2010 (1) TMI 938 - AT - Income Tax

Penalty under section 272A(2)(c) - delay in filing the returns - Held that - As 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 filing quarterly returns (filed along with this year s quarterly returns) was not disputed by the tax authorities Thus as delay is supported by reasonable cause thus no penalty is leviable under section 272 A(2)(c)for failure to file quarterly returns of TDS. appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Levy of penalty under section 272A(2)(c) of the Income-tax Act, 1961 for delayed filing of TDS returns.
2. Reasonable cause for delay in filing TDS returns.
3. Applicability of section 272A(2)(c) for quarterly TDS returns.

Issue-wise Detailed Analysis:

1. Levy of penalty under section 272A(2)(c) of the Income-tax Act, 1961 for delayed filing of TDS returns:
The assessee-company filed an appeal against the penalty of Rs. 1,13,888 levied by the Assessing Officer under section 272A(2)(c) of the Income-tax Act, 1961 for the assessment year 2007-08. The penalty was imposed due to the delayed filing of TDS returns in Form 26Q and Form 24Q for four quarters. The returns were filed significantly late, with delays ranging from 37 to 382 days. The penalty was calculated at Rs. 100 per day of delay but was restricted to the amount of tax deducted at source.

2. Reasonable cause for delay in filing TDS returns:
The assessee argued that the delay was due to a bona fide belief that TDS returns were to be filed annually, as per the old provisions, rather than quarterly. The company also faced issues such as the departure of a part-time accountant and unfamiliarity with electronic filing, which contributed to the delay. The assessee contended that there was no intention to disregard the law, as evidenced by timely tax deductions and payments. The CIT(A) rejected these arguments, stating that ignorance of law is not a valid excuse for non-compliance.

3. Applicability of section 272A(2)(c) for quarterly TDS returns:
The assessee referred to previous judgments, arguing that penalty under section 272A(2)(c) should be levied only in cases of wanton negligence and not for ignorance of amended provisions. The assessee also cited a previous ITAT decision (Crest Communication Ltd. v. Addl DIT) to argue that failure to file quarterly TDS returns falls under section 200(3) of the Act, not section 272A(2)(c). The Departmental Representative countered that ignorance of law is not a reasonable cause and that the penalty is applicable under section 272A(2)(k), which is saved by section 292B.

Judgment:
The Tribunal noted that the assessee had deducted and deposited the tax on time and that the delay in filing returns was marginal when reckoned from the old due dates. The Tribunal also observed that for the preceding year, the assessee had similarly delayed filing quarterly returns without facing penalty, indicating acceptance of the delay by the Assessing Officer. The Tribunal referred to section 273B, which provides that no penalty shall be imposed if the assessee proves a 'reasonable cause' for the failure. The Tribunal cited various judgments to support the view that ignorance of law, especially in the context of complex tax provisions, can be a reasonable cause. The Tribunal concluded that the delay was a venial breach of law and that the penalty should not be levied automatically. Consequently, the penalty under section 272A(2)(c) was canceled.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, canceling the penalty levied under section 272A(2)(c) of the Income-tax Act, 1961, for the delayed filing of TDS returns, based on the reasonable cause and previous judicial decisions indicating that such delays should not attract automatic penalties.