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Central Scientific I... v. Commissioner Of Inco...
Judgment Summary: Ajay Kumar Mittal, J.
Factual and Procedural Background
This order disposes of a bundle of three appeals (ITA Nos. 421, 423 & 424 of 2015) consolidated because the legal issue was identical. The facts are extracted from ITA No. 421 of 2015.
The assessee (appellant) preferred ITA No. 421 of 2015 under Section 260A of the Income Tax Act, 1961 against the Tribunal's order dated 30.4.2015 in ITA No. 54/Chandi/2015 for assessment year 2009-2010. The dispute arose because the assessee filed Tax Deducted at Source (TDS) statements (Form 26Q) very late for the four quarters of the financial year 2008-09: the returns for the first three quarters were filed on 10.05.2013 and for the fourth quarter on 13.05.2013, although the amounts deducted had been deposited with the Government in time.
The Joint Commissioner of Income Tax (TDS) issued a show cause notice dated 24.9.2013 proposing penalty under Section 272A(2)(k). By order dated 21.10.2013 the respondent imposed penalty totaling Rs. 4,84,945/-. The CIT(A) affirmed the penalty by order dated 31.10.2014. The Tribunal dismissed the appeal on 30.4.2015. The appellant challenged those decisions before the High Court.
Legal Issues Presented
- Whether the impugned orders (Annexures A-1, A-2 and A-3) are legally sustainable?
- Whether the ITAT was legally justified in upholding the penalty of Rs. 4,84,945/- under Section 272A(2)(k) of the Income Tax Act for technical default in filing returns late when the tax was deducted and deposited in time and requisite forms were issued to the deductee?
Arguments of the Parties
Appellant's Arguments
- The penalty under Section 272A(2)(k) was unwarranted because the TDS statutory requirements were substantively complied with: tax was deducted and deposited within time and the requisite certificates/forms were issued to deductees.
- Reliance was placed on Section 200(3) of the Act and Rule 31A of the Income Tax Rules, and it was contended that there was a reasonable cause for delay within the meaning of Section 273B of the Act.
- The theory of "no loss of revenue" was advanced: since tax was deducted and deposited, there was no revenue loss and thus the penalty should not be exigible.
- Reliance was placed on earlier judicial decisions (Commissioner Of Income-Tax (Tds) v. Executive Engineer; HMT Ltd., Tractors Division v. Commissioner of Income Tax; Commissioner Of Income-Tax v. Deputy Housing Commissioner, Rajasthan Housing Board; Commissioner Of Income-Tax v. Accounts Officer, Telecom) to the effect that penalty under Section 272A category provisions should not apply in the appellant's factual matrix.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner Of Income-Tax (Tds) v. Executive Engineer, (2010) 320 ITR 494 (P&H) | Relied upon by appellant to argue exemption from penalty (context: defaults relating to TDS compliance). | The Court observed that this decision was fact-specific, concerned with default in issuing certificates and related to Section 272A(2)(g); therefore, it did not help the appellant in the present facts and no advantage was available from that case. |
| HMT Ltd., Tractors Division v. Commissioner of Income Tax, (2005) 274 ITR 544 (P&H) | Relied upon by appellant to oppose levy of penalty under Section 272A category provisions. | The Court held the case was fact-specific (again concerning certificates/defaults) and not applicable to the present case; it did not assist the appellant. |
| Commissioner Of Income-Tax v. Deputy Housing Commissioner, Rajasthan Housing Board, (2004) 265 ITR 686 (Raj.) | Relied upon by appellant (as authority for relief on facts relating to TDS procedural defaults). | The Court recorded that the Rajasthan High Court's pronouncement was based on its individual factual matrix and thus did not come to the relief of the appellant in this case. |
| Commissioner Of Income-Tax v. Accounts Officer, Telecom, Telecom (2006) 281 ITR 302 (All) | Relied upon by appellant for the proposition that penalty might not be exigible in certain factual situations. | The Court noted the Allahabad High Court decision was fact-specific and did not assist the appellant here. |
| Hindustan Steel Ltd. v. State Of Orissa, (1972) 83 ITR 26 (SC) | Invoked in the context of comparison with other penal provisions or precedents (the opinion mentions it while discussing applicability). | The Court stated that the law enunciated in Hindustan Steel Ltd. has no applicability to the present case (explicitly rejected its applicability). |
Court's Reasoning and Analysis
The Court first identified and quoted the relevant statutory provisions: Section 200(3) (requiring preparation and delivery of prescribed TDS statements after paying deducted tax), the Rule 31A(2) schedule of due dates for quarterly TDS statements (Form No. 26Q), and Section 272A(2)(k) (penalty for failure to deliver the statement within the specified time — Rs.100 per day subject to a limit of the tax deductible/collectable).
