No penalty for mere non-quoting of PAN in TDS certificates

Briefly stated the facts giving rise to the present appeal are that the respondent- assessee is a public sector undertaking which is under the control of Ministry of Petroleum and Gas, Government of India. It has been deducting income tax at source as per the provisions of Section 194-C and 194-J of the Act on all the payments made to contractors/professionals during the financial year 2002-03. The tax so deducted was also deposited by it in the government treasury in time. The annual return of TDS as per the provisions of Section 203 of the Act, was also filed in the prescribed ‘Form-26-C’ and TDS certificates were issued to contractors/professionals. However, penalty at the rate of Rs.10,000/- for each 350 defaults committed by the respondent- assessee amounting to Rs. 35 lacs was imposed by the Additional Commissioner of Income Tax Range-I, Agra on the ground that the respondent- assessee has not mentioned Permanent Account Number in Form-16-A issued to 350 contractors. The Additional Commissioner, rejected all the submissions of the respondent- assessee, namely, that non mentioning of PAN in Form 16-A issued to certain contractors was neither intentional nor violative of the provisions, the contractor did not make it available at the time of issue of TDS certificates within the time prescribed, there is no legal obligation on the deductors to obtain PAN of the deductee either before or after deduction of tax at source and it is obligatory upon the deductee under section 139(5A) and if the payee has not informed their PAN to the deductor, the provisions of Section 139-A is not attracted and penalty under Section 272B cannot be imposed in view of the law laid down by Hon’ble Supreme Court in the case of ‘Hindustan Steels Ltd. Vs.State of Orrissa reported in [1972] 83 ITR 26’, the penalty will not ordinarily be imposed unless the parties obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation which circumstances do not exist in the present case and Section 272-B does not provide for penalty one default deducteewise under the Act. However, the Additional Commissioner rejected the explanations submitted by the respondent- assessee and imposed penalty.

We have already noted the provisions of Section 272B, 273-B and section 139A(5A) and 139A (5B) of the Act. A bare reading of the provision itself makes it clear that the penalty under section 272-B 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 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.

We further find that on the findings recorded by the ITAT regarding no revenue loss and mere technical breach, clearly satisfies the test of reasonable cause under section 273B of the Act. In the present case the levy of penalty under Section 272-B of the Act by the assessing authority was fully unjustified.

HIGH COURT OF JUDICATURE AT ALLAHABAD

JUDGMENT RESERVED ON 17.7.2013

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