2018 (7) TMI 117 - AT - Income Tax

Levying penalty u/s 272A(2)(k) - Held that - Appellant has deposited TDS along with interest. Thus it has compensated Govt. for late payment of TDS ensuring no loss to the revenue. In case there is no loss to the revenue then penalty u/s 272A(2) cannot be levied Sec.273B of the Act lays down that the penalty shall not be imposed in respect of a default relating to the provisions mentioned therein if the person or the assessee concerned can show that there was a reasonable cause for default in question. Section 272A(2)(k) falls within the ambit of sec.273B of the Act. It is observed that the AO has levied the penalty in a routine manner without bringing the facts on record to establish that the appellant committed the default without a reasonable cause. - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against penalty imposed under section 272A(2)(k) of the Income Tax Act, 1961 for Assessment Year 2012-13.

Analysis:

Issue 1: Challenge to Penalty Imposed under Section 272A(2)(k)
The assessee contested the penalty of Rs. 1,72,000 levied under section 272A(2)(k) for delay in filing TDS returns, citing reasons of inadequate staff and facilities. The AO disregarded these reasons and imposed the penalty. The CIT(A) upheld the penalty, stating that the appellant failed to provide a reasonable cause for the delay. The AR emphasized staff shortage and location issues, but the CIT(A) found these reasons insufficient as the appellant had not shown a valid cause for the delay. The CIT(A) highlighted that the delay caused hardship to taxpayers and the government. The Tribunal noted a similar case where the penalty was deleted due to financial constraints, leading to the deletion of the penalty in the present case as well.

Issue 2: Interpretation of Section 273B
The CIT(A) considered the applicability of Section 273B, which provides for a reasonable cause exemption from penalties under section 272A(2)(k). The CIT(A) observed that the AO incorrectly applied Section 273B, which covers section 272A(2)(k). The AR's defense of staff shortage and location challenges did not qualify as reasonable causes under Section 273B. The Tribunal, following precedent, emphasized that financial constraints could constitute a reasonable cause for delayed compliance, leading to the deletion of the penalty.

Issue 3: Judicial Precedents and Reasonable Cause
The Tribunal referenced judicial decisions where penalties were deleted due to financial constraints and timely payment of TDS with interest. These cases highlighted that no loss to the revenue justified the deletion of penalties under section 272A(2)(k). The Tribunal applied these precedents to the current case, emphasizing that financial difficulties could be a reasonable cause for late filing. By following these precedents, the Tribunal reversed the lower authorities' decision and allowed the appeal, deleting the penalty imposed.

In conclusion, the Tribunal allowed the appeal, reversing the penalty imposed under section 272A(2)(k) for the Assessment Year 2012-13, based on the grounds of financial constraints constituting a reasonable cause for the delay in filing TDS returns.