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Mahaveer Prasad Jain v. Income Tax Officer, Tds Kota .
Factual and Procedural Background
This appeal arises from the order of the learned CIT(A), Kota dated 31.03.2016 for AY 2011-12, wherein the assessee challenged the levy of a penalty of Rs. 41,500/- under section 272A(2)(k) of the Income Tax Act for late filing of the quarterly TDS statement for the 4th quarter of FY 2010-11. The assessee had deducted TDS on interest payment and was required to file the statement by 15.05.2011 but filed it belatedly on 14.07.2012. The Assessing Officer imposed the penalty after finding no reasonable cause for the delay. The CIT(A) confirmed the penalty. The appeal was initially dismissed in limine by a Coordinate Bench on 11.07.2017, which was later recalled on 03.08.2018, and the matter came before the present Bench for consideration.
Legal Issues Presented
- Whether the penalty under section 272A(2)(k) of the Income Tax Act can be sustained for the delayed filing of the quarterly TDS statement when the delay was due to the ill health of the accountant and technical difficulties related to the newly introduced e-filing system?
- Whether the provisions of section 273B providing for exemption from penalty on reasonable cause apply to the facts of this case?
- Whether the penalty was correctly levied under section 272A(2)(k) or should have been under section 272A(2)(c) for delay in filing the quarterly e-TDS return?
- Whether an undated order passed by the JCIT is valid and can sustain the penalty?
Arguments of the Parties
Appellant's Arguments
- The delay in filing the TDS return was due to the illness of the experienced accountant responsible for preparing the return, which constitutes a reasonable cause.
- The tax deducted was paid on time without any delay, and the TDS returns were filed voluntarily before any departmental notice.
- There was no malafide intention or deliberate delay; the default was technical or venial in nature and should not attract penalty automatically.
- Section 273B of the Act provides relief from penalty if reasonable cause is shown, and the expression “reasonable cause” should be interpreted liberally to advance justice.
- The introduction of e-filing in FY 2010-11 caused multiple technical difficulties, including 18 amendments and corrections to the software, making compliance challenging and constituting reasonable cause for delay.
- The order by JCIT was undated, sketchy, and lacked proper application of mind, rendering it invalid.
- The penalty was levied under an incorrect provision (section 272A(2)(k)) instead of section 272A(2)(c), which covers delay in filing quarterly e-TDS returns.
- Reliance was placed on the Tribunal decision in Royal Metals Printers Pvt Ltd vs Addl. CIT and Nisar Mehboob Alam Khan vs JCIT supporting the view that reasonable cause exempts penalty.
- Reference was made to the Tribunal decision in Argus Golden Traders Ltd. vs. JCIT regarding the correct section for penalty levy.
Respondent's Arguments
The opinion does not contain a detailed account of the parties' legal arguments from the respondent.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Royal Metals Printers Pvt Ltd vs Addl. CIT (ITA NO.6840/MUM/2008) | Reasonable cause exempts penalty under section 272A where delay is technical or venial. | Supported the assessee’s argument that reasonable cause should be liberally construed to avoid penalty for technical delays. |
| Nisar Mehboob Alam Khan vs JCIT (ITA No.2026/PUN/2016) | Reasonable cause including technical difficulties with e-filing system can exempt penalty under section 272A. | Applied as binding precedent to hold that technical glitches and amendments in e-TDS system constituted reasonable cause for delay. |
| Argus Golden Traders Ltd. vs. JCIT, Jaipur | Clarification on the correct section under which penalty for delay in filing e-TDS returns should be levied. | Supported the contention that penalty under section 272A(2)(c) applies to delay in e-TDS filing, not section 272A(2)(k). |
| M/s. Ashirwad Complex Vs. JCIT (TDS) | Penalty under section 272A(2)(k) is leviable only for delay in payment of TDS, not for delay in filing returns post payment. | Reinforced the view that penalty period should be restricted from date of payment of TDS to date of filing returns. |
Court's Reasoning and Analysis
The Court noted that the issue of penalty for delayed filing of e-TDS returns in the context of newly introduced e-filing requirements and technical difficulties has been considered extensively by a Coordinate Bench in the case of Nisar Mehboob Alam Khan vs JCIT. The Court accepted that the delay was caused by reasonable causes, including the illness of the accountant and the teething troubles of the new e-filing system, which underwent multiple amendments and corrections. The Court emphasized that the authorities have the duty to provide an accessible platform for compliance and that failure to do so should be liberally construed as reasonable cause under section 273B of the Act, exempting the assessee from penalty. The Court also observed that penalty under section 272A(2)(k) is leviable only where there is delay in payment of TDS, whereas delay in filing e-TDS returns falls under section 272A(2)(c). The undated and sketchy order of the JCIT was implicitly found insufficient to sustain the penalty. Applying these principles to the facts, the Court found the assessee’s explanation credible and held that the penalty was not justified.
