Nagarjuna Public School Nanded v. The Jt. Commissioner of Income Tax, TDS Range, Nashik
[Citation -2016-LL-1007-102]

Citation 2016-LL-1007-102
Appellant Name Nagarjuna Public School Nanded
Respondent Name The Jt. Commissioner of Income Tax, TDS Range, Nashik
Court ITAT-Pune
Relevant Act Income-tax
Date of Order 07/10/2016
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags statutory obligation • technical support • deduction of tax • ignorance of law • tds return
Bot Summary: Under section 200(2) of the Act, any person being an employer, as referred to in sub-section of section 192 of the Act shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs. Reading of section 273B of the Act shows that under it, the Section refers to along with many other sections clause or clause of sub-section or sub-section of section 272A of the Act. What is relevant for adjudication before us is section 272A(2) of the Act, since penalty has been levied for default in furnishing e-TDS returns under section 272A(2)(k) of the Act. Since section 273B of the Act covers the cases of levy of penalty under section 272A(2) of the Act, then in line with the provisions of said section in case a person establishes its case of reasonable cause for not complying with the provisions of said section, then the section provides that such a person shall not be liable to the penalty imposable for the said failure i.e. under section 272A(2) of the Act. The CIT(A) in the case of several assessee before us has wrongly come to the conclusion that the provisions of section 273B of the Act do not cover the defaults under section 272A(2)(k) of the Act. No benefit of the same was given to the assessee because the CIT(A) was of the view that the provisions of section 273B of the Act do not cover penalty leviable under section 272A(2)(k) of the Act. First of all, we shall deal with the last submissions of the assessee that under the provisions of section 273B of the Act, the provisions of section 272A(2)(k) of the Act are referred and in case the person establishes its case of reasonable cause, then no penalty is to be leviable for such defaults.


IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM ITA No. 1729/PN/2015 Assessment Year : 2011-12 Nagarjuna Public School Nanded, Plot No.1, Main Road, A/P Kautha, Nanded - 431603 Appellant Vs. Jt. Commissioner of Income Tax , TDS Range, Nashik Respondent Appellant by : Shri Y.S. Nagla Respondent by : Shri S.K. Rastogi, CIT Date of Hearing : 07.07.2016 Date of Pronouncement: 07.10.2016 ORDER PER SUSHMA CHOWLA, JM: This appeal filed by assessee is against order of CIT(A)-I, Aurangabad, dated 07.10.2015 relating to assessment year 2011-12 against penalty levied under section 272A(2)(k) of Income Tax Act, 19 61 (in short Act ). 2. assessee has raised following grounds of appeal:- 1. That, order passed by CIT(A) vide order dated 07/10/2015 in Appeal No.661/2013-14 is illegal, arbitrary, uncalled for and without any basis and he is not justified in dismissing appeal. 2. That, penalty imposed by Jt. CIT(TDS) Range Nashik U/s. 272A(2)(k) of I.T Act, 1961 vide his order dated 16-05-2013 amounting to Rs.58,600/- being illegal arbitrary, 2 ITA No.1729/PN/2015 Nagarjuna Public School, Nanded uncalled for and against facts on record and learned CIT(A) should have quashed same. 3. That, statement of facts and grounds of appeal before CIT(A) may kindly be considering as part of this grounds of appeal. 4. default is not deliberate or intentional; there is no wilful neglect but lack of knowledge of law and submission of TDS return through electronic system. 5. It is settled law that order imposing penalty for failure to carry out statutory obligation is result of quasi criminal proceeding. Penalty will not be levied merely because it is lawful to do so. 6. We have relied on decision of Hon ble Madras High Court in case of CIT Vs. KPVS Mohammad Rowther & Co. 232 ITR 176 (Mad) held that ignorance of law can be reasonable cause for failure and deletion of penalty was justified. This decision have considered by Appellate Tribunal Ahmedabad Bench B in case of ACIT TDS Ahmedabad , Vs. Lok Prakashan Ltd. Ahmedabad ITA No.2815/Ahd/2009. 