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Branch Manager (TDS), UCO Bank v. Additional Commissioner of Income-tax (TDS)
Structured Summary of the Tribunal Order
Factual and Procedural Background
This appeal arises from a penalty order dated January 6, 2011, levied by the Additional Commissioner of Income-tax (TDS), Bhubaneswar, under section 272A(2)(k) of the Income-tax Act, 1961, amounting to Rs. 3,00,900. The assessee is a nationalised bank branch (a rural branch) which filed its TDS filing through its Balasore branch and via an authorised franchise/NSDL service provider. The assessee's explanation was that tax deducted at source was deposited on time, but e-filing of quarterly TDS statements was delayed on account of staff shortages, distances to the filing centre, incomplete availability of deductees' PANs, and administrative/technical difficulties.
The Assistant Commissioner of Income-tax (TDS) levied the penalty after receiving a proposal from the Income-tax Officer (TDS), Balasore. The assessee's appeal to the Commissioner of Income-tax (Appeals) was dismissed (an ex parte order dated December 24, 2012 is referenced in the grounds), and the assessee then appealed to the Tribunal. The Tribunal heard submissions from both sides and considered earlier Tribunal and judicial decisions dealing with similar facts.
Legal Issues Presented
- Whether the ex parte order passed by the Commissioner of Income-tax (Appeals) dated December 24, 2012 (in Appeal No. 0569/2010) was illegal or without basis.
- Whether the penalty imposed under section 272A(2)(k) of the Income-tax Act, 1961 (dated January 6, 2011 and amounting to Rs. 3,00,900) was legal and justified.
- Whether the Assistant Commissioner of Income-tax (TDS) and the Commissioner of Income-tax (Appeals) properly considered the assessee's explanation (including facts such as tax deposited on time, staff shortages, absence of PANs) before levying/confirming the penalty.
- Whether a quasi-criminal view requiring mens rea applies such that, given taxes were deposited and there was no mala fide intention, penalty should not have been imposed.
Arguments of the Parties
Appellant's (Assessee's) Arguments
- The assessee explained that it is a rural branch filing through the Balasore branch and that taxes deducted at source were deposited on the due date; delays related only to e-filing of the quarterly statements due to staff shortage, heavy workload, distance, and lack of PAN details for deductees.
- The branch manager who provided much of the explanation had joined only two months prior to the show-cause notice; earlier managers (who were present when defaults occurred) could not file returns in time for the stated reasons.
- The defaults were bona fide, technical/administrative (venial) breaches rather than deliberate or wilful; there was no mala fide intention, fraud, or wilful neglect, and no loss to revenue because tax amounts were deposited.
- Penalty proceedings are quasi-criminal and normally require evidence of deliberate default, contumacious or dishonest conduct, or conscious disregard of obligations; mere lawful power to impose penalty does not mandate its imposition (relied on Hindustan Steel Ltd. v. State of Orissa).
- The authorities failed to judicially consider the assessee's explanations and to record reasoned conclusions on the points raised (relying on A. Venkata Rao v. Commissioner of Income-Tax for the duty to examine points and state reasons).
- The assessee filed the quarterly TDS returns (statements) subsequently and the returns/statements were uploaded by the franchise on a single day for multiple quarters; this demonstrates bona fides and technical reliance on third-party/departmental processes.
- Relied on earlier Tribunal decisions (Branch Manager, Punjab National Bank v. Addl. CIT and Garrision Engg (I) R&D v. Addl. CIT (TDS)) where penalties in similar circumstances were deleted.
Respondent's (Department's) Arguments
- The Department submitted that penalty was levy-worthy because purported returns were not filed in accordance with section 200(3) up to the date of the penalty order, and the assessee's asserted inability due to staff shortage or incompetence is not a legally acknowledged excuse.
- The Department pointed out that e-filing rules had been in place since 2005 and the defaults related to the financial year 2008-09, so the assessee ought to have complied when the requirement existed.
- The Department relied on the Assistant Commissioner's noting and the proposal from the Income-tax Officer (TDS), Balasore, and supported the Commissioner of Income-tax (Appeals) in confirming the penalty and finding that section 273 (consequences/exemptions) was not applicable on the facts.
