assessees.

6. I have considered the rival contentions and also perused the relevant material on record. As rightly contended by the learned D.R., the requirement of filing the TDS returns as per the provisions of sub-section (3) of section 200 itself is technical in the sense that it does not involve any revenue implication and therefore, penalty leviable under section 272A(2)(k) for not complying with such requirement cannot be held to be unsustainable on the ground that the delay in filing the TDS returns is only a technical default. In my opinion, the impugned order of the Ld. CIT(A) cancelling the penalties by the A.O. under section 272A(2)(k) on this ground thus is not well founded.

7. At the time of hearing, the Ld. Counsel for the assessee has supported the impugned order of the Ld. CIT(A) cancelling the penalties imposed by the A.O. under section 272A(2)(k) by contending that such penalties cannot be imposed on or after 1st day of July, 2012 as per the second proviso to section 272A(2) inserted in the statute by the Finance Act, 2012 w.e.f. 01.07.2012. The said proviso reads as under :

“Provided further that no penalty shall be levied under this section for the failure referred to in clause (k), if such failure relates to a statement referred to in sub-section (3) of section 200 or the proviso to sub- section (3) of section 206C which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 2012.”

7.1. A careful reading of the above proviso makes it clear that even though the same covers the failure relating to a statement referred to in sub-section (3) of section 200 as involved in the present cases, it is applicable to such a statement which has to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 2012. In the present cases, the relevant TDS returns were to be delivered or caused to be delivered by the assessees before the 1st day of July, 2012 and this being the undisputed position, I am of the view that the second proviso to section 272A(2) is not applicable in the present cases. The reliance of the Ld. Counsel for the assessee on the said proviso to support the impugned order of the Ld. CIT(A) cancelling the penalties imposed under section 272A(2)(k) thus is clearly misplaced.

7.2. As regards the second contention of the Ld. Counsel for the assessee that the reasonable cause, which prevented the assessees from filing the relevant TDS returns within the stipulated time, was pleaded before the A.O. as well as before the Ld. CIT(A) by pointing out that there was a delay on the part of the concerned deductees in furnishing the required PAN details, it is observed that neither the A.O. nor the Ld. CIT(A) has appreciated and considered the same on merit by verifying the relevant details. At the time of hearing before me also, Ld. Counsel for the assessee has not furnished the relevant details and documents to support and substantiate the case of the assessees that the delay on the part of the concerned deductees in furnishing details resulted into the delay in filing the relevant TDS returns by all the assessees. He however has contended that the assessees are in the position to produce all these relevant details as well as documentary evidence before the A.O. to establish that there was a delay on the part of the concerned deductees to furnish their PAN details and the same constituted a reasonable cause which prevented the assessees from filing the relevant TDS returns within the stipulated time. He therefore has urged that one opportunity may be given to the assessees by sending the matter back to the A.O. for this purpose. I consider it fair and proper and in the interest of justice to accept this contention of the Ld. Counsel for the assessee and since the learned D.R. has also not raised any objection in this regard, I set aside the impugned order of the Ld. CIT(A) and restore the matter to the file of the A.O. with a direction to decide the issue relating to imposition of penalty under section 272A(2)(k) afresh, after giving the assessees proper and sufficient opportunity to support and substantiate their case of reasonable cause by producing relevant details and documentary evidence.

8. In the result, all the appeals of the Revenue are partly allowed.

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