3. issue raised in present appeal is in relation to levy of penalty under section 272A(2)(k) of Act. 4. Tribunal in bunch of appeals with lead order in Nav Maharashtra Vidyalaya Vs. Addl. CIT (TDS) Range, Pune in ITA No.832/PN/2016, relating to assessment year 2011-12 vide even date order has decided issue of levy of penalty under section 272A(2)(k) of Act. relevant findings of Tribunal are as under:- 17. We have heard rival contentions and perused record. In this bunch of appeals, issue which arises for adjudication is against levy of penalty under section 272A(2)(k) of Act for late filing of TDS statements / returns. In this regard, reference is being made to relevant provisions of Act. Under Chapter XVII of Act, duty is upon person making certain payments to deduct tax at source under respective sections. said tax deducted at source is due to be income received by deductee as per section 198 of Act. Section 199 of Act further provides that where any deduction is made under Chapter and paid to Central Government, then same is to be treated as payment of tax on behalf of person from whose income such deduction is made. 18. Section 200 of Act lays down duty of person deducting tax, which reads as under:- 200. (1) Any person deducting any sum in accordance with foregoing provisions of this Chapter shall pay within prescribed time, sum so deducted to credit of Central Government or as Board directs. (2) Any person being employer, refe rred to in sub-section (1A) of section 192 shall pay, within prescribed time, tax to credit of Central Government or as Board directs. 3 ITA No.1729/PN/2015 Nagarjuna Public School, Nanded (2A) In case of office of Government, where sum deducted in accordance with foregoing provisions of this Chapter or tax referred to in sub-section(1A) of section 192 has been paid to credit of Central Government without production of challan, Pay and Accounts Officer or Treasury Officer or Cheque Drawing and Disbursing Officer or any other person, by whatever name called, who is responsible for crediting such sum or tax to credit of Central Government, shall deliver or cause to be delivered to prescribed income-tax authority, or to person authorised by such authority, statement in such form, verified in such manner, setting forth such particulars and within such time as may be prescribed. (3) Any person deducting any sum on or after 1st day of April, 2005 in accordance with foregoing provisions of this Chapter or, as case may be, any person being employer referred to in sub-section (1A) of section 192 shall, after paying tax deducted to credit of Central Government within prescribed time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to prescribed income-tax authority or person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed: Provided that person may also deliver to prescribed authority correction statement for rectification of any mistake or to add, delete or update information furnished in statement delivered under this sub-section in such form and verified in such manner as may be specified by authority. 19. Under section 200(1) of Act, it is provided that any person deducting any sum in accordance with provisions of Chapter shall pay within prescribed time, sum so deducted to credit of Central Government or as Board directs. Under section 200(2) of Act, any person being employer, as referred to in sub-section (1A) of section 192 of Act shall pay, within prescribed time, tax to credit of Central Government or as Board directs. Under sub- section (2A) of Act, it is provided that where sum has been deducted in accordance with foregoing provisions of Chapter, by office of Government, then duty is upon Treasury Officer or Drawing & Disbursing Officer or any other person, to deliver or cause to be delivered to prescribed income tax authorities, or to person authorized by such authority, statement in such form, verified in such manner, setting forth such particulars within such time as may be prescribed. Under section 200(3) of Act, similar responsibility is on any person deducting any sum on or after first day of April, 2005 in accordance with foregoing provisions of Chapter, including any person as employer referred to in section 192(1A) of Act. onus is upon such person that he shall after paying tax to credit of Central Government within prescribed time, prepare such statement for such period as may be prescribed and deliver or cause to be delivered to prescribed income tax authority or any person so authorized, such statement in such form and verified in such manner and setting forth such particulars and within such time as may be provided. duty is upon person deducting any sum in accordance with various provisions under Chapter and also upon employer who is making deduction out of payments made to employees, then sub- section (3) requires that deductor is to prepare statement for such period as may be prescribed, which is to be delivered to prescribed authority, in such form and verified and setting forth such particulars as may be prescribed. said statement is to be delivered within such time as may be prescribed. 