Rampal Trivedi Inter College Vs ITO (ITAT Lucknow)
Summary: ITAT Lucknow partly allowed seven appeals of Rampal Trivedi Inter College and reduced the penalty imposed under Section 271H(1)(a) of the Income Tax Act from the maximum ₹1,00,000 to the statutory minimum ₹10,000 for each quarter. The dispute arose after teachers complained that TDS deducted from their salaries was not reflected in Form 26AS. Departmental action revealed that the College had failed to file its quarterly TDS statements within the prescribed time; in the first quarter of Assessment Year 2015-16, Form 24Q was filed on 5 September 2017 against the due date of 31 July 2014, resulting in a delay of 1,131 days. Similar penalties were imposed for other quarters of Assessment Years 2015-16 and 2013-14.
The Tribunal held that although the default attracted Section 271H(1)(a), the statutory range of ₹10,000 to ₹1,00,000 conferred discretion which had to be exercised judicially after considering the circumstances, gravity of default and proportionality. It noted that the TDS itself had been duly deposited into the Government treasury and, after filing of the statements, the deductees’ tax credits stood regularised.
The assessee was also a Government educational institution. Relying upon Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), the Tribunal observed that penalty should not be imposed merely because it is lawful to do so. Considering the absence of loss to the exchequer and the institution’s bona fide constraints, the Tribunal held the maximum penalty to be harsh, disproportionate and unsustainable and directed the Assessing Officer to restrict it to ₹10,000 for each quarter.
Cases Discussed
- Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (Supreme Court) — Relied upon by the Tribunal for the principle that penalty should not be imposed merely because it is lawful to do so and that penal discretion must be exercised judicially considering the relevant circumstances.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT LUCKNOW
The appeals in ITA Nos.220 to 223/LKW/2026 have been preferred by the Assessee against the respective orders, all dated 09.12.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2015-16 and appeals ITA Nos.224 to 226/LKW/2026 have been preferred by the Assessee against the respective orders, all dated 09.12.2025, passed by the NFAC for assessment year 2013-14.
2.0 Since the facts and the issues involved in the above captioned appeals are almost identical, therefore, they were taken up together for hearing and are being disposed of through this common order for the sake of convenience.
3.0 First, we will deal with the issues involved in the case of the assessee in ITA No.220/LKW/2026 for assessment year 2015-16.
4.0 The brief facts of the case are that a grievance petition was received by the Income Tax Department from teachers of the assessee College, i.e., Rampal Trivedi Inter College, Gosaiganj, Lucknow. As per grievance petition dated Nil, filed on 05.07.2017 in the Office of the Hon’ble Prime Minister, New Delhi, the TDS deducted by the assessee College was not being reflected in Form 26AS of the teachers. The Assessing Officer (AO), therefore, issued a letter to the Manager of Rampal Trivedi Inter College on 02.08.2017 to clarify the matter pertaining to non-reflection of TDS in Form 26AS and date of hearing was fixed on 07.08.2017, but no reply was submitted by the Manager. Accordingly, show cause notice was issued on 11.08.2017 by the AO for penalty proceedings under section 271H of the Income Tax Act, 1961 (hereinafter called ‘the Act’) for the year under consideration, but again there was no response from the side of the assessee College. Thereafter, action under section 133A(2A) of the Act was conducted on 07.09.2017 in the premises of Rampal Trivedi Inter College Gosaiganj, Lucknow. During this action, it was found that no TDS statement has been filed by the assessee college for the year under consideration. The AO noted that as per provision of section 192 of the Act, the assessee was required to deduct TDS on the salary payment, if gross salary was above the minimum taxable income, and deposit the TDS into the Central Government Account and that the TDS statement was also required to be filed as per provisions of section 200 of the Act. The AO further noted that in this case, the assessee College was required to file the TDS statement in Form 24Q for the first quarter of the year under consideration by 31.07.2014 but the same was filed only on 05.09.2017 with a delay of 1131 days. The AO, therefore, issued a show cause notice, requiring the assessee to explain the reason for delay. In response, the assessee, vide letter dated 01.09.2017 submitted that “Income Tax deducted from salary paid has regularly been deposited in Central Government Account within stipulated time. Form No. 24Q has also been filed. Due to sad demise of head clerk who look after the TDS/ Income Tax matters, details could not be traceable at present. It is requested that a week’s time may kindly be allowed to file the relevant details.” After considering the reply furnished by the assessee, the AO noted that the assessee’s submission was not factually correct, as TDS statement in Form 24Q for the first quarter of the year under consideration was filed on 05.09.2017 whereas it should have been filed by 31.07.2014 and, thus, there was a clear cut violation of the provisions of section 271H (1)(a) of the Act. The AO also noted that as per provisions of section 271H of the Act, the minimum and maximum imposable penalty was Rs.10,000/- and 1,00,000/- respectively and considering the fact that there was a delay of 1131 days and TDS statement was filed after coercive action by the Department under section 133A (2A) of the Act, the AO imposed maximum penalty of Rs.1,00,000/- under section 271H(1)(a) of the Act for the first quarter of the assessment year 2015-16.
5.0 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee and confirmed the order of the AO by passing an order ex-parte qua the assessee.
6.0 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:
1. That the learned Commissioner of Income tax (Appeals) has erred in confirming the penalty imposed by the assessing Officer without considering the facts of the case.
2. That the learned Commissioner of Income tax (Appeals) has not given any finding about the maximum penalty imposed by the Assessing Officer.
3. That the learned A.O. has erred in imposing a penalty without considering a reasonable cause for the failure of filing of e-TDS statement on a higher side of Rs.1 lac.
