Penalty u/s 272B cannot be imposed if there was reasonable cause of failure to quote valid PANs

Brief Facts of the case:

The assessee filed quarterly e-TDS Quarterly statement of deduction of tax in Form No.26Q for the first quarter of the financial year 2009-10. On processing of the aforesaid return, it was observed that PANs of as many as 56 tax-deductees were invalid and the assessee deductor did not submit correct PANs in respect thereof. A show cause notice was issued u/s 272B wherein it was alleged that the assessee has contravened the provisions of Sec 139(5B) by providing invalid PANs. Similar notices were issued for the second, third and fourth quarter of FY 2009-10. Thus, in aggregate a penalty of Rs. 31,16,000 was slapped on the assessee for the quarters in question. Aggrieved by the order of the AO, assessee preferred an appeal before the CIT(A) who deleted the above penalty by holding that the assessee during the course of adjudication proceedings has submitted correct PANs after receiving the PANs from the deductor.

 Contention of the Assessee:

The assessee’s learned counsel contended that the assessee has submitted returns with corrected PANs in reply to the SCN. The assessee could not furnish correct PANs in the original E-TDS returns as the same was not provided by the deductors. Since the assessee has not made contravention knowingly, thus, the penalty u/s 272B is not sustainable in law as for the failure of non-quoting of correct PANs assessee has shown reasonable cause.

 Contention of the Revenue:

The learned counsel for the revenue supported the stand taken by AO and stated that the assessee has contravened the provisions of Sec 13995B) by quoting invalid PANs in the E-TDS return. Further, the assessee submitted corrected PAN only after the issue of show cause notice by the AO. Thus, the assessee has contravened the provisions knowingly and cannot escape from penalty of Rs. 10,000 per invalid PAN quotation.

Decision of the ITAT:

The ITAT after hearing rival submissions observed that the non-compliance to the provisions of Sec 139(5B) would attract penalty u/s 272B. However, it is pertinent to note that Sec 272B is subject to Sec 273B , which provides that no penalty shall be imposed for any failure referred to in the said provision if it is proved that there was a reasonable cause for the said failure.

In the instant case, there was a reasonable cause in the assessee not mentioning the correct PANs in respect of a few deductees at the time of originally filing e-TDS quarterly statement of deduction of tax in Form No.26Q, which were in fact, not available with the assessee at the material time. As and when the necessary information was obtained, the assessee corrected the lapse and revised the statement by furnishing due particulars thereof.

Therefore, CIT(A) was justified in deleting the penalty by relying on the judgment of the Hon’ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC), in which the Hon’ble Supreme Court has laid down that penalty cannot be ordinarily imposed unless the party obliged either acts deliberately in defiance of law or is guilty of conduct contumacious or dishonest, or acts in conscious disregard of its obligation.

Thus, all the four appeals of Revenue is dismissed.