20. In other words, any deductor deducting any sum on or after first day of April, 2005 in accordance with provisions of Chapter has following duties i.e. after paying tax deducted at source credit to Central Government, TDS statements within prescribed time shall be prepared. Rules 31A of Rules provide time limit for deposit of tax deducted statement as per section 200(3) of Act. TDS statements are to be deposited quarterly i.e. quarter ending 30th June, 4 ITA No.1729/PN/2015 Nagarjuna Public School, Nanded 30th September, 31 st December and 31st March of each financial year and due date for furnishing TDS statements is 15th July for first quarter, 15 th October for second quarter, 15 th January for third quarter and 15th May of immediately following financial year for fourth quarter i.e. 31st March. said statements could be furnished either in paper form or electronically. However, subsequent to amendment by IT (Sixth) Amendment Rules, 2010 with retrospective effect from 01.04.2010, it was provided that furnishing of statements electronically in accordance with format and standards prescribed became mandatory. deductor in said statement of tax deducted at source was compulsorily required to quote its tax deduction and Collection Account Number i.e. TAN number. Further, quote its Permanent Accountant Number except in case where deductor was office of Government and also quote PAN number of all deductees. Further, deductor was required to furnish particulars of tax paid to Central Government including Book Identification Number or challan indication number as case may be. He was also required to furnish particulars of amount paid or credited on which tax was not deducted. 21. In view of various provisions of Act, as pointed out above, substitution was made by Income Tax (Sixth) Amendment Rules, 2010 and was applicable for financial year 2010-11. Since e-compliance of TDS returns was introduced in said financial year, there was time and again amendments/corrections in order to make system of filing TDS returns user-friendly. learned Authorized Representative for assessee has pointed out that there were about 18 amendments / corrections in this regard. In present set of appeals before us admittedly, there was default in furnishing e-TDS statements late for respective quarters by different assessee, but all relating to assessment year 2011-12. question which arises for adjudication before us is whether in such cases where e- TDS was made compulsory for instant assessment year and where software was not user-friendly and required amendments at end of Government itself from time to time and compliance being complex procedure introduced for first time and where originally deductors were not default in depositing paper TDS returns, does assessee deductor have reasonable cause for not furnishing said e-TDS returns in time. In this regard, reference is to be made to provisions of section 273B of Act, where it has been provided that in case person establishes or proves that he had reasonable cause for failure to comply with provisions of various sections provided in section 273B of Act, then no penalty shall be imposable on such person for said failure. Reading of section 273B of Act shows that under it, Section refers to along with many other sections clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A of Act. What is relevant for adjudication before us is section 272A(2) of Act, since penalty has been levied for default in furnishing e-TDS returns under section 272A(2)(k) of Act. Since section 273B of Act covers cases of levy of penalty under section 272A(2) of Act, then in line with provisions of said section in case person establishes its case of reasonable cause for not complying with provisions of said section, then section provides that such person shall not be liable to penalty imposable for said failure i.e. under section 272A(2) of Act. CIT(A) in case of several assessee before us has wrongly come to conclusion that provisions of section 273B of Act do not cover defaults under section 272A(2)(k) of Act. We reverse finding of CIT(A) in this regard. 