TMI Blog2006 (9) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 272A(2)(c) of the Income-tax Act (Act) passed by the Additional Director of Income-tax (International Taxation). The brief facts borne out from the record are that the assessee filed its return under section 206 of the Income-tax Act in Form No. 27 for the financial year ending on 31-3-1998 on 30th June, 2000 which was due on 14-6-1998. Thus, there was a delay of 747 days in filing of the said return. With respect to the assessment year 1998-99, the return under section 206 was filed on 30-6-2000, whereas, it was due on 14-6-1999 and was late by 381 days. The Assessing Officer issued a show-cause notice in both these cases for levy of penalty under section 272A(2)(c) of the Income-tax Act and the assessee contended that the return could not be filed in time on account of non-payment of tax due to financial constraints. The Assessing Officer observed that similar default had been committed by the assessee in earlier years as well as in subsequent years and there was inordinate delay of 747 days in assessment year 1997-98 and delay of 381 days in assessment year 1998-99 in filing of the return. He, therefore, held that it is a fit case for levy of penalty and accordingly l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing of the return. The return was filed as and when the tax were deposited. The learned counsel for the assessee 'further contended that under section 206 no time limit was prescribed for filing of the return. It was simply stated in this section that it should be filed after the end of the financial year. Whereas, rules 36 to 37 deal with the time of filing of the return under section 206 in prescribed format. But, in the assessee's case rule 37A is applicable, according to which, return is to be filed within 14 days from the end of the quarter in Form No. 27. Rule 37A does not deal with the returns which are required to be filed under section 206 of the Income-tax Act. As such, for default under rule 37A, there is no provision for levying the penalty. Hence, the penalty levied under section 272A(2)(c) in the instant case is not sustainable in the eyes of law. 5. The learned counsel for the assessee further contended that before introduction of rule 37A with effect from 12-7-1988 there was only one rule i.e., rule 37, which dealt with the time and the prescribed form for filing of the return regarding TDS deducted at source in other cases. In that rule there was no specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation for filing the TDS return? We have carefully perused the relevant provisions of section 206 of the Income-tax Act and rules 37 and 37A of the Income-tax Rules. For the sake of reference, we prefer to reproduce the relevant portion of section 206 of the Income-tax Act and rules 37 and 37A of the Income-tax Rules. Section 206: Person deducting tax to furnish prescribed return(1) The prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax under the foregoing provisions of this Chapter shall, within the prescribed time after the end of each financial year, prepare and deliver or cause to be delivered to the prescribed income-tax authority or such other authority or agency as may be prescribed, such returns in such form and verified in such manner and setting forth such particulars as may be prescribed." Rule 37 : Prescribed returns regarding tax deducted at source under section 206-Every person, being a person responsible for deducting tax un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident or a resident but not ordinarily resident, or (ii) a company which is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends within India; shall send within fourteen days from the end of the quarter a statement in Form No. 27 to the Assessing Officer referred to in rule 36A:" 8. It is quite evident on bare perusal of section 206 that it simply requires a person deducting the tax at source to furnish certain TDS returns, after the end of each financial year, in such form and verified in such manner and within such time limit as may be prescribed. However, the mode, manner, form of verification and time limit for filing the TDS returns have been prescribed under the Income-tax Rules, 1962. There are two rules, namely, rule 37 and rule 37A, which prescribe the modalities in this behalf. Prior to insertion of rule 37A in the Income-tax Rules with effect from 12-4-1988, there was only one rule, namely, rule 37 prescribing the mode, manner and time limit for filing the TDS returns. Erstwhile rule 37 did not make any reference to section 206. However, with the insertion of rule 37A, rule 37 stood split in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to section 206 in rule 37A when such a reference is missing. We cannot supply the omission. Rather, the legislative policy is clear that it is only the returns mentioned in rule 37, which have been prescribed in terms of section 206. Ld. Authorised Representative for the assessee is, therefore, right in his submission that the assessee cannot be penalized for failure to furnish a quarterly return in terms of rule 37A as such return have not been prescribed with reference to section 206 of the Income- tax Act. Therefore, the person responsible for deducting the tax on source cannot be penalized under section 272A(2)(c) for default in filing the previous return under rule 37A as such default is not committed with reference to the TDS return required to be filed in terms of section 206 of the Income-tax Act. If it had been the intention of the Legislature to bring the defaulter falling under rule 37A within the purview of section 206 it could have made similar reference to section 206 in rule 37A as a reference has been made to section 206 in rule 37. In our view no penalty can be levied for default in filing quarterly returns under rule 37A as such returns have not been prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminal proceedings should not be initiated to levy the penalty. We, therefore, set aside the Order of the CIT(A) and delete the penalty. 12. The next issue raised by the assessee is with regard to the reasonable cause for non-filing of the return. In this regard, the assessee has filed the voluminous evidence to justify that he was under a financial constraint on account of which TDS was not deposited and return was not filed in time. We have also examined the prescribed form in which returns are to be filed and we find that in that form there is a specific column in which details of payment are to be mentioned and when the assessee was facing financial constraints and could not deposit the TDS, there was no purpose of filing the return. In support of this proposition, the learned counsel for the assessee has placed reliance upon the following judgments: 1. R. Karuppaswamy v. Second ITO [1980] 9 TTJ (Mad.) 442. 2. Third ITO v. Bombay Cable Co. (P.) Ltd [1981] 11 TTJ (Bom.) 386. 12.1 The assessee has also filed the series of documents to establish that he was under financial constraints at the relevant point of time. We have carefully perused the judgments referred to by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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