Case Law Details

Case Name : ITO (TDS) Vs. Bharat Electronics Ltd. (ITAT Chandigarh)
Appeal Number : ITA No. 743/Chandi/2011
Date of Judgement/Order : 20/09/2011
Related Assessment Year : 2009- 10
Courts : All ITAT (5189) ITAT Chandigarh (122)

ITO (TDS) Panchkula Vs. Bharat Electronics Ltd. (ITAT Chandigarh)– ‘ Tax deductor’ is the holder of tax deduction and collection account Number RTKBO 1838 E. The TDS quarterly statement of deduction of Tax in Form No. 24Q for Financial year 2008- 09 relevant to Assessment Year 2009- 10. as required under sub-sec (3) of Sec 200 of the Act was filed on 22.7.2009.

The ITO (TDS) while going through the quarterly return in Form NO. 24Q filed by the assessee noted that it has omitted to quote PAN/has quoted invalid PAN in 64 cases. The ITO(TDS) has afforded number of opportunities to the assessee to explain his position and file the correct  details in this regard. However, the assessee did not file any reply due to which the AO concluded that the assessee has committed a default u/s 139A(5B) for which penalty u/s 272B(1) of the Act is leviable. The ITO (TDS) therefore, levied a penalty of Rs. 6,40,000/- @ of Rs. 10,000/- per default vide his order dated 26.7.2010.

On Appeal ITAT has held that  it is apparent from the record that the assessee deducted TDS correctly and revised the PAN and filed revised statement in Form No. 26Q, hence there was sufficient compliance of the provisions of section 139A of the Act. Even otherwise the assessee did not derive any benefit whatsoever, by filing the wrong PANs and PAN was corrected after ascertaining the same from the respective deductees. In our view the assessee has proved that there was reasonable cause for alleged failure and hence no penalty is leviable. Even otherwise also no penalty is leviable when there is a technical or venial breach of the Act.

The Hon’ble Supreme Court in the case of Hindustan Steel Ltd V. State of Orissa (1972) 83 ITR 26 (S.C) has 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.”

Considering the entire facts and circumstances of the case, we hold that no penalty can be validly levied on facts and circumstances of the present case. We, therefore uphold the order of ld. CIT(A) in canceling the penalty.

FULL TEXT OF THE ABOVE JUDGEMENT IS AS FOLLOWS:-

INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH

ITA No. 743/Chandi/2011

Cross Objections No. 67/Chandi/2011

Assessment Year: 2009- 10

ITO (TDS) Panchkula

Vs.

Bharat Electronics Ltd.

Date of Pronouncement: 20.09.2011

ORDER

Per H.L. Karwa, V.P

The appeal by the Revenue and the Cross objections by the assessee are directed against the order passed by the ld. CIT(A), Panchkula dated 11 .5.2011 relating to Assessment Year 2009-2010.

2. In appeal the revenue has challenged the action of the ld. CIT(A) in canceling the penalty of Rs. 6,40,000/- imposed u/s 272B of Income-tax Act, 1961 (In short ‘the Act’) for Assessment Year 2009-10

3. Briefly stated, the facts of the case are that ‘ tax deductor’ is the holder of tax deduction and collection account Number RTKBO 1838 E. The TDS quarterly statement of deduction of Tax in Form No. 24Q for Financial year 2008-09 relevant to Assessment Year 2009-1 0. as required under sub-sec (3) of Sec 200 of the Act was filed on 22.7.2009. The ITO (TDS) while going through the quarterly return in Form NO. 24Q filed by the assessee noted that it has omitted to quote PAN/has quoted invalid PAN in 64 cases. The ITO(TDS) has afforded number of opportunities to the assessee to explain his position and file the correct  details in this regard. However, the assessee did not file any reply due to which the AO concluded that the assessee has committed a default u/s 139A(5B) for which penalty u/s 272B(1) of the Act is leviable. The ITO (TDS) therefore, levied a penalty of Rs. 6,40,000/- @ of Rs. 10,000/- per default vide his order dated 26.7.2010.

4. Aggrieved by the order passed by the AO, the assessee carried the matter in appeal before the ld. CIT(A) and took the following line of arguments before the ld. CIT(A):

“i) Penalty u/s 272B has been imposed stating PANs of deductees are invalid in an many as 64 cases in the TDS return – 24Q for the Assessment Year 2009-10.

ii) The assessee has been replying to all the queries and notices received from your esteemed income tax office on time and further attending the concerned offices as and when required.

iii) In response to the notice of show cause for default u/s 272B vide reference No. 1923 dated 16.8.2010, the attended the office of ITO (TDS) on 24.8.2010 and discussed the issue with the available officials in the office of ITO (TDS) regarding the filing of revised return and the reasons for non availability of PANs of relevant deductees as mentioned in the said notice at the time of filing TDS return and hence it is presumed that due compliance had been made by the assessee.

iv) Considering the working environment and certain unavoidable circumstances, the assessee could not mention correct PANs of 64 deductee records out of 645 deductee records in the original TDS return.

v) Revised return has been field by the ae after updating all the 64 PANs as said vide receipt No. 070870100046281 dated 27.9.2010.