- The Department referred to rule 31A of the Income-tax Rules (proviso) as indicating penalty was ripe for levy in the circumstances.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court in This Opinion |
|---|---|---|
| Hindustan Steel Ltd. v. State Of Orissa [1972] 83 ITR 26 (SC) | Principle that penalty for failure to carry out a statutory obligation is quasi-criminal; bona fide breach cannot lead to penalty. | The Tribunal relied on this principle to support the view that penalty should not be imposed where breaches are bona fide/technical and there is no wilful or mala fide conduct. |
| A. Venkata Rao v. Commissioner Of Income-Tax [1993] 203 ITR 64/71 Taxman 577 (Orissa) | Authority's duty to examine points raised by parties and record definite conclusions with reasons; failure to do so renders order illegal. | The assessee invoked this decision to argue the penalty order was a nullity because the Assistant Commissioner did not properly consider and record reasons on the explanations; the Tribunal accepted inadequacy of consideration as part of its analysis. |
| Branch Manager, Punjab National Bank v. Addl. CIT [2011] 16 taxmann.com 318 / [2012] 52 SOT 142 (Luck.) | Used by the assessee as an instance where penalty was deleted in similar factual circumstances. | Cited by the assessee; the Tribunal noted similar decisions and used them as part of the body of precedents supporting deletion of penalty in cases of technical delay and bona fide conduct. |
| Garrision Engg (I) R&D, Chandipur, Balasore v. Addl. CIT (TDS), ITA No. 69/CTK/2013 | Tribunal decision deleting penalty under section 272A(2)(k) on facts similar to the present case. | The Tribunal expressly relied on this decision (and stated they had occasion to deal with the same issue) and followed its reasoning to cancel the impugned penalty in the present appeal. |
| CIT v. Superintending Engineer [2003] 260 ITR 641 (Rajasthan) | Authority supportive of the proposition that bona fide/technical breaches may not attract penalty. | Referenced within the Tribunal's consolidated discussion of similar authorities which together supported cancellation of penalties for technical delays and bona fide reasons. |
| Royal Metal Printers Pvt. Ltd. v. Addl. CIT [2010] 37 SOT 139 (Mum) (UO) | Decision cited for the position that technical/venial breaches supported by reasonable cause do not attract penalty under section 272A(2). | Included among the authorities the Tribunal considered in its consolidated reasoning that technical delays and dependence on third-party filing mechanisms can constitute reasonable cause to negate penalty. |
Court's Reasoning and Analysis
The Tribunal considered the record, the assessee's explanation, and earlier decisions addressing similar circumstances. The reasoning proceeded along these main lines:
- The Tribunal observed that the penalty was levied in a largely mechanical manner on the basis of a proposal from the Income-tax Officer (TDS), Balasore, without adequate enquiry into whether banks were required to file in the particular manner assumed by the Department and without proper consideration of the assessee's explanation.
- The Tribunal noted the assessee produced purported quarterly statements uploaded by the authorised franchise/NSDL on November 27, 2009 for all four quarters on a single day. Those uploads—made without PANs in some cases—demonstrated that the information could be uploaded and later reconciled by the Department's systems (Form AS-26 could be updated when PANs were obtained).
- The Tribunal accepted the proposition, supported by prior Tribunal decisions, that: (a) penalties under section 272A(2)(k) should not be levied in a routine or mechanical manner; (b) a bona fide, technical, or venial breach, especially where tax deducted has been deposited and there is no loss to revenue, does not attract penalty; and (c) many deductors depended upon third-party/department-designated service providers for e-filing and lacked the technical competence to file directly.
- The Tribunal reproduced and relied on a consolidated reasoning from a group of cases which emphasized that the Department itself had been instrumental in prescribing e-filing processes and that deductors were dependent on external service providers; in that context delays were often administrative/technical and not attributable to wilful default. That consolidated reasoning also invoked Hindustan Steel (supra) to stress the need for mens rea or contumacious conduct to justify quasi-criminal penalties.
- Given those factual findings (tax deposited, statements eventually uploaded, bona fide explanations), and the line of precedents where penalties were deleted on similar facts, the Tribunal concluded the impugned penalty had not been justified and must be cancelled.
Holding and Implications
Holding: The Tribunal allowed the assessee's appeal and cancelled the penalty. The core decision can be stated as:
The penalty imposed under section 272A(2)(k) of the Income-tax Act, 1961 is cancelled and the assessee's appeal is allowed.
Implications:
- Direct effect on the parties: The specific penalty of Rs. 3,00,900 (levied on January 6, 2011) against the assessee was set aside and the appeal allowed.
- The Tribunal's decision follows and applies principles from earlier decisions that technical/administrative delays in e-filing, where tax deducted has been deposited and there is no loss to revenue and no mala fide or wilful default, do not justify imposition of penalty under section 272A(2)(k).
