Case Law Details

Case Name : Royal Metal Printers Pvt. Ltd. Vs. Add. CIT (ITAT Mumbai)
Appeal Number : ITA No. 6840/Mum/2008
Date of Judgement/Order : 29/01/2010
Related Assessment Year :


7.We have heard the rival submissions and carefully perused the record. Admittedly tax was deducted at source and payment was made/ deposited within the time provided under the Act and the returns under Form 26Q as well as 24Q were filed with a marginal delay, reckoned from the due date for filing the regular returns as per the old provisions of the Act. It is also not in dispute that for the immediately preceding year also there was a delay in filing the quarterly statements but the Assessing Officer has not initiated penalty proceedings.

8. Section 273B of the Act provides an exception to the rigid provisions of section 272A of the Act by providing that in the event of an assessee proving a ‘reasonable cause’ for the failure, penalty shall not be imposed by the authorities concerned. In the case of ACfT Vs Gayatri Traders the ITAT, Hyderabad Special Bench (1996) 58 ITD 121, while explaining the expression ‘reasonable cause’ under section 273B of the Act observed in para 25 as under :

“Levy of penalty under section 271B is neither mandatory nor a must. The plain language of section 271B provides that if any person fails to get his accounts audited or obtain a report as required under section 44AB, “the Assessing Officer may direct that such person shall pay by way of penalty’. The use of the words ‘may direct’ clearly indicates that the Assessing Officer is vested with the discretion either to impose or not to impose penalty depending upon the facts and circumstances of the case. No doubt, it is true, the said discretion should be exeredsed judicially and not either arbitrarily or capriciously. When there is a technical or minor breach of the law, the ends of justice require that the discretion should not be exercised in favour of punishing a venial default. Further, it is not as though the moment a default under section 44AB is committed, the levy of penalty under section 271b is automatic The words ‘without reasonable cause’ that existed in section 271B as applicable to the assessment years under consideration are important. If the assessee is able to show a reasonable cause for his failure to comply with the requirements of section 44AB before the due date, no penalty is leviable under section 27IB. What is “a reasonable cause”, in a given set of facts depends upon the peculiar facts of that case. A cause which a reasonable man accepts it as a reasonable one can be taken as a reasonable cause. The expression ‘reasonable cause’ requires to be interpreted liberally in a fair and reasonable manner so as to advance the cause of justice, since harsh legalistic approach should be mitigated by soft practical approach in applying penal provisions.”

9. It is well settled that ordinarily an assessee is duty bound to know the provisions of statute but in the event of making a claim of ignorance of law it is for the Revenue to examine the plea judiciously keeping in mind the fact that assessee who has deducted tax and deposited the same within the stipulated time could have normally been said to be a law abiding citizen/ assessee and the delay, under such circumstances, cannot ordinarily be attributable to wanton negligence, particularly when the penalty leviable can be equivalent to the tax deducted or deductible. In the case of Motilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar Pradesh & Others {1979J 118 ITR 326 the Apex Court observed, at page 339 of the report that it is impossible to know all the statutory provisions of law and hence the principle that ‘everyone is presumed to know the law’, is not applicable universally since it is of a very different scope and application. Similarly in the case of WTO Vs. Jayakumar (S.P.) (1983) 3 ITD 221 the ITAT Madras Bench observed, at para 6 of the judgement as under:

“That the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specialising in this field, is a well known fact. It is equally well known fact that the legislation in this field undergoes so frequent changes and amendment that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making reference to the history of the enactments. In such circumstances, it would be a travesty of truth and justice to hold that the assessee knew or ought to have known the correct law and comply therewith, even though, in fact, he was not aware of the provisions.”

10. Bearing in mind the above principles we are of the view that the delay in filing the returns, even if they are characterised as negligence on the part of the assessee, can only be considered as a technical or venial breach of law for which penalty should not be levied automatically. The consistent stand of the assessee that there was no default on the part of the Company in the earlier years and the default in this year was only on account of change of provisions of the Act and even for the immediately preceding year there was a delay in Tiling quarterly returns (filed along with this year’s quarterly returns), was not disputed by the tax authorities. Under these circumstances, we are of the view that the delay is supported by reasonable cause and hence we cancel the penalty levied by the Assessing Officer under section 272A (2) (c) of the Act.

11. Even otherwise, in the light of the decision of the ITAT, Bombay Bench (supra) no penalty is leviable under section 272A(2)(c) of the Act for failure to file quarterly returns of TDS. Under the circumstances, appeal filed by the assessee is allowed.

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