5. The ld. CIT(A) cancelled the penalty observing that the TDS was deducted and deposited in time. The default was only with regard to wrong quoting of PAN of 64 of the deductees as the deductees quoted wrong PAN. Correct PAN was given as soon as the default was brought to the notice of the assessee. The ld.  CIT(A) categorically observed that tax was deducted correctly revised copy of receipt was also submitted. The ld. CIT(A) observed that the penalty is levied if the default committed u/s 139A. In the instant case, the penalty has been levied for default under section 139A(5B)(iv) as per which a person who is responsible for deducting tax under chapter XVII-B shall quote the PAN of the person to whom such income/sum has been paid in all the statements prepared and delivered in accordance with the provisions of Sec 200(3) of the Act to Income tax authorities. According to the ld. CIT(A), the assessee quoted invalid PAN for 64 deductees which was corrected by the ITO(TDS). The ld. CIT(A) also referred to Sec 273B of the Act which provides that no penalty is imposable for failure u/s 272B of the Act, if it is proved by the deductor that there was reasonable cause for such failure. The ld. CIT(A) has categorically stated that the assessee has explained that the failure to quote right PAN occurred as the concerned depositor has mis-quoted the PAN. It was also observed by the ld. CIT(A) that PAN was corrected after ascertaining the same from the respective deductees. In that view of the matter, the ld. CIT(A) cancelled the penalty.

6. We have heard the rival submissions and have perused the materials available on record. We find that a similar case i.e. ITA No. 773/Chandi/201 1 for Assessment Year 2009-10 in the case of ITO (TDS), Panchkula V. Oriental Bank of Commerce, Naraingarh came up for consideration before this Bench of the Tribunal. While deciding a similar issue, we have confirmed the order of ld. CIT(A) in canceling the penalty of Rs. 7,70,000/- vide order dated 19.9.11 observing as under:-

5. We have heard Shri N.K. Saini, DR for the revenue at length and have also perused the materials available on record. In this case the assessee quoted wrong PANs for 77 deductees which was corrected on being pointed out by the ITO(TDS). Section 273B of the Act provides that no penalty is imposable for a failure u/s 272B, if it is proved by the deductees that there was reasonable cause for the said failure. In this case the assessee has explained that failure to quote right PAN was occurred as the concerned depositor has himself mis¬quoted PAN. It is also the case of the assessee that the PAN was corrected after ascertaining the same from respective deductees. In the case of the Financial Co-operative Bank Ltd v. ITO (supra) the Ahmedabad Bench has held as under:-

“We are, therefore of the opinion that since the furnishing of incomplete declaration by the customer was a mistake  committed by the Customer and not by the Bank, the failure to comply with the provisions of section 139A as envisaged in sub-sec (1) of Sec 272B of the Act was of the customer and not of the Bank; meaning thereby that the penalty under sec 272B(1) of the Act, if any, is to be imposed, it is to be imposed on the customer and not on the Bank. Bank can be penalized if it fails to comply with the provisions of section 139A(6) or rule 114D(2) is for failure to ensure that PAN or GIR Number is quoted by the customer and for failure in forwarding the copies of Form No. 60, but not for any other default.”

5.1 In the instant case, it is apparent from the record that the assessee deducted TDS correctly and revised the PAN and filed revised statement in Form No. 26Q, hence there was sufficient compliance of the provisions of section 139A of the Act. Even otherwise the assessee did not derive any benefit whatsoever, by filing the wrong PANs and PAN was corrected after ascertaining the same from the respective deductees. In our view the assessee has proved that there was reasonable cause for alleged failure and hence no penalty is leviable. Even otherwise also no penalty is leviable when there is a technical or venial breach of the Act. The Hon’ble Supreme Court in the case of Hindustan Steel Ltd V. State of Orissa (1972) 83 ITR 26 (S.C) has 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.”

5.2 Considering the entire facts and circumstances of the case, we hold that no penalty can be validly levied on facts and circumstances of the present case. We, therefore uphold the order of ld. CIT(A) in canceling the penalty.

6. In the result, appeal filed by the Revenue is dismissed.”

7. The facts of the present case are similar to that of ITA No. 773/Chandi/201 1, A.Y 2009-10 (supra) and therefore respectfully following the order of the Tribunal passed in that case, we uphold the order of the ld. CIT(A) and dismiss the appeal of the Revenue.

8. Cross-objections No. 67/Chandi/2011

At the time of hearing, Ms. Bhawna Joshi, Ld. counsel for the assessee did not press for the grounds raised in the cross-objections and hence we dismiss the same as not pressed.

9. In the result, appeal of the Revenue and the Cross-objections by the assessee are dismissed.

Order pronounced on 20.09.2011

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