- The opinion does not purport to create a novel legal principle beyond aligning the result with existing authorities; its decision is expressly framed as consistent with prior orders (including Garrision Engg (I) R&D and a consolidated set of Tribunal orders) and applies those precedents to the present facts.
Result: Appeal allowed; impugned penalty cancelled.
ORDER
K. K. Gupta, Accountant Member - This appeal by the assessee raises the following grounds.
2. At the outset learned counsel for the assessee contended that the issue stands covered in favour of the assessee by various decisions of the Tribunal which have been brought on record for the consideration of penalty levied under section 272(2)(k). He submitted that the assessee is a nationalised bank. In compliance to the show-cause notice issued by the Assistant Commissioner of Income-tax (TDS), the assessee stated as follows :
"Ours is a rural branch and tax deducted at source filing is done by us through branch at Balasore. It is a distant place from Balasore. Tax deducted at source is deposited on due date. We personally go and file tax deducted at source at Balasore. This is a very busy branch and we have no adequate staff in comparison to the volume of business. Due to shortage of staff and heavy pressure of work, sometimes delay occurs in filing the e-tax deducted at source within the due date. More so, the permanent account numbers of the deductees are not furnished by our business constituents/on whose behalf tax deducted at source is made. For lack of information of permanent account numbers the filing of return is also delayed".
3. Further, the branch manager explained that he had joined service only two months back. Due to different problems like the one stated above, the then managers were unable to file return, within the due date. The challans are deposited through their Balasore branch in time. Thus the circumstances under which the default occurred were explained. But though the returns are not filed in time, the tax deducted have been deposited. The Assistant Commissioner of Income-tax (TDS) did not consider the above explanation and levied the impugned penalty under section 272(2)(k) of the Income-tax Act, 1961.
4. Aggrieved the assessee appealed before the first appellate authority, who having confirmed the same, the assessee is in appeal before the Tribunal.
5. Learned counsel for the assessee reiterated the submissions as were made before the authorities below by submitting that though ignorance of law is of no excuse, still the actual fact is that, they may it be bankers or Government officers, the people or the employees, are still in the learning stage so far as computerised system of filing is concerned and the e-banking services have not been fully developed. Staffs are yet to be acquainted with the provisions of the income-tax laws vis-a-vis the computerised system, that too in rural areas where it is under developed. The default is not deliberate or intentional there is no mala fide intention or taint in it. In the matters of penalty proceeding "mens rea" has always to be taken into consideration. Here in this case there is no element of fraud or wilful neglect. More so, the present branch manager was not there when the default was committed. Notice for show-cause should have been made to the then branch manager, who could explain the default. It is no doubt a bona fide mistake. It is a settled law that an order imposing penalty for failure to carry out a statutory obligation is result of a quasi criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of its obligation. Penalty will not be levied merely because it is lawful to do so. [Hindustan Steel Ltd. v. State Of Orissa†. [1972] 83 ITR 26 (SC) ]. Learned counsel for the assessee submitted that the provision of the income-tax law in section 272A(2)(k) of the Income-tax Act, 1961 is so much complicated with so many provisions that it is very difficult to understand even for a person professionally dealing with it. From a bare reading of the penalty order, it is apparent that though the learned Additional Commissioner of Income-tax (TDS), Bhubaneswar has mentioned that deductor's submission has been carefully considered but in fact he has not considered at all. It is settled law that the authority is duty bound to examine the points raised by the parties record definite conclusions of each one of them. It has to indicate reasons in support of its conclusions (A. Venkata Rao v. Commissioner Of Income-Tax. [1993] 203 ITR 64/71 Taxman 577 (Orissa) . Not doing so, his order is illegal and has become a nullity.
6. He continued that the assessee the petitioner has already filed the default returns and therefore the matter has been regularised. The amount of tax deducted at source due has already been deposited with the Central Government treasury account on due date. Learned counsel for the assessee contended that it is a matter concerning a nationalised bank and nobody's personal affairs are involved. The non-compliance to the statutory obligation was not with any mala fide intention or taint. Law is well-settled that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding. Therefore, penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will also not be levied only because it is lawful to do so Hindustan Steel Ltd. (supra). In view of the above, learned counsel for the assessee submitted that the assessee being a nationalised bank the question of any such mala fides does not arise. Further, he submitted that the assessee could not collect the details of permanent account numbers for all the deductees. There are only technical breaches. The assessee did not derive any benefit whatsoever by not filing the quarterly tax deducted at source return in time as the amount of tax deducted at source was duly deposited in the Government treasury to the credit of the Government. In view of the above, he contended that the Act of the assessee cannot be said to be intentional and wilful and therefore, penalty should not have been levied because the assessee was prevented by sufficient cause. Non filing of statement does not result in any revenue loss.
