Non-furnishing of PAN by payee caused delay in filing of e-TDS return, penalty for such late filing not to be levied

It is an admitted fact that the amount of tax deducted at source by the assessee (Person Responsible) was paid within the limit under the relevant provisions of the Income Tax Act, 1961. There was only a technical and venial breach to the provisions contained in Rule 31A(2) of the Income Tax Rules, 1962 requiring the assessee to submit quarterly returns statement of Tax Deducted at Source which were required to be filed on due date as per section 200(3) of the I.T. Act. As regards the delay in submitting TDS returns, it was explained by the assessee that due to non-furnishing of PAN numbers, the TDS certificate could not be filed in time,

but the tax was deducted in time and deposited with the government account. It is also explained that the Collector Land Acquisition, Department of Industries is a Government Organization. The Organization is acquiring land on behalf of  Punjab Government. The Land Compensation is paid by the Organization to the land owners through the District / High Courts. The TDS is deducted at source on the interest payment to the land owners. But the compensation and interest is deposited in the Court and not paid directly to the land owners. It is also explained that generally the land owners / agriculturists do not have PAN numbers. The Department was not able to find PAN numbers of these land owners. It is also explained by the assessee that the Department has issued letters to individual land owners for PAN numbers at the available address but no response was received due to improper addresses. However, it is also explained that as the PAN numbers were not provided by the duductees, so the e-TDS returns could not be filed in time. In our view, the assessee has satisfactorily explained the reasons regarding non filing of TDS returns in time, therefore, no penalty should be levied in these cases. Even otherwise also, the assessee did not derive any benefit whatsoever by not filing the e-TDS returns in time, as the amount of TDS was duly deposited in the government treasury within prescribed time. Such delay has not caused any loss to the Revenue / Income Tax Department.

INCOME TAX APPELLATE TRIBUNAL CHANDIGARH

ITA Nos. 1226 to 1229/Chd/2011

Assessment Years: 2007- 08 to 2010- 11

The Collector Land Acquisition, Vs Addl. CIT(TDS)

Date of Pronouncement : 09.03.20 12

ORDER

PER H.L.KARWA, VP

These four appeals by the assessee are directed against the common order of CIT(A), Chandigarh dated 13.10.2011 in confirming the penalty of Rs. 6,11,600/- levied u/s 272A(2)(k) of the Income Tax Act, 1961 (in short ‘the Act’) for the assessment years 2007-08 to 2010-11.

2. The issue is common and, therefore, we will dispose of all the appeals together by this common order.

3. Briefly stated, the facts of the case are that the Person Responsible in respect of Collector Land Acquisition, Department of Industries & Commerce, Punjab Chandigarh (in short ‘PR’) had not filed the e-TDS quarterly returns on respective due dates and so had defaulted u/s 200(3) of the Income Tax Act, 1961 (in short ‘the Act’). In response to the show cause notice, the person responsible had submitted before the Addl. CIT (in short the Assessing Officer) that the delay was due to the fact that the land owners have not submitted their PAN numbers and there was no intentional delay on the part of the PR. The Assessing Officer was not satisfied with the explanation on the ground that PR was supposed to obtain the PAN numbers of the persons to whom payment was made, prior to release of the payment and the PR was supposed to file the returns in form No. 26Q within prescribed period. He accordingly held that the PR as ‘the assessee in default’ in not filing the e-TDS returns in form No. 26Q within prescribed period and levied penalty u/s 272A(2)(k). The total number of days of default worked out to 6116 and so he levied penalty of Rs. 6,11,600/- @ Rs. 100/- for every day u/s 272A(2)(k) of the Act. The delay calculated by the Assessing Officer was 4 days, 2745 days, 2720 and 947 days in assessment years 2007-08, 2008-09, 2009-10 and 2009-10 respectively. Before the CIT(A), the PR took the following line of arguments:-

“1. The Income Tax Officer (TDS) Chandigarh vide letter dated informed that there is delay in submission of quarterly returns for the financial year 2006-07 to 2009-10. The total Number of delay days were calculated as 6116 days therefore it attracts penalty u/s 272A(2)(k) of the Income Tax Act.

2. In reply the assessee has informed to the ITO (TDS) that due to non availability of PAN the TDS Returns could not be filed in time. But the Tax was Well deducted in time and deposited with the Govt. account

3. It is submitted that the Collector Land Acquisition, Department of Industries is a Government Organization. The Organization is Acquiring Land on Behalf of Punjab Government. The Land Compensation is paid by the Organization to the Land Owners through the District/High Courts. The TDS is deducted at Source on the interest is deposited in the Court and not paid directly to the Land Owners. The mostly Land Owners/Agriculturist don’t have PAN Numbers.

4. The Assessing Officer ignored the submissions made by the assessee and penalty of Rs. 6,11,600/- was imposed.

5. Govt. has issued guidelines for submission of ETDS quarterly returns. It was decided that Form 26Q with less than 70% of Pan Data will not be accepted for the quarter ending on 30.09.2007. With non availability of requisite PAN data, we could not submit the ETDS returns. Before 30.09.2007 we were filing the all TDS Returns in Time. The Details of our TDS submission is as under:

Before the above notification assessee was filling ETDS Returns in Time.”

