2007 (10) TMI 547 - AT - Income Tax

Penalty levied u/s 272B - Mistake in quoting correct PAN of the deductee in the TDS returns - banking business - default in complying with the provisions of section 139A of the Act read with rules 114B to 114D - HELD THAT - In view of interpretation of the provisions of sections 139A(5) 139A(6) 272B(1) and of 272B(2) of the Act and rules 114B to 114D we are of the opinion that penalty for failure to comply with the provisions of section 139A of the Act can be imposed only on the customer and not on the bank except when the bank is found to (sic). Levy of penalty for failure to comply with Rules is concerned We are of the opinion that there is no provision i.e. section 272B of the Act does not prescribe levy of any penalty for such failure and secondly we are of the opinion that even if it is assumed that there is any penalty for such failure then in our opinion there being no failure on the part of the assessee to comply with the provisions of rules 114B to 114D the assessee was not liable to any penalty. In the result we first of all direct the Assessing Officer to see if enhancement made by the CIT(A) has resulted in double levy of penalty of section 209 accounts and if it is so then penalty to that extent should be reduced straightaway. We cancel the penalty in question. Without prejudice to the aforesaid conclusion even if it is assumed that it was the assessee s obligation to procure duly filled in Form No. 60 and supporting evidence thereof and the penalty u/s 272B is leviable for such failure of the assessee then also we are of the opinion that the assessee having procured Form No. 60 though defective one it should have been allowed an opportunity to make good that of efficiency but was not a fit case for levying of any penalty u/s 272B of the Act. So far as the assessee s plea that the penalty if at all was leviable could be levied only with respect to 237 accounts is concerned we having cancelled the penalty as a whole are of the opinion that this ground requires no independent adjudication. The assessee s another plea that penalty if any leviable could be only for default as a whole ; i.e. only to the extent of Rs. 10, 000 and not on the basis of default for each account i.e. penalty could be levied only to the extent of Rs. 10, 000 we are again of the opinion that we having cancelled the whole this issue requires no independent adjudication. In the result the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Levy of penalty under section 272B of the Income-tax Act.
2. Enhancement of penalty by the Commissioner of Income-tax (Appeals).

Issue-Wise Detailed Analysis:

1. Levy of Penalty under Section 272B of the Income-tax Act:

The assessee, engaged in banking, was penalized for not fully complying with section 139A of the Act and rules 114B to 114D of the Income-tax Rules, 1962. During a survey under section 133A, it was discovered that Form No. 60, obtained from depositors without PANs, was either incomplete or lacked supporting evidence for addresses. The Assessing Officer imposed a penalty of Rs. 79,30,000 for 793 cases of non-compliance.

The assessee contended that 209 of these cases predated the enactment of section 272B (June 1, 2002) and should not attract penalty. The Commissioner of Income-tax (Appeals) instead issued an enhancement notice and confirmed the penalty, adding Rs. 20,90,000 for these 209 cases.

The Tribunal analyzed sections 139A(5) and 139A(6) and rules 114B to 114D, concluding that the obligation to quote PAN or file Form No. 60 lies with the customer, not the bank. The bank's duty is to ensure the PAN is quoted or Form No. 60 is obtained and forwarded to the relevant tax authority. Therefore, the Tribunal held that the penalty under section 272B(1) should be imposed on the customer, not the bank. The Tribunal canceled the penalty, emphasizing that the bank should have been allowed to rectify any defects in Form No. 60.

2. Enhancement of Penalty by the Commissioner of Income-tax (Appeals):

The assessee argued that the enhancement by the Commissioner resulted in double penalty for the 209 cases. The Tribunal directed the Assessing Officer to verify if the enhancement led to double penalty and to reduce it if confirmed.

The Tribunal also addressed the assessee's plea that the penalty, if any, should be limited to Rs. 10,000 for the entire default rather than Rs. 10,000 per account. However, since the Tribunal canceled the entire penalty, this issue did not require independent adjudication.

Conclusion:

The Tribunal concluded that the penalty under section 272B was not applicable to the bank for the customers' failure to comply with section 139A and related rules. The bank's obligation was limited to ensuring PAN or Form No. 60 was obtained and forwarded. The appeal was allowed, and the penalty was canceled. The Tribunal also directed the Assessing Officer to check for any double penalty due to the enhancement and reduce it accordingly.