The Court's step-by-step analysis proceeded as follows:
- Statutory scheme and purpose: The Court emphasized that Section 200(3) read with Rule 31A(2) imposes a distinct statutory obligation to file TDS statements by specified dates so that the department has the information necessary for cross-checking and proper assessment of tax for deductees. The penal provision in Section 272A(2)(k) enforces that filing obligation.
- On the "no loss of revenue" contention, the Court rejected the appellant's argument that absence of revenue loss precludes penalty. The Court explained that the penalty provision targets compliance and availability of information, not direct loss to the exchequer in the deductor's account. The Court quoted and approved the CIT(A)'s reasoning that a failure to file may not cause direct revenue loss to the deductor but can cause loss to deductees and frustrate the assessment process.
- The Court noted that the CIT(A)'s observations were approved by the Tribunal, and it further recorded factual evidence that a grievance letter had been received by the department indicating the assessee's deductions did not reflect in the deductee's 26AS; this supported the departmental interest in timely statements.
- On the recorded delay, the Court observed that the returns were filed nearly five years late (the precise delays per quarter were reproduced in the opinion) and that the assessee had not provided any plausible or sufficient explanation to attract the protection of Section 273B (reasonable cause). Consequently, the assessee could not escape penalty on that ground.
- Treatment of earlier authorities: The Court considered the appellant's reliance on prior cases (Executive Engineer; HMT Ltd.; Rajasthan Housing Board; Accounts Officer, Telecom) and held that those decisions were rendered on their own facts — in particular some dealt with defaults in issuing certificates (leading to conclusions under Section 272A(2)(g)) — and therefore were not applicable to the present factual matrix concerning late filing of TDS statements under Section 272A(2)(k). Hindustan Steel was also held inapplicable.
- Conclusion from concurrent findings: Given the statutory obligation, the substantial delay, the absence of a plausible explanation, and the concurrence of the CIT(A) and the Tribunal in treating the assessee as in default, the Court found no error or perversity warranting interference.
Holding and Implications
Final Holding: The appeals are dismissed and the impugned penalty orders imposing Rs. 4,84,945/- under Section 272A(2)(k) are upheld.
Implications:
- The direct effect is that the penalty levied by the Joint Commissioner (and affirmed by the CIT(A) and Tribunal) stands; the assessee's delay of approximately five years in filing TDS statements was not excused and Section 273B relief was denied on the facts.
- The Court treated the statutory obligation to file TDS statements as independent of any immediate loss to Government revenue; non-filing undermines administrative processes and can prejudice deductees, and therefore the penal provision is enforceable notwithstanding "no loss of revenue" arguments.
- The Court indicated that the earlier case law relied upon by the appellant was fact-specific and did not create a controlling rule to nullify the penalty in the present factual matrix. The Court found no substantial question of law arising for interference from the High Court; accordingly, the decision does not alter or extend legal principles beyond the application to these facts.
Ajay Kumar Mittal, J.:—
1. Whether the Reporters of the local papers may be allowed to see the judgment?
2. To be referred to the Reporters or not? YES
3. Whether the judgment should be reported in the Digest?
1. This order shall dispose of a bunch of three appeals bearing ITA Nos. 421, 423 and 424 of 2015 as according to learned counsel for the appellant, the issue involved is identical. For brevity, the facts are being extracted from ITA No. 421 of 2015.
2. ITA No. 421 of 2015 has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 30.4.2015 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 54/Chandi/2015, for the assessment year 2009-2010, claiming the following substantial questions of law:—
i) Whether in the facts and in the circumstances of the case, the orders (Annexure A-1), (Annexure A-2) and (Annexure A-3) are legally sustainable?
ii) Whether on the facts and in the circumstances of the case the ITAT is legally justified in law in upholding the order imposing penalty of Rs. 4,84,945/- u/s. 272A(2)(k) of the Income Tax Act for the assessment year 2009-2010 for technical default in filing returns late on the part of the appellant more so when the tax has been deducted, after deduction has been deposited in Government account in time and the requisite forms have been issued to the deductee as per the provisions of the Act?