Holding and Implications
The appeal is allowed and the penalty of Rs. 41,500/- levied under section 272A(2)(k) is deleted.
The direct effect of the decision is the relief granted to the assessee by quashing the penalty for delayed filing of the quarterly TDS return for FY 2010-11. The Court’s ruling clarifies that reasonable cause, including technical difficulties and illness of responsible personnel, exempts penalty under section 273B. The decision aligns with prior Tribunal rulings but does not establish a new precedent beyond the facts considered.
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Kota dated 31.03.2016 for AY 2011-12 wherein the assessee has challenged the sustenance of penalty of Rs. 41,500/- levied u/s 272A(2)(k) of the Act.
2. This appeal was earlier dismissed in limine by the Co-ordinate Bench vide its order dated 11.07.2017. Subsequently, the Co-ordinate Bench vide its order dated 03.08.2018 has recalled the said appeal and now, the appeal has come up before this Bench.
3. Briefly stated the facts of the case are that the assessee has deducted an amount of Rs. 41,500/- towards TDS on interest payment and was required to file the quarterly statement for the 4th quarter of the F.Y 2010-11 u/s 200(3) on or before 15.05.2011. However, the said statement was later on filed on 14.07.2012. Given the delay in filing of the quarterly statement, a notice was ITA No. 649/JP/2016 Shri Mahaveer Prasad Jain, Tonk Vs. ITO TDS, Kota issued as to why penalty u/s 272A(2)(k) should not be imposed for late filing of the quarterly statement by the assessee. In response, the assessee submitted that his accountant was ill at the relevant time so that he could not file the return in time. The assessee also submitted that the default is purely of a technical or venial nature and the delay should be condoned. However, the reply so filed by the assessee was not found acceptable to the Assessing Officer who held that there was no reasonable cause which prevented him from filing TDS statement in time and an amount equivalent to TDS of Rs. 41,500/- was levied as penalty u/s 272A(2)(k) of the Act. On appeal, the ld. CIT(A) has confirmed the said levy of penalty and now, the assessee is in appeal before
4. During the course of hearing, the ld. AR submitted that the CIT(A) has erred in confirming the penalty of Rs. 41,500/- u/s 272 A(2)(K). In this regard, it was submitted that the accountant who was having experience in preparing of data for TDS return was ill therefore we could not prepared the return in time. Although tax was paid on 30.04.2011 which was fully in time and there was not a single day delay in payment of tax. We have filed out TDS returns before issue of any notice by the department. There was no malafide intention on the part of assessee. Neither in previous years nor in succeeding year, no penalty was imposed for filling of TDS return. The delay was neither intentional nor deliberate. The delay was due to reasonable cause. Section 273B of the Act provides an exception to the rigid provisions of section 272A of the Act by proving that in the event of an assessee providing a reasonable cause for the failure, penalty shall not be imposed by the authorities concerned. The expression reasonable cause requires to be interpreted liberally in a fair and reasonable manner so as to advance the cause of justice. We have replied time to time to all the notices issued by Department. The JCIT is wrong to say that we have not replied the notices. We do not understand why illness of ITA No. 649/JP/2016 Shri Mahaveer Prasad Jain, Tonk Vs. ITO TDS, Kota accountant was not reasonable cause and nothing is mentioned by CIT(A) in his order in the matter of illness of accountant. The case referred by CIT(A) is different from us because in that case reasonable cause was not perfect. We have filed the return voluntarily before any notice by department and tax was paid in time. There was no loss to department because department gives credit of tax after payment of tax and filled of return. The default if any was of technical or venial nature for which penalty should not be levied automatically. The view is supported by the decision in case of Royal Metals Printers Pvt ltd Vs Addl.ClT (ITA NO.6840/MUM/2008 decided on January 20 2010).
