Initiation of penalty u/s 272A(2)(k) starts from date of issuance of notice by competent authority
Issue before tribunal:
- Whether penalty u/s 272 A(2) (k) for filing of e-TDS return in Form no. 24Q, 26Q & 27EQ was righty sustained by the CIT (A).
- Whether penalty was barred by limitation and ITO (TDS) rightly initiated penalty u/s 272 A (2) (k).
- Whether CIT (A) was right in confirming that there was no reasonable cause of delay in filing.
- Due to survey/verification exercise carried out by the ITO(TDS), serious default on TDS payment were unearthed. It was noted further that the assessee had not filed e-TDS return in form No. 24Q, 26Q and 27EQ and also could not provide any reasonable cause for such action.
- The ITO(TDS) initiated penalty proceedings under sec. 272A(2)(K) of the Act and referred the case to the Office of the Competent Authority i.e. Additional CIT(TDS).
- Thereafter, notice under sec. 272A(2)(K) of the Act was issued on 25.2.2010 to the assessee by the learned Additional CIT(TDS) requiring him to explain the reason for failure to file e-TDS return as per provisions of sec. 206 of the Act.
- The Addl. CIT-TDS, due to non-compliance by assessee, held the default on the part of the assessee as negligent behavior and a deliberate attempt to mislead the department. And failed to establish that there was a reasonable cause for non-filing of e-TDS return.
- The Addl. CIT (TDS) levied penalty under sec. 272A(2)(K) of the Act at Rs.2,99,400 ( i.e. Rs.99,800 each for non-filing of form Nos. 24Q, 26Q and 27EQ).
- On appeal CIT (A) rejected assessee contention that ITO wrongly mentioned default in filing e-TDS return for last two years but for last quarter in actual. Further CIT (A) being agreed with assessee that penalty order was silent on period of default and consequent computation of penalty.
Contention of the revenue:
- The reason of imposing penalty was non-filing of e-TDS return unearthed during the survey/verification procedure. AO righlty imposed penalty which was examined by CIT (A) in appeal where all the contentions of assessee already rejected by first appellate authority.
Contention of the assessee:
- Assessing Officer in the penalty order was silent about the period of default and consequent computation of penalty.
- The Learned CIT(A) has failed to appreciate that the penalty order in question was barred by time limit under sec. 275 of the Act and there was sufficient reason for not filing of e-TDS return in time and thus within the provisions of sec. 273B of the Act, the penalty was liable to be deleted.
- According to the provisions of section 275 of the Act the order levying penalty could be passed either within a period of six months from end of the month in which the order was passed or by the end of financial year in which the order was passed. In terms of section 275 of the Act, the order levying penalty could be passed by 31-03-2009. The order levying penalty has however been passed on 16-03-2010. Therefore, the order is time barred.
Held by the court:
- The action of initiation of penalty by ITO (TDS) was non-est in the eye of law as no such powers were conferred on him by the act. But subsequently he rectified his mistake by referring the matter to competent authority i.e. Addl. CIT (TDS).
- Therefore, legally the limitation starts from the issue of first notice by the Addl. CIT(TDS)[ competent authority] dated 25-02- ‘2010. The penalty has been imposed before 30-08-2010 i.e. on 16-03-2010. Therefore, it cannot be said that penalty order was barred by limitation.
- CIT (TDS) had rightly imposed penalty on the assessee.
Issuing notice is a statutory requirement of initiating of penalty as to intimate the assessee about such initiation and to give him an opportunity of being heard. Under the act power are conferred on income-tax authorities to initiate any proceeding and to initiate notice. Here in this case ITO (TDS) initiated penalty but he was not conferred any power to do so which he rectified by referring the matter to the competent authority.