3. Briefly stated, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee filed its return of Tax Deducted at Source (TDS) on 10.5.2013 in Form No. 26Q for the quarters ending on 30.6.2008, 30.9.2008 and 31.12.2008. The return for the 4 quarter ended on 31.3.2009 was filed on 13.5.2013. It had deducted TDS from the payments made under Section 194C of the Act amounting to Rs. 1,46,068/-, Rs. 35,377/- Rs. 1,90,192/- and Rs. 1,89,251/- in the 1, 2, 3 and 4 quarter respectively. The amount so deducted was deposited by the appellant with the Government well in time and there was no default either under Section 201 or Section 201(1A) of the Act. The Joint Commissioner of Income Tax (TDS) issued a show cause notice dated 24.9.2013 to the appellant for levy of penalty under Section 272A(2)(k) read with Section 274 of the Act. The appellant filed reply dated 7.10.2013 to the said show cause notice. Respondent No. 2 vide order dated 21.10.2013 (Annexure A-1) levied penalty of Rs. 4,84,945/-. Feeling aggrieved, the appellant filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”] who vide order dated 31.10.2014 (Annexure A-2) affirmed the penalty order and dismissed the appeal. Being dissatisfied, the appellant filed an appeal before the Tribunal. The Tribunal vide order dated 30.4.2015 (Annexure A-4) upheld the order of the CIT(A) and dismissed the appeal. Hence, the instant appeals.
4. Learned counsel for the appellant submitted that the penalty of Rs. 4,84,945/- levied under Section 272A(2)(k) of the Act was unwarranted. Section 200(3) of the Act and Rule 31A of the Income Tax Rules, 1962 (in short “the Rules”) were referred to by the learned counsel. It was also urged that there was reasonable cause within the meaning of Section 273B of the Act on the basis of which there was justification for delay in filing the TDS returns. Moreover, the TDS was deposited within time and, therefore, there was no loss of revenue. Relying upon the judgments of this Court in Commissioner Of Income-Tax (Tds) v. Executive Engineer, (2010) 320 ITR 494 (P&H); HMT Ltd., Tractors Division v. Commissioner of Income Tax (2005) 274 ITR 544 (P&H); Rajasthan High Court in Commissioner Of Income-Tax v. Deputy Housing Commissioner, Rajasthan Housing Board (2004) 265 ITR 686 (Raj.) and Allahabad High Court in Commissioner Of Income-Tax v. Accounts Officer, Telecom, Telecom (2006) 281 ITR 302 (All), it was urged that no penalty under Section 272A(k) of the Act was exigible.
5. After hearing learned counsel for the appellant, we find no merit in the appeals.
6. It would be expedient to refer to Section 200(3) of the Act which read thus:—
“Section 200(3)
Any person deducting any sum on or after the 1st day of April, 2005 in accordance with the forgoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of Section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income tax authority or the person authorized by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed.”
Section 200 incorporated in Chapter XVII of the Act deals with collection and recovery of tax and provides for various cases relating to deduction of tax at source. sub-section (3) of Section 200 of the Act was inserted by Finance (No. 2) Act, 2004 with effect from 1.4.2005. It provides for filing of the statements as prescribed thereunder after deduction of the TDS.
7. Rule 31(2) of the Rules, which is relevant for the decision of the controversy raised in the appeal, is in the following terms:—
“Rule 31A(2)
Statements referred to in sub-rule (1) for the quarter of the financial year ending with the date specified in column (2) of the Table below shall be furnished by the due date specified in the corresponding entry in column (3) of the said Table:—
1. Date of ending of the quarter - 30 June - Due date of the financial year - 15 July of the financial year.
2. Date of ending of the quarter - 30 September-Due date of the financial year - 15 October of the financial year.
3. Date of ending of the quarter - 31 December-Due date of the financial year - 15 January of the financial year.
4. Date of ending of the quarter - 31 March - Due date of the financial year - 15 May of the financial year immediately following the financial year in which deduction is made.”
Thus, TDS returns have to be filed in Form No. 26Q by the due dates mentioned in the aforesaid rule.