7. Concluding, learned counsel for the assessee submitted that under similar circumstances penalty has been deleted. He relied on the following decisions :
8. Learned counsel for the assessee prayed for cancellation of the impugned penalty levied under section 272(2)(k) of the Income-tax Act. The learned Departmental representative opposed the contention of the learned counsel for the assessee. He submitted that as per the noting for levy of penalty under section 272A(2)(k), the Assistant Commissioner of Income-tax (TDS) had received information from the Income-tax Officer (TDS), Balasore pressing initiation of penalty in sofaras he has levied penalty till the date of the penalty order when no purported returns in accordance with the provisions of section 200(3) had been filed which attracts penalty not because the purported assessee has tried to state its inability due to shortage of staff or incompetence to file such return. The law does not acknowledge such defaults in sofaras the rules for such e-filing was made in 2005 and the matter relating to the financial year 2008-09 ought to have been complied with when the order for levy of penalty is dated January 6, 2011. He fully supported the order of the learned Commissioner of Income-tax (Appeals) confirming the penalty in sofaras the learned Commissioner of Income-tax (Appeals) has taken into consideration that the assessee could not be considered under the provisions of section 273 as well on the facts and circumstances of the case.
9. We have heard the rival parties and perused the material available on record. On our careful consideration of the facts and circumstances of case as brought on record by the authorities below, we are inclined to find that the penalty has been levied unilaterally by the Assistant Commissioner of Income-tax (TDS) on the proposal of the Income-tax Officer (TDS), Balasore, who has not bothered to find out whether the banks are required to file such statements in sofaras he has computed the penalty at Rs. 100 per day whether the amount was equal to or more than the tax deducted at source which amount was to be penalised in accordance with the provisions of the said section. Learned counsel for the assessee before us has produced the purported statements filed under section 200(3) for the impugned financial year which have been uploaded by the franchise on November 27, 2009 on a single day for all the four quarters indicating that the particulars reported by the deductor were uploaded even without obtaining the permanent account numbers of the deductees. In other words, it has been established that the contention of the Department to correlate the deductees claim vis-a-vis the information submitted by the assessee under the provisions of section 272(2)(k) were to be relayed to the Income-tax Officer (TDS), Balasore as submitted by the learned Departmental representative. It was automatic therefore the basic requirement of uploading was available on Form AS-26 which changed in accordance with the permanent account numbers obtained at any point of time was known to the Department when the delay in filing such statements was in relation to the levy of penalty. We had occasions to deal with such similar issue in the case of Garision Engineer (I) R & D (supra) 2013, wherein the penalty levied under section 272A(2)(k) was deleted. We have also decided a group of cases of different assessees in the consolidated order passed in I. T. A. Nos. 111, 97, 86, 87, 88, 75 and 67/CTK/2013, the relevant portion of which is reproduced below :
"3. We have heard the contentions of the rival parties at length. We do find that the penalty so levied by the respective Assessing Officers and confirmed by the learned Commissioner of Income-tax (Appeals) appears to be leaning more on holding the assessees in default for such penalty as a mechanical/automatic levy in sofaras it is the Department itself, who has insisted the e-filing of such returns as late as making the respective assessees literate about the data to be uploaded on the basis of tax deducted at source already given credit to by the Income-tax Department on the basis of tax deducted at source certificates furnished by the respective assessees namely the deductees. The bona fide is established beyond doubt when the very fact that the quarterly returns for more than four quarters and less than eight quarters were filed simultaneously on the same date when assuming but not accepting that the assessee in default become suddenly computer literate. We have also considered the submissions of the learned Departmental representative that the filing of quarterly statement was in favour of the assessee on the basic connotation that the deductees would only be given credit to such deduction of tax at source once the e-filing by the deductor was on-time not requiring penalty at Rs. 100 per day as have been put forth by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) indicating that the provisions of such default is liberal to the extent that the amount so deducted and credited to the Government account was not to be more than the penalty so levied. This clearly indicates that the case laws as submitted by learned counsel for the assessees before us indicate that there is no loss to the Revenue for attracting levy of such penalty. The Income-tax Appellate Tribunal, Cuttack Bench, in the case cited above, had clearly, held that once the amount is deducted by identifying the deductee it was on the basis of obtaining the permanent account number of the deductee without