5. It was further submitted that amendment was made in Income tax Rules 2010 and was applicable for the financial year 2010-11. Since e-return was introduced in the said financial year, there was time and again amendment/ correction in order to make system of filled TDS return user friendly. It is quite natural that the change of software would lead to various teething troubles which needs to be addressed and plugged at the initial stage itself so that new module could function smoothly later on. It is well known that migration to a new software would certainly result in lot of issues on account of heads etc. which consumes considerable time for addressing the same. Hence assessee was reasonably prevented from filling its quarterly TDS statement for the 4th quarter. The delay was due to reason beyond the control of the assessee. There were 18 amendments and correction in this regard. The software was not user friendly and required amendment at the end of the government itself from time to time and the compliance being a complex procedure. Therefore as per section 273B it was also a reasonable cause for delay in filled of TDS return. In support, reliance was placed on Tribunal decision in case of Nisar Mehboob Alam Khan vs JCIT (ITA No.2026/PUN/2016 dated 16.10.2018). ITA No. 649/JP/2016 Shri Mahaveer Prasad Jain, Tonk Vs. ITO TDS, Kota
6. It was further submitted that the order passed by JCIT is undated which does not show when the order was passed. The undated order is invalid order and it was passed without applying mind and order is sketchy order and have no value in the eyes of law.
7. It was further submitted that the penalty in our case is levied u/s 272A(2)(K) of the Act which talks about the failure to deliver a copy of statement within the time specified in section 200(3) or proviso to section 206C of the Act. In this case, there is no such factual situation rather there is a delay in filling of quarterly e-TDS return which is covered under the provisions of section 272A(2)(C) of the Act. The learned Assessing officer is not clear under which section penalty is leviable. The same view is supported by the decision of ITAT Jaipur Bench Jaipur as held in the case of Argus Golden Traders Ltd. vs. JCIT Jaipur.
8. The ld DR is heard who has relied on the findings of the lower authorities.
9. Heard both the parties and perused the material available on record. We find that similar issue has been dealt at length by the Coordinate Bench in case of Nisar Mehboob Alam Khan vs JCIT (supra) wherein it was held as under:
28. On the other hand, various Benches of Tribunal have time and again held that where there was case of reasonableness, there was no merit in levying the penalty under section 272A(2)(k) of the Act. Thus, in order to adjudicate the issue before us, we accept the case of reasonable cause as relevant to section 273B of the Act put up by the assessee in the respective cases in the appeals before us, which admittedly relate to different quarters of assessment year 2011-12. Where for the first time, ITA No. 649/JP/2016 Shri Mahaveer Prasad Jain, Tonk Vs. ITO TDS, Kota there was requirement of e-TDS furnishing of TDS statement and since there were certain complications in e-filing of TDS returns because of system failure, which admittedly, was amended 18 times by the Department, the delay in furnishing the said returns late could not be attributed to the assessee. The onus was upon the authorities to provide platform for easy compliance to newly introduced provisions of the Act. Where such facilities could not be provided by the authorities and the technical support not being available to small assessees, who are in appeal before us, then the delay in furnishing the e-TDS returns late should be liberally construed. Hence, there was practical difficulty on the part of assessee to comply with newly introduced requirement of e-TDS filing of TDS statements, being technical delay and not venial in nature, merits to be considered as reasonable cause for non levy of penalty as per the requirements of section 273B of the Act. We hold so. In this bunch of appeals, there are cases where the assessee has defaulted in not depositing tax deducted at source in time, in such cases, the returns were delayed because of default on behalf of the deductor. In such cases, penalty under section 272A(2)(k) of the Act is leviable. However, the same is to be restricted from the date of payment of TDS to the date of filing e-TDS statements since e-TDS statements cannot be filed without payment of TDS to the credit of Central Government. Similar ratio has been laid down by the Chandigarh Bench of Tribunal in M/s. Ashirwad Complex Vs. JCIT (TDS) (supra). Accordingly, we hold so.
10. In the instant case, the assessee has deducted the TDS on interest payment, however, there is a delay in filing of quarterly statement for the 4th Quarter of the financial year 2010-11. The assessee has explained the reasons for the delay is on account of ill-health of his accountant and secondly on account of e-filing provided for the first time during the financial year 2010-11 ITA No. 649/JP/2016 Shri Mahaveer Prasad Jain, Tonk Vs. ITO TDS, Kota and the frequent changes/amendments and updates to the filing software. Following the decision of the Coordinate Bench referred supra, we believe that there was a reasonable cause for delay in filing the quarterly statement for the financial year 2011-11 and the penalty so levied is hereby directed to be deleted. In the result, appeal of the assessee is allowed. Pronounced in the Open Court on 29/03/2019. Sd/- Sd/- fot; iky jko foe flag ;kno (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 29/03/2019 *Ganesh Kr. vkns'k dh izfrfyfi vxzsfkr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Mahaveer Prasad Jain, Tonk
2. izR;FkhZ@ The Respondent- ITO TDS, Kota
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 649/JP/2016} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar
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