Penalty Not Justified for Delayed TDS Deposit When Reasonable Cause Proven: ITAT Delhi

DCIT Vs PCI Limited (ITAT Delhi)

After Compounding & Interest, No Justification for Penalty- Reasonable Cause Saves the Day: ITAT Deletes 272A(2)(g) Penalty; Technical Delay, Heavy Compounding Already Paid—ITAT Says No to Additional Penalty

Tribunal dismissed the Revenue’s appeal against CIT(A)’s order deleting penalty levied on PCI Ltd u/s 272A(2)(g) for delay in issuing TDS certificates.

AO had imposed penalty despite the fact that Assessee had already deposited late TDS, paid interest & had undergone compounding proceedings, including payment of compounding charges of Rs.84.39 lakh & additional compounding charges of Rs.5.06 lakh for extended period. CIT(A) examined the cause of delay & noted that Form 16/16A can be generated only after deposit of TDS, & the delay in issue of certificates was purely technical, arising from late deposit for which Assessee had already suffered substantial financial consequences. CIT(A) invoked s.273B & held that reasonable cause existed. Relying on detailed quarter-wise delay chart, CIT(A) restricted penalty to Rs.4,71,217/- computed only for delays relatable to date of TDS return filing.

Tribunal upheld the CIT(A)’s reasoning, holding that Assessee had demonstrated reasonable cause & that levy of penalty, after already paying interest & heavy compounding charges, was inequitable. It agreed that in the factual matrix, penalty u/s 272A(2)(g) could not survive. Revenue’s appeal was accordingly dismissed.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the Revenue is directed against the order of the ld. CIT(A) dated 12.03.2025 pertaining to A.Y 2015-16.

2. In the instant case, the assessee had deducted TDS but there was a delay in depositing the TDS as well as issuing certificate of deduction.

Therefore, the Assessing Officer has levied penalty u/s 272A(2)(g) of the Act on the assessee.

3. None appeared on behalf of the assessee. We heard the ld. DR at length who assisted us with the facts of the case and relied on the orders of the Assessing Officer. Case records carefully perused and considered.

4.On a perusal of the relevant material on record, we find that the assessee has deducted the TDS and the only transgression committed by the assessee was the delay in depositing the TDS and certificate of deduction. We find that the ld. CIT(A) has discussed this issue in detail and came to the conclusion which reads as under:

“4.1.10 Regarding the delay, the appellant explained that it had a reasonable cause in late issue of TDS certificates as the utility for online filing of TDS returns and generation of Form-16/16A by giving particulars of Tax Deducted at Source of the deductees can be generated only after payment of Tax Deducted at Source to the Central treasury.

4.1.11 In the present case the appellant deposited late TDS for which it had obtained compounding order along with extension of time for payment of compounding charges. The appellant paid compounding charges of Rs. 84,39,091/- and Additional Compounding Charges of Rs. 5,06,345/- for the extended period of deposit of compounding charges. It is pertinent to refer to the Compounding Order wherein it was mentioned that the appellant company had paid Additional Compounding charges of Rs. 5,06,345/- for the delay in payment of TDS for which compounding had been granted. The appellant had not only been subjected to payment of interest apart from TDS compounding charges and then penalty under section 272A(2)(g) which is not equitable in the facts and circumstances of the case. The appellant late deposited TDS of Rs.1,46,83,523/- and paid interest on TDS of Rs. 35,16,288/-and compounding charges of Rs. 66,56,694/-. In total, the appellant paid a sum of Rs. 1,01,72,982/- over and above the liability of Tax Deducted at Source.

4.1.12 The appellant had also furnished a chart giving TDS return wise and quarter wise dates of filing of TDS Returns and date of issue of TDS certificates along with number of days of delay from the date of due date of issue of TDS certificates computed from the date of filing of TDS returns reproduced below:-

4.1.13 Looking at the fact that the late issue of TDS certificates is a technical breach which after the appellant had paid compounding charges for late deposit of TDS. Therefore, the penalty levied u/s 272A(2)(g), restricted to Rs. 4,71,217/- as per computation of penalty on the basis of delay computed from the date of filing of TDS returns. Accordingly, Ground Nos. 1 to 6 of appeal are partly allowed.”

5. After perusing the order of the ld. CIT(A), we find that he has correctly invoked the provisions of section 273B. We are inclined to agree with the CIT(A) that the assessee had reasonable cause for the said failure and hence we do not find any reason to interfere with the same. We are therefore, of the considered view that in the factual matrix of the instant case, penalty u/s 272A(2)(g) is not justified. Accordingly, the appeal of the Revenue stands dismissed.

6. In the result, appeal of Revenue in ITA No. 4164/DEL/2025 is dismissed.

Order pronounced in open court on 29.10.2025.