4. That even subject to prejudiced above the penalty should have been levied Rs.10,000/- and not Rs.1,00,000/-.
5. That the order passed by the Commissioner of Income tax (Appeals) is against the law and principle of natural justice.
6. That the appellant craves leave to add, amend, alter vary and/or withdraw any grounds of appeal at the time of hearing.
7.0 On identical set of facts, as narrated above in first quarter of assessment year 2015-16, in second quarter, third quarter and fourth quarter of assessment year 2015-16 and also in second quarter, third quarter and fourth quarter of assessment year 2013-14, the AO imposed the maximum penalty of Rs.1,00,000/- each under section 271H(1)(a) of the Act.
8.0 Aggrieved, the Assessee preferred appeals before the NFAC, which dismissed the appeals of the assessee and confirmed the orders of the AO by passing identical worded ex-parte orders qua the assessee.
9.0 Now the assessee has approached this Tribunal challenging the orders of the NFAC for second quarter, third quarter and fourth quarter of assessment year 2015-16 and also for second quarter, third quarter and fourth quarter of assessment year 2013-14. In all the appeals, the assessee has raised identically worded grounds, as raised in quarter one of assessment year 2015-16 and reproduced above, challenging the levy of penalty at Rs.1,00,000/- under section 271H(1)(a) of the Act.
10.0 During the course of hearing before us, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the assessee is an established Government College, functioning strictly on non-commercial lines to impart higher education to students. It was further submitted that the delay in filing quarterly statements was neither willful nor intentional, but directly caused by lack of funds. It was submitted that the entire tax deducted from salaries was already credited to the Central Government without default. It was the prayer of the Ld. A.R. that considering that the assessee is a non-profit Government College running under severe budgetary stress, the orders, levying the maximum penalty of Rs.1,00,000/- under Section 271H(1)(a) be set aside.
11.0 Per contra, the Ld. Sr. D.R. submitted that Chapter XVII-B mandates timely filing of TDS returns within the statutory deadlines prescribed under section 200(3) read with Rule 31A of the Income Tax Rules. It was further submitted that the assessee failed to file the returns within the stipulated timeline without any valid extension, rendering the statutory default undisputed. The Ld. Sr. D.R. also submitted that the law makes no exception for a Government College and being a public entity, a higher standard of statutory adherence and discipline is expected rather than laxity. It was submitted by the Ld. Sr. D.R. that multiple opportunities were afforded by the Ld. First Appellate Authority, however, the assessee chose not to respond, nor filed any written submissions or adjournment petitions. The Ld. Sr. D.R. submitted that because the assessee had adopted an evasive approach, the Ld. First Appellate Authority had no alternative but to confirm the maximum penalty ex-parte. The Ld. Sr. D.R. submitted that in view of the above facts, no interference was called for in the orders of the Ld. First Appellate Authority, who has decided the issue in the right perspective.
12.0 We have heard the both the parties, perused the material available on record, and considered the statutory provisions governing the levy of penalty under Section 271H of the Act. It is an undisputed fact that the quarterly TDS statements were not filed by the assessee college within the prescribed due dates under section 200(3) of the Act read with Rule 31A of the Income Tax Rules. Consequently, the provisions of section 271H(1)(a) of the Act stood attracted. However, the crucial issue before us is whether the Assessing Officer was justified in mechanically imposing the maximum penalty of Rs.1,00,000/-, and whether the Ld. First Appellate Authority was right in confirming the same in toto.
12.1 A bare reading of sub-section (2) of section 271H of the Act reveals the following:
“The penalty referred to in sub-section (1) shall be a sum which shall not be less than ten thousand rupees but which may extend to one lakh rupees.”
12.2 The legislature has consciously provided a wide discretionary window, ranging from a minimum of Rs.10,000/- to a maximum of Rs.1,00,000/-. Such statutory discretion entrusted to a quasi-judicial authority must be exercised on sound judicial principles, taking into account the justifying circumstances, gravity of the default, and proportionality. The maximum penalty is not to be levied automatically in every routine case of delay, otherwise, the lower threshold of Rs.10,000/- crafted by the Parliament would be rendered redundant. It is not the case of the Revenue that the tax deducted at source was retained by the assessee. The tax deducted was duly deposited into the Government treasury. Once the statements were eventually uploaded, the tax credits stood regularized in favour of the deductees. It is also a fact that the assessee is a Government Educational Institution.
12.3 The Hon’ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC) held that penalty should not be imposed merely because it is lawful to do so. Where the breach flows from a bona fide delay and causes no revenue loss, a harsh or maximum penal consequence is unwarranted.
12.4 Regarding the non-appearance before the Ld. First Appellate Authority, while we do not approve of the assessee’s lethargy in responding to notices, we are of the considered view that a public educational institution should not be saddled with a crushing financial penalty merely due to bureaucratic communication gaps. Substantive justice must prevail over technical lapses.
12.5 In view of the above totality of facts, the absence of any loss to the exchequer, and the bona fide institutional constraints of the Government College, we are of the considered opinion that the levy of the maximum penalty of Rs.1,00,000/- is harsh, disproportionate, and unsustainable. We, therefore, modify the impugned orders of the Ld. First Appellate Authority and direct the Assessing Officer to scale down the penalty levied under Section 271H(1)(a) of the Act to the statutory minimum of Rs.10,000/- (Rupees Ten Thousand only) for each quarter.
13.0 In the final result, the appeals of the assessee stand partly allowed.
Order pronounced in the open Court on 15/09/2026.