8. The controversy herein relates to levy of penalty under Section 272A(2)(k) of the Act. According to the aforesaid provision, penalty is imposable if any person fails to deliver or cause to be delivered a copy of the statement under sub-section (3) of Section 200 within the specified time. The quantum of penalty thereunder is a sum of one hundred rupees for every day default till the date of filing the TDS return but the same would be limited to the amount of tax deductible or collectable as the case may be. It is in following terms:—
“272A(2). If any persons fails-
(a) to (j) XXX
(k) to deliver or cause to be delivered a copy of the statement within the time specified in sub-section (3) of Section 200 or the proviso to sub-section (3) of Section 206C;
(l) & (m) XXX
9. Having noticed the relevant statutory provisions, we proceed to examine the contention relating to concept of ‘no loss of revenue’ for exigibility of penalty, as urged by the learned counsel for the appellant. Section 200(3) of the Act read with Rule 31A(2) of the Rules enjoins upon any person deducting tax at source to file statements of deduction of tax at source within the prescribed period specified thereunder. In our opinion, the penal provisions contained in Section 272A(2)(k) of the Act has been inserted for the purpose of compliance of filing of TDS returns in time in Form No. 26Q by due dates mentioned in Rule 31A(2) of the Rules so that the information is available with the department for utilizing by way of cross checking for proper assessment of tax in the case of the persons from whom income tax has been deducted at source and it has nothing to do with the loss of revenue. In case it is interpreted in any other manner, it would render the provision redundant. Similar contention of theory of ‘no loss of revenue’ raised before the CIT(A) was repelled with the following observations:—
“A plain reading of the provision clearly shows that the question of direct loss of revenue can never occur if the specified statement is not filed within the stipulated time. The legislature has to be attributed that much intelligence that the penalty for delay in submission of the statement was provided even when there could have been no loss of revenue under any circumstances. Therefore, in such a situation to plead that since there is no loss to revenue, no penalty should be imposed would go not only against the intention of the legislature but would render the clear provisions of law otiose. It has to be borne in mind that the State compels the subjects to obey its laws at the pain of penalty for its violation. Every violation of law does not necessarily entail loss to the exchequer but still there are penal provisions to enforce the legal obligations. If there are no penal consequences for default, the question arises as to how else the law is to be enforced. It may also be mentioned that the information contained in TDS statements is utilized by the department in ensuring proper assessment of tax in the case of the persons from whose income, tax has been deducted at source. Hence, while non-filling of statement by the deductor may not entail a loss to revenue in deductor's case, it may result in loss of revenue in the case of deductees and so the contention of the Ld. Counsel that in the absence of loss to revenue, the penalty imposed has to be cancelled is rejected.”
On appeal, the Tribunal had approved the said observations and the conclusion. Further, the Tribunal had recorded by way of example that grievance letter had also been received from one Shri Ashok Gulati by the department intimating that the assessee had deducted tax at source but it was not reflected in the 26AS statement. Thus, it shows that various persons would stand to suffer on whose behalf taxes have been deducted for not getting benefit of those taxes for no fault of their due to non-filing of statements on time. Therefore, the law enunciated in Hindustan Steel Ltd. v. State Of Orissa†. (1972) 83 ITR 26 (SC) has no applicability to the present case.
10. The appellant had filed the TDS returns late as per the details given below:—
Quarter Due date of filing of TDS return Date of filing of TDS return Delays in filing TDS returns Amount of TDS Amount of Penalty Penalty restricted to 1st 15.07.2008 10.05.2013 1760 1,46,068 1,76,000 1,46,068 2nd 15.10.2008 10.05.2013 1668 35,377 1,66,800 35,377 3rd 15.01.2009 10.05.2013 1576 1,90,192 1,57,600 1,57,600 4th 15.05.2009 13.05.2013 1459 1,8,2251 1,45,900 1,45,900 Total 6463 5,60,888 6,46,300 4,84,945
11. There was a delay of nearly five years in filing the TDS returns/statements as is discernible from the perusal of Form No. 26Q reproduced above for the financial year 2008-2009 relating to the assessment year 2009-2010. No plausible explanation had been tendered by the assessee for filing the TDS returns belatedly and, therefore, the benefit under Section 273B of the Act could not be given.
12. Moreover, the authorities below had noticed that the appellant was supposed to mandatorily file TDS returns within the prescribed time as provided under Rule 31A(2) of the Rules. Since the appellant had failed to do so, it had rightly been treated to be in default for not filing the TDS returns within the prescribed period. Further, it had also been recorded that the penalties under Section 272A(2)(k) of the Act have rightly been imposed upon the appellant in all the three financial years. The assessee had failed to explain that there was any reasonable cause or failure to comply with the provisions of law and the authorities below had concurrently concluded that there was delay in filing the TDS returns without any justifiable reason or cause.
13. Adverting to the judgments in Executive Engineer and HMT Ltd.'s cases (supra), it may be noticed that these cases were decided on the basis of facts involved therein as they were relating to default in issuing certificates for deduction of tax at source and keeping in view the factual matrix, the levy of penalty under Section 272A(2)(g) of the Act was found to be inappropriate. The cases being based on individual facts involved therein, no advantage is available to the assessee-appellant therefrom. Similarly, the issue before the Rajasthan High Court and Allahabad High Court in Rajasthan Housing Board and Accounts Officer, Telecom's cases (supra), shows that the pronouncements were also based on individual facts of these cases and do not come to the rescue of the appellant.
14. In view of the above, there is no error or perversity in the approach of the CIT(A) or the Tribunal or in the findings recorded by them warranting interference by this Court. Accordingly, no substantial question of law arises in these appeals. Consequently, finding no merit in the appeals, the same are hereby dismissed.
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