22. Now, coming to case of reasonableness put up before us by different assessee. first plea raised by all assessee is that where compliance to provisions of Act was complicated and difficult and in absence of any technical support in this regard, default if any, in furnishing TDS returns late should be condoned. Another plea raised by some of assessee was that where tax deducted at source was not paid in time, e-TDS returns as such could not be filed and hence, assessee was prevented by reasonable cause in not filing e-TDS returns in time and as such, no merit in levy of penalty. Another plea raised before us is that charging of fees for each day of default and then, restricting same to 5 ITA No.1729/PN/2015 Nagarjuna Public School, Nanded tax deducted at source was not correct. One another aspect of reasonableness was that in case returns for quarter 1 was filed belatedly, then returns for consequent quarters also got delayed for no default and as such, no penalty was leviable for such quarters. Different learned Authorized Representatives appearing before us has made reference to decisions of various Benches of Tribunal. On other hand, learned Departmental Representative for Revenue has placed reliance on ratio laid down by Hon ble Allahabad High Court in Raja Harpal Singh Inter College Vs. Prl. CIT (supra) and Chandigarh Bench of Tribunal in Central Scientific Instruments Organization Vs. JCIT (TDS) (supra). One last aspect pointed out by learned Authorized Representative for assessee was that CIT(A) has acknowledged that there was reasonable cause in not furnishing e-TDS returns in time. However, no benefit of same was given to assessee because CIT(A) was of view that provisions of section 273B of Act do not cover penalty leviable under section 272A(2)(k) of Act. 23. First of all, we shall deal with last submissions of assessee that under provisions of section 273B of Act, provisions of section 272A(2)(k) of Act are referred and in case person establishes its case of reasonable cause, then no penalty is to be leviable for such defaults. case put up by assessee was that where tax was deducted at source and merely because e-TDS statements / returns were not filed in time does not result in any loss of revenue and hence, no merit in levy of penalty under section 272A(2)(k) of Act. claim of deduction of tax deducted at source, its payment to Treasury to Government and thereafter, credit to be allowed to deductee of tax deducted from his account, all work on principle that tax is collected and deposited in account of Government as income is earned. In other words, said provisions of tax deducted are advance payments of tax as you earn income. Taxes are deducted by deductor out of payments due to deductee and such tax deducted is income of deductee. credit for tax deduction at source would be allowed to deductee only after tax deducted at source is deposited in credit of Government and deductor files compliance report in this regard by way of e-TDS returns. Thus, it is obligatory upon person deducting tax to deposit tax deducted at source and also to furnish statement declaring tax deduction made from account of various deductees. Earlier provisions were to be complied with manually by filing TDS returns in paper form. However, as per IT (Sixth) Amendment Rules, 2010 with retrospective effect from 01.04.2010, deductor was asked to file e-TDS statements for which infrastructure was provided and it was required that assessee complies to said filing of e-TDS returns. However, since assessment year 2011-12 was first year of introduction of such facilities of e-TDS returns, there were certain hindrances which were taken care of by authorities by way of various amendments introduced in this behalf. case of assessee on other hand, is that they were small tax payers and in absence of technical guidance provided and because of technical hitches, TDS returns could not be filed in time. Most of assessee before us have paid tax deducted at source to Treasury within time frame but have defaulted in filing e-TDS statements. In some of cases, there is default in payment of tax deducted at source and consequently, delay in filing e-TDS returns. question which arises is whether in above said scenario, can provisions of section 273B of Act be applied in order to decide issue of levy of penalty under section 272A(2)(k) of Act. 24. Hon ble Punjab & Haryana High Court in HMT Ltd., Tractor Division Vs. CIT (2005) 274 ITR 540 (P&H) had held that where tax deducted at source had been paid in time and necessary returns in respect thereto were filed in time with Income Tax Department, on mere late issue of tax deduction certificate, there was no loss to Revenue and delay in furnishing tax deduction certificate was held to be merely technical or venial in nature and penalty levied under section 272A(2)(k) of Act was deleted. It may be clarified herein that earlier under