Penalty U/s. 272A (2)(k) cannot be imposed for a mere technical venial breach

New India Assurance Co. Ltd. Vs JCIT (ITAT Kolkata)

We find that the fact of change of software from ‘Genesis’ to ‘CWISS’ Module by the assessee has not been disputed by the revenue in the instant case. It is quite natural that change of software would lead to various teething troubles which need to be addressed and plugged at the initial stage itself, so that the new Module could function smoothly later on. It is well known that migration to a new software would certainly result in lot of issues on accounting, accounting heads, etc which consumes considerable time for addressing the same. The assessee in the instant case had to undergo the same problems from October 2009 onwards , which had been duly stated by the senior branch manager of , Serampore Branch, vide letter dated 11.11.2011 , which fact is also acknowledged in the order of the ld CITA. The due date of filing the quarterly statement for the second quarter of financial year 2009-10 falls in October 2009 only. Hence we hold that the assessee was reasonably prevented from filing its quarterly TDS statements for 2^ndand 3^rdquarters of financial year 2009-10 with delay due to reasons beyond the control of the assessee.

We hold that the explanation offered by the assessee would constitute ‘reasonable cause’ within the meaning of section 273B of the Act and hence the assessee would be entitled for immunity from levy of penalty u/s 272A(2)(k) of the Act. Moreover, we find that there is absolutely no loss to the exchequer due to the delay committed by the assessee in filing the quarterly TDS statements as admittedly the entire TDS has been duly remitted within the prescribed time by the assessee to the account of the Central Government. Hence we hold that the assessee had committed only a technical venial breach , for which it should not be invited with penalty u/s 272A(2)(k) of the Act. Accordingly, the grounds raised by the assessee are allowed.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

1. This appeal is directed against the order of the learned Commissioner of Income Tax (Appeals) -24, Kolkata [in short the ld CITA] in Appeal No. 174/CIT(A)-24/Kol/2012-13 dated 9.5.2016 against the order passed by the JCIT (TDS) Range -58, Kolkata [in short the ld AO] levying penalty u/s 272A(2)(k) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) in the sum of Rs 94,200/- for the Asst Year 2010-11 dated 1.12.2011.

2. The brief facts of this issue is that the assessee had submitted its quarterly TDS statements for the second and third quarters of the financial year 2009-10 with some delay. The ld AO asked the assessee to show cause why a penalty should not be imposed on it for the delays of 517 and 425 days in respect of 2^ndand 3^rdquarters respectively. The assessee submitted that due to the replacement of the erstwhile Software Module ‘Genesis’ by ‘CWIIS’ Module with effect from October 2009, it had to face various accounting problems. Due to the system lapses and communication gap between the assessee and the service provider , the assessee’s day to day work and the customer service had been hampered. Though the assessee tried its level best to overcome the Software oriented problems, yet because of the lack of knowledge regarding the new Modules, the assessee could not collect the required reports of its agents and surveyors to whom commission had been paid. It was submitted before the ld AO that though the taxes deducted at source had been duly deposited to the credit of the Central Government within the prescribed dates, yet in the absence of the necessary reports, it had not been possible for the assessee to prepare the quarterly statements of TDS and submit the same within the prescribed dates. Later on, the quarterly statements of TDS were duly submitted to the ld AO. The ld AO however, observed that the reasons stated for the delay does not constitute ‘reasonable cause’ within the meaning of section 273B of the Act, and rejected the explanation of the assessee. Accordingly, the ld AO levied penalty of Rs 51,700/- for delay of 517 days for second quarter and Rs 42,500/- for the delay of 425 days for third quarter totaling to Rs 94,200/- u/s 272A(2)(k) of the Act. The order levying penalty u/s 272A(2)(k) of the Act by the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us on the following grounds:-

1. That the Commissioner of Income Tax(Appeals) was wrong in confirming the penalty of Rs. 94,200/- imposed by the Assessing Officer u/s 272A(2)(k)/274.

2. That without prejudice to the contention raised in Ground No. 1 above, the Commissioner of Income Tax (Appeals) was wrong in not appreciating the fact that there had been reasonable cause for the delays occurred in furnishing Quarterly TDS Statement by the appellant.

3. That the appellant craves leave to add, alter or withdraw any Ground or Grounds of appeal before or at the Hearing of the Appeal.

3. None appeared on behalf of the assessee. We have heard the ld DR. We find that the fact of change of software from ‘Genesis’ to ‘CWISS’ Module by the assessee has not been disputed by the revenue in the instant case. It is quite natural that change of software would lead to various teething troubles which need to be addressed and plugged at the initial stage itself, so that the new Module could function smoothly later on. It is well known that migration to a new software would certainly result in lot of issues on accounting, accounting heads, etc which consumes considerable time for addressing the same. The assessee in the instant case had to undergo the same problems from October 2009 onwards , which had been duly stated by the senior branch manager of , Serampore Branch, vide letter dated 11.11.2011 , which fact is also acknowledged in the order of the ld CITA. The due date of filing the quarterly statement for the second quarter of financial year 2009-10 falls in October 2009 only. Hence we hold that the assessee was reasonably prevented from filing its quarterly TDS statements for 2^ndand 3^rdquarters of financial year 2009-10 with delay due to reasons beyond the control of the assessee. We hold that the explanation offered by the assessee would constitute ‘reasonable cause’ within the meaning of section 273B of the Act and hence the assessee would be entitled for immunity from levy of penalty u/s 272A(2)(k) of the Act. Moreover, we find that there is absolutely no loss to the exchequer due to the delay committed by the assessee in filing the quarterly TDS statements as admittedly the entire TDS has been duly remitted within the prescribed time by the assessee to the account of the Central Government. Hence we hold that the assessee had committed only a technical venial breach , for which it should not be invited with penalty u/s 272A(2)(k) of the Act. Accordingly, the grounds raised by the assessee are allowed.

4. In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 04.04.2018