4. The CIT(A) did not find any merit in the above submissions of PR and therefore, CIT(A) upheld the order of Assessing Officer. Hence, the assessee is in appeal before the Tribunal.

5. Before us, Shri Harry Rikhy, Ld. Counsel for the assessee submitted that the Assessing Officer vide letter dated 12.8.2010 informed the PR that there was a delay in filing of e-TDS quarterly returns for the financial years 2006-07, 2007-08, 2008-09 and 2009-10. The total number of days of default was 6116. A show cause notice was issued on 14.12.2010. In reply, the PR has informed that due to non availability of PAN number, the e-TDS quarterly returns could not be filed in time but the tax was well deducted in time and deposited with the government account.

6. Ld. Counsel for the assessee further submitted that Collector Land Acquisition, Department of Industries is a Government Organization. The Organization is acquiring land on behalf of the Punjab Government. The land compensation is paid by the Organization to the land owners through the District / High Courts. The TDS is deducted at source on the interest payment to the land owners. But the compensation and interest is deposited in the Court and not paid directly to the land owners. The land owners / agriculturists do not have PAN numbers. The Department was not able to find the PAN numbers of these land owners. The PR submitted that it had issued letters to individual land owners for PAN numbers at the available addresses but no response was received due to improper address. As the PAN numbers were not provided by the deductee, so the e-TDS return could not be filed in time. Shri Harry Rikhy, Ld. Counsel for the assessee further submitted that it is accepted that there was delay in filing the e-TDS returns but there was no malafide intention of the PR / Department. The TDS was deducted at the rates prescribed by the Income Tax Department. Tax was deposited will in time in the Government Treasury. The Department has fulfilled their responsibility for deduction of tax and depositing of the tax. On the other side it was the responsibility of the deductee to inform about the PAN  Number to the deductor so that TDS return could be filed with the Income Tax Department and tax credit goes to deductee. He, therefore, submitted that the penalty levied should be cancelled. Reliance was placed on the decision of the Hon’ble Supreme Court in the case of Hindustan Steels Ltd v State of Orissa (1972) 83 ITR 26 (SC).

7. The Ld. DR supported the orders of CIT(A) and Assessing Officer and relied upon the reasons mentioned in their respective orders.

8. We have heard the rival submissions and have also perused the materials available on record. In our opinion, the penalty levied in all the aforesaid cases deserves to be canceled. The reasons for taking such a view are stated in the following paras.

9. It is an admitted fact that the amount of tax deducted at source by the assessee (Person Responsible) was paid within the limit under the relevant provisions of the Income Tax Act, 1961. There was only a technical and venial breach to the provisions contained in Rule 31A(2) of the Income Tax Rules, 1962 requiring the assessee to submit quarterly returns statement of Tax Deducted at Source which were required to be filed on due date as per section 200(3) of the I.T. Act. As regards the delay in submitting TDS returns, it was explained by the assessee that due to non-furnishing of PAN numbers, the TDS certificate could not be filed in time, but the tax was deducted in time and deposited with the government account. It is also explained that the Collector Land Acquisition, Department of Industries is a Government Organization. The Organization is acquiring land on behalf of  Punjab Government. The Land Compensation is paid by the Organization to the land owners through the District / High Courts. The TDS is deducted at source on the interest payment to the land owners. But the compensation and interest is deposited in the Court and not paid directly to the land owners. It is also explained that generally the land owners / agriculturists do not have PAN numbers. The Department was not able to find PAN numbers of these land owners. It is also explained by the assessee that the Department has issued letters to individual land owners for PAN numbers at the available address but no response was received due to improper addresses. However, it is also explained that as the PAN numbers were not provided by the duductees, so the e-TDS returns could not be filed in time. In our view, the assessee has satisfactorily explained the reasons regarding non filing of TDS returns in time, therefore, no penalty should be levied in these cases. Even otherwise also, the assessee did not derive any benefit whatsoever by not filing the e-TDS returns in time, as the amount of TDS was duly deposited in the government treasury within prescribed time. Such delay has not caused any loss to the Revenue / Income Tax Department. The Hon’ble Supreme Court in the case of Hindustan Steels Ltd v State of Orissa 83 ITR 26 (SC) inter alia held as under:-

“An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was a guilty or conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be  justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.”

10. From the above discussion, it is clear that the assessee was prevented by sufficient case from filing the returns within the statutory period. Even otherwise, there was only a technical and venial breach to the provisions contained in Rule 31A (2) of the Income Tax Rule, 1962 read with section 200(3) of the Income Tax Act, 1961. Considering the entire facts and circumstances of the present case, we are of the considered opinion that no penalty can be validly levied on the facts and circumstances of the present case. We, therefore, cancel the penalty in all these cases.

11. In the result, the appeals are allowed.

Order Pronounced in the Open Court on this 9th day of March, 2012