section 272A(2)(k) of Act, penalty was leviable where tax deduction certificate was not issued in time. However, by Finance (No.2) Act, 2004 w.e.f. 01.04.2005, it has been 6 ITA No.1729/PN/2015 Nagarjuna Public School, Nanded provided that where person fails to deliver or cause to be deliver copy of statement within time specified in section 200(3) of Act or proviso to section 206C(3) of Act, then he shall pay by way of penalty sum of Rs.100/- for every day of default. It is further provided under said sub-section that amount of penalty for failure shall not exceed amount of tax deductible or collectable, as case may be. It is further provided that no penalty shall be levied under clause (a) for failure to furnish statement under section 200(3) of Act or proviso to section 206C(3) of Act, on or after first day of July, 2012. 25. learned Departmental Representative for Revenue has placed strong reliance on ratio laid down by Hon ble Allahabad High Court in Raja Harpal Singh Inter College Vs. Prl. CIT (supra) for proposition that where e TDS statement was not filed in time, then penalty under section 272A(2)(k) of Act has been held to be leviable. In facts of said case before Hon ble High Court, assessee was deducting tax at source but had not filed e-TDS returns for five successive assessment years starting from 2008-09 to 2012-13. assessee failed to furnish any explanation before Assessing Officer for said default and only on last date, it was pointed out that since Principal of college had joined recently, it would take some time to collect records for filing e-TDS statements. assessee however, failed to comply with notice and Assessing Officer held assessee to be liable for levy of penalty under section 272A(2)(k) of Act. Before CIT(A), assessee for first time offered explanation that prior to joining regular Principal in college on 25.01.2010, only officiating Principal had been working, who did not have idea of e-TDS statements and requirement of filing same. Tribunal noted that appellate authority had accepted explanation offered by assessee and imposed penalty only from 01.04.2010 though regular Principal had joined college on 25.01.2010. Tribunal dismissed appeal of assessee as no explanation was furnished for non-furnishing TDS statements in time. Hon ble High Court thus, in this regard observed that requirement of filing e-TDS statements in time could not be overlooked. In such circumstances, Hon ble High court held that it cannot be urged by Counsel for assessee that no penalty could have been imposed for non-filing e-TDS returns in time since it had not resulted in any loss to Revenue. Hon ble High Court further took note of fact that before Assessing Officer, no explanation was offered. However, explanation was offered before appellate authority, which was taken into consideration and penalty amount was suitably reduced as case of appellant that regular Principal assumed charge on 25.01.2010, was accepted and penalty was imposed after that date. appeal of assessee in this regard was thus, dismissed. 26. Applying said ratio laid down by Hon ble Allahabad High Court in Raja Harpal Singh Inter College Vs. Prl. CIT (supra), there is no merit in plea of learned Departmental Representative for Revenue that Hon ble High Court has laid down proposition that in every case of default in filing e-TDS statements in time, penalty under section 272A(2)(k) of Act is leviable. Hon ble High Court in appeal filed by assessee dismissed plea of assessee that no penalty is leviable but has upheld orders of authorities below, wherein CIT(A) had restricted levy of penalty from date of 1st April, 2010 in respect of e-TDS statements to be filed for assessment years 2008-09 to 2012-13, since assessee had explained that regular Principal had assumed charge on 25.01.2010. In other words, Hon ble High Court has accepted explanation offered by assessee regarding reasonableness of cause of delay in furnishing e- TDS returns late partially. Admittedly, default in filing said e -TDS returns have not been accepted in full but taking into consideration reasonableness of explanation, penalty chargeable under section 272A(2)(k) of Act has been restricted i.e. suitably reduced in case of appellant as held by Hon ble High Court. 