FURNISHING OF INVALID PERMANENT ACCOUNT NUMBER IN RETURNS

[Mr. M. GOVINDARAJAN]

Section 200 (3) of the Income Tax Act, 1961 (‘Act’ for short)  provides that any person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorized by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed.

Section 139A (5B) of the Act provides that where any sum or income or amount has been paid after deducting tax under Chapter XVIIB, every person deducting tax under that Chapter shall quote the permanent account number of the person to whom such sum or income or amount has been paid by him—

        (i) in the statement furnished in accordance with the provisions of sub-section (2C) of section 192;

        (ii) in all certificates furnished in accordance with the provisions of section 203;

        (iii) in all returns prepared and delivered or caused to be delivered in accordance with the provisions of section 206 to any income-tax authority;

       (iv) in all statements prepared and delivered or caused to be delivered in accordance with the provisions of sub-section (3) of section 200.

Section 139A (5B) requires that PAN of all persons on behalf of whom tax is deducted should be quoted in the quarterly statement.  The issue to be discussed in this article whether furnishing of invalid PAN will attract to penalty under Section 272B of the Act with reference to decided case law.

In ‘Commissioner of Income Tax (TDS) V. Superintendent of Police’ (2012) 349 ITR 550 (P&H) the assessee is required to file e-TDS quarterly statement of deduction of tax in Form 24Q for the financial year 2008-09 as required under Section 200(3) of the Act. The assessee filed the said statement on 16.10.2009.  During processing, it was noticed by the Authorities that PAN of many as 196 tax deductees were found to be invalid. A show cause notice was issued to the assessee by the Department as to why penalty under Section 272B of the Act be not imposed.  The assessee neither replied nor appeared before the authority.   The original authority passed order on 30.08.2010 imposing a penalty of Rs.19,60,000/- 

Aggrieved against the order of Income Tax Officer (TDS), the assessee filed appeal before the Commissioner of Income Tax (Appeals).  The Commissioner (Appeals) held that the appellant deducted TDS correctly and revised PAN and filed the revised statement on Form 26Q, hence there is sufficient compliance with the provisions of Section 139A of the Act.  The Commissioner (Appeals) further held that the Income Tax Officer (TDS) was not justified to levy the penalty of Rs.19,60,000/- at Rs.10,000/- per default.   The penalty levied was deleted by the Commissioner (Appeals).

Against the order of Commissioner (Appeals) the Department filed appeal before the Tribunal.  The Tribunal considered the question whether there was reasonable cause for alleged failure on the part of the assessee.  The Tribunal observed that the Income Tax Officer (TDS) while going through the quarterly return in Form 26Q filed by the assessee noted that it has omitted to quote PAN had quoted invalid PAN in 196 cases.  As regards the reasonable cause, the assessee pleaded that TDS was deducted and deposited in time in the Government Treasury.  The default is only with regard to the wrong quoting of the PAN of 196 of the deductees, who quoted wrong PAN.  However the wrong PAN was corrected when it was brought to the notice of the assessee.  The Tribunal held that the failure to quote right PAN has occurred as the concerned depositor had misquoted PAN. There is also no dispute that the PAN was corrected after ascertaining the same from the respective deductee. Therefore no penalty was leviable.  The Tribunal allowed the appeal of the assessee.

Also aggrieved against the order of Commissioner (Appeals) the Department filed appeal before the High Court claiming the following questions of law:

Whether, on facts and in the circumstances of the case, the Hon’ble Tribunal was right in law for deleting the penalty levied under Section 272B of the Act, amounting to Rs.19,60,000/- for non-quoting/wrong quoting of PANs in 196 cases in the TDS returns 24Q for the assessment year 2009 – 10?

Whether, on facts and in the circumstances of the case, the Hon’ble Tribunal was right in deleting the penalty and giving relief to the assessee merely on the ground that the appellant deducted TDS correctly and revised PAN and filed the revised statement in Form 26Q.   While penalty was levied for non-quoting of PANs of deductees in Form 24Q.  Thus, accepting additional evidence in contravention to Rule 46A of the Income Tax Rules, 1962?

Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal is right in law in giving benefit of Section 273B of the Income tax Act, 1961, despite the failure on the part of the respondent to prove that there was a reasonable cause in not furnishing the valid PAN numbers?

Whether, on the facts and in the circumstances of the case, the findings recorded by the learned Income Tax Appellate Tribunal are perverse and contrary to record?

The High Court analyzed the decisions taken by the Commissioner (Appeals) and Tribunal. The High Court held that the Department was unable to show that the findings recorded by the Commissioner of Income Tax (Appeals) and the Tribunal are erroneous in any manner. On appreciation of the entire matter, the High Court held that the Commissioner of Income Tax (Appeals) and the Tribunal examined the explanation of the assessee and came to the conclusion that there was sufficient cause was shown which would be a question of fact in the given facts and circumstances.  Finding no merit in the appeal the High Court dismissed the appeal. taxmanagementindia.com

If sufficient cause is shown for non-quoting of PAN or wrong quoting of PAN no penalty shall be imposable.