which the information could not be uploaded in the electronic media which software was only available to the franchisees outsourced by the Department or the NSDL being the apex nodal agency. The learned Departmental representative has insisted that the proviso to rule 31A of the Income-tax Rules clearly indicate that the penalty was ripe for levy not because of the insistence of the Department on the respective assessees to e-file it on a particular date for calculating number of days the default continues. We are unable to consider the proposition of the learned Departmental representative in sofaras the Department itself was handicapped as the bona fide of the assessees has been established in the negative way as they would have filed the hardcopy of the quarterly statements which the Department refused to acknowledge. Therefore, the computer generated number for acknowledging such receipt of such statements was not in the hands of the assessees in sofaras the generation of that number would have never occurred till such time the permanent account numbers and the information available on AS-26 would have been tallied by the computer system itself. We have been submitted that it was not the case that the assessees were in default not being computer literate their principal officers have been held responsible for such late filing of the quarterly statements ; it was an administrative glitch. It was not in the interest of the Government employee to hold back the information which they have already gathered in sofaras they are now being governed by the computer which software has its own filters for accepting the quarterly statements for which the assessees in default have not maintained any record to establish that efforts were made by them to reduce the time delay in filing such statements. Concluding, we observe that it is only a question of delayed filing of the e-tax deducted at source quarterly return, which was entrusted to an authorised service provider and the delay has occurred unintentionally. The assessees deductors are law compliant and the delay occurred only due to the reason that the assessees deductors are dependent on information of tax deducted at source and its deposit from the sub-treasury of the Government and filing of e-return through the designated service provider of the Income-tax Department. The assessees deductors have no technical competency to file the return by themselves without external aid. The assessees are also not competent to do so by themselves as per rule 37B and "filing of return of tax deducted at source" scheme 2003, which requires the submission of quarterly statement through NSDL or other approved agencies, i.e., third party, not under the control of the assessees. There is neither any wilful negligence nor any mala fide on the part of the assessees in the matter of compliance and the delay was due to reasonable cause, the default being beyond the control of the assessees deductors. It is at best a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the assessee is not liable to Act in the manner prescribed by the statute. The penalty under section 272(A)(2) cannot be levied in a routine manner. Law is well-settled that a bona fide breach cannot lead to a penalty under section 272(A) [Hindustan Steel Ltd. v. State Of Orissa†. [1972] 83 ITR 26 (SC) ]. In the present case of the respective assessees either Government bodies or aided by the Government, or public office and since the tax deduction and payment are made by treasury, there is undisputedly no default. There arises no reason for non-filing of tax deducted at source return with an intentional Act or wilful Act as to attract a quasi-criminal imposition of penalty. The assessees have relied on the decisions of the honourable High Court of Rajasthan in the case of CIT v. Superintending Engineer [2003] 260 ITR 641 and the decision of the Income-tax Appellate Tribunal Mumbai Bench in the case of Royal Metal Printers Pvt. Ltd. v. Addl. CIT [2010] 37 SOT 139 (Mum) (UO) and the decision of the Income-tax Appellate Tribunal, Cuttack Bench in the case of Garrision Engineer (I) R&D, Chandipur, Balasore v. Addl. CIT (TDS), ITA No. 69/ CTK/2013 Bhubaneswar (supra), wherein it has been clearly held that for such technical or venial breach supported by reasonable cause, penalty under section 272(A)(2) is not leviable and imposition of penalty is not justified for the reason that it was for the first time the requirement to convert the hardcopy into softcopy was to be learnt by respective Government DDOs from the Department officials. There is reasonable cause for delay in filing E-TDS return under section 273B. Considering the facts and circumstances of the cases in its entirety, we are of the considered view that the penalty so levied in the case of the respective assessees are not all justified. We, therefore, cancel the penalty levied under section 272A(2)(k) for the respective assessees for the respective assessment years as captioned in the cause title of this order by allowing the appeals under consideration. In consequence thereof, the respective stay petitions become infructuous."
10. Consistent with the view taken therein on very much similar facts and circumstances as are in the present case at hand, we hold that the impugned penalty levied under section 272A(2)(k) against the assessee is not justified and as such we cancel the same by allowing the appeal of the assessee.
11. In the result, the appeal of the assessee is allowed.
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