7 ITA No.1729/PN/2015 Nagarjuna Public School, Nanded 27. Another reliance placed upon by learned Departmental Representative for Revenue is on ratio laid down by Chandigarh Bench of Tribunal in Central Scientific Instruments Organization Vs. JCIT (TDS) (supra). In facts of said case, assessee had filed TDS returns in Form No.26Q belatedly after expiry of 10 years from prescribed time limit and assessee had submitted that he was unaware of provisions of section 200(3) of Act. assessee had deposited tax to Central Government at relevant time, however, assessee failed to furnish TDS returns. delay in filing returns in prescribed form for all four quarters was 6463 days in assessment year 2009-10 and in assessment year 2010- 11 for all four quarter was 4966 days and in assessment year 2011-12, delay was 3474 days. In view of factual aspects of case, where delay is so huge and in absence of any explanation of assessee, we find no merit in reliance placed upon on such decision by learned Departmental Representative for Revenue. 28. On other hand, various Benches of Tribunal have time and again held that where there was case of reasonableness, there was no merit in levying penalty under section 272A(2)(k) of Act. Thus, in order to adjudicate issue before us, we accept case of reasonable cause as relevant to section 273B of Act put up by assessee in respective cases in appeals before us, which admittedly relate to different quarters of assessment year 2011-12. Where for first time, there was requirement of e-TDS furnishing of TDS statement and since there were certain complications in e-filing of TDS returns because of system failure, which admittedly, was amended 18 times by Department, delay in furnishing said returns late could not be attributed to assessee. onus was upon authorities to provide platform for easy compliance to newly introduced provisions of Act. Where such facilities could not be provided by authorities and technical support not being available to small assessees, who are in appeal before us, then delay in furnishing e-TDS returns late should be liberally construed. Hence, there was practical difficulty on part of assessee to comply with newly introduced requirement of e-TDS filing of TDS statements, being technical delay and not venial in nature, merits to be considered as reasonable cause for non levy of penalty as per requirements of section 273B of Act. We hold so. In this bunch of appeals, there are cases where assessee has defaulted in not depositing tax deducted at source in time, in such cases, returns were delayed because of default on behalf of deductor. In such cases, penalty under section 272A(2)(k) of Act is leviable. However, same is to be restricted from date of payment of TDS to date of filing e-TDS statements since e-TDS statements cannot be filed without payment of TDS to credit of Central Government. Similar ratio has been laid down by Chandigarh Bench of Tribunal in M/s. Ashirwad Complex Vs. JCIT (TDS) (supra). Accordingly, we hold so. 29. Another issue raised in some of appeals is that where all quarterly returns relating to assessment year 2011-12 were filed on one date i.e. there was default in furnishing returns for each of quarters late, case of assessee was that because of overlapping default, penalty at best should be restricted to quarter No.1 and no penalty should be levied for subsequent quarters. We find merit in above plea of assessee and accordingly, we direct Assessing Officer to restrict penalty leviable to first quarter which is in default and for overlapping default, no penalty is to be levied under section 272A(2)(k) of Act. We direct Assessing Officer to verify claim of assessee in this regard and work out penalty accordingly. 30. issue arising in other appeals before us is identical and following our directions in paras hereinabove, Assessing Officer in case of individual assessee has to verify claim of assessee and work out penalty, if any, leviable accordingly after affording reasonable opportunity of hearing to assessee. 8 ITA No.1729/PN/2015 Nagarjuna Public School, Nanded 5. issue before Tribunal in bunch of appeals (supra) is similar to issue before us and following same parity of reasoning, we direct Assessing Officer to follow our directions in deciding issue raised of levy of penalty under section 272A(2)(k) of Act and afford reasonable opportunity of hearing to assessee. 6. In result, appeal of assessee is allowed as indicated above. Order pronounced on this 7th day October, 2016. Sd/- Sd/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated : 7th October, 2016. GCVSR Copy of Order is forwarded to : 1. Appellant; 2. Respondent; 3. ( CIT(A)-I, Aurangabad; 4. CIT-TDS, Pune; 5. DR , ITAT, Pune; 6. Guard file. BY ORDER, //True Copy // Sr. Private Secretary ITAT, Pune Nagarjuna Public School Nanded v. Jt. Commissioner of Income Tax, TDS Range, Nashik
Report Error