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Facts
The assessee, a developer, delayed in issuing TDS certificates to its deductees. This delay was attributed to financial difficulties, resulting in delays in TDS deposit and filing of TDS statements. The assessee had paid interest, late filing fees, and had its offence compounded.
Held
The Tribunal held that the delay in issuing TDS certificates was a consequence of delays in TDS deposit and TDS statement filing, for which the assessee had faced other penalties. It found no deliberate defiance of law or contumacious conduct by the assessee, and therefore set aside the penalty.
Key Issues
Whether the delay in issuing TDS certificates, under the circumstances, constituted a reasonable cause for waiver of penalty under section 272A(2)(g) of the Income Tax Act.
Sections Cited
272A(2)(g), 273B, 203, 201(1A), 234F, 276B, 279(2)
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI AVDHESH KUMAR MISHRA
ORDER
PER AVDHESH KUMAR MISHRA, AM
The appeal for the Assessment Year (‘AY’) 2014-15 filed by the assessee is directed against the order dated 18.03.2019 of the Commissioner of Income Tax (Appeals)-28, New Delhi [‘CIT(A)’].
The assessee has raised following grounds of appeal: -
1. On the facts and circumstance of the case, the Learned CIT(A) has erred both on facts and in laws in confirming the penalty to the extent of Rs. 90,57,620/- under section 272A(2)(g) of the Act.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty rejecting the contention of the appellant that delay in issuance of TDS certificate was on account of a reasonable cause in terms of provision of Section 273В, as such the penalty is not leviable.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty levied by JCIT ignoring the fact that there is no loss of revenue on account delay in issuance of TDS certificate as appellant had deducted TDS and deposited the same to the Government account as per law.
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming penalty despite the fact that there is no contumacious conduct on the part of the appellant for the delay in issuing of TDS certificates.
5. That the Learned CIT(A) has erred in law while confirming the penalty levied by an order passed u/s 272A(2)(g) of the Act on 30.09.2016, which is otherwise barred by limitation in view of decision of Hon’ble jurisdictional High Court in the case of PCIT vs Hindustan Coca Cola Beverages (P.) Ltd in IT APPEAL NO. 408 OF 2023 dated 27.07.2023 and therefore illegal, invalid and liable to be quashed.
6. The appellant craves leave to add, amend, or alter any of the grounds of appeal
.”
3. The relevant facts giving rise to this appeal are that the assessee, a developer, has not issued the Tax Deducted at Source (TDS) certificates to its Deductees within the prescribed time period under section 203 of the Income Tax Act, 1961 (‘Act’). Therefore, the Range Head-TDS, on reference by the AO-TDS, initiated penalty proceedings under section 272A(2)(g) of the Act. In response to the show cause notice, the assessee submitted that it filed its Quarterly TDS Statements (Form 24Q and 26Q) after due dates as its financial conditions was not good in the relevant year due to recession in the real estate sector and meagre receipts from prospective buyers of the real estate. It was further submitted before the Range Head- TDS that since the assessee had not deposited the TDS even after deduction (on actual basis and also as per book entries) and had not filed Vardhman Infra Developers (P) Ltd. the Quarterly TDS Statements (Form 24Q and 26Q) within the prescribed statutory time. Therefore, it was not possible at its end to issue TDS Certificates within the time provided under section 203 of the Act. The assessee further drew the attention of the Range Head-TDS that it had paid interest and late filing fee under section 201(1A) and 234F of the Act respectively for the defaults in (i) deposit of TDS within the specified time and (ii) filing of Quarterly TDS Statements (Form 24Q and 26Q). Besides, the interest and late filing fee under section 201(1A) and 234F of the Act, the assessee also got its offence of late deposit of TDS after deduction of tax punishable under section 276B of the Act compounded under section 279(2) of the Act.
3.1 Further, it was also submitted before the Range Head-TDS that the assessee had not received reasonable booking amount to maintain its liquidity/inflow of the fund, which resulted the delay in depositing TDS. The assessee explained various reasons for not able to generate TDS certificates to be given to the deductees. It was contended that unless the Quarterly TDS Statements were filed after deposit of TDS, the consequential TDS Certificates could not be generated, which delayed the issuance of TDS Certificates. Since the assessee had neither deposited TDS within the specified time nor filed Quarterly TDS Statements (Form 24Q and 26Q) within the prescribed statutory time; therefore, the consequential TDS Certificates could not be issued. For defaults entailing the non-issuance of Vardhman Infra Developers (P) Ltd. TDS Certificates, the assessee had already paid the interest and late filing fee under section 201(1A) and 234F of the Act along with the compounding fee under section 279(2) of the Act for offence of late deposit of TDS after deduction of tax punishable under section 276B of the Act. Therefore, it submitted that there was reasonable cause for late issuance of TDS Certificates. It was also brought to the notice Range Head-TDS that the offence punishable under section 276B of the Act was compounded by the CCIT-TDS vide order dated 14.09.2015. The assessee placed reliance on following decisions: - “1. Executive Engineer vs. CIT(1994) 48 ITO 414 (Pune Bench) 2. Motilal Padampat Sugar Mills Co. Ltd. vs. State of UP (1979) 118 ITR 326 (SC) 3. Hindustan Steel Ltd. vs. State of Orissa (1972) 183 ITR 26 (SC) 3.2 The Range Head-TDS was not satisfied with the said explanation and thus, he levied the penalty of Rs.1,02,48,566/- as under: - “12. As seen from the provisions of the section 272A(2)(g) of the Act penalty is imposable for delay in issue of each and every certificate separately as the section uses the expression "a certificate". For each certificates issued late, the penalty is computed at the rate of Rs. 100/- per day for the period of delay not exceeding the amount of tax deducted as the assessee has not provided the details of the amount of tax deducted in respect of the deductees to whom the certificates were issued late, it is considered fit to calculate the penalty at the rate of rupees hundred per day for the period of default presuming that the amount of tax deducted for each such deductee is more. The penalty imposable u/s 272A(2)(g) of the Act for delay in issue of certificates to the deductees is calculated quarterly return-wise as tabulated below:
F.Y. 2013-14 Quarterly Type of Due date of Actual date Delay Total No. Quarterly Returns TDS issuance of of issuance (No. of return-wise Certificates certificates to of ertificates of Deductees Penalty u/s the deductees Days) 272A(2)(g) (in Rs.) A. B. C. D. E. F. G. Q-1 Form 16A 30.07.2013 25.03.2014 267 765 2405681/- Q-2 Form 16A 30.10.2013 15.04.2014 196 886 2593639/- Q-3 Form 16A 30.01.2014 17.04.2014 908 299 2567521/- Q-4 Form 16A 30.05.2014 30.07.2014 61 1090 2681725/- Total 10248566/- Notice Col. No. G: - ……………………………….. Accordingly, penalty of an amount of Rs. 10248566/- under section 271A(2)(g) of the IT Act, 1961 is imposed relevant to the F.Y. 2013-14 in the case of the assessee company.” 3.3 Aggrieved, the assessee filed appeal before the CIT(A), who restricted the penalty to Rs.90,57,620/- from Rs.1,02,48,566/- as under: - “6. I have considered the facts of the case, basis of imposition of penalty, remand report of AO and submissions of the appellant. As it is clear from the penalty order that AO has computed the quantum of penalty by taking into account total number of deductees and delay of days in Issuing certificates to the deductees. On what basis the total number of deductees and delay in number of days have been computed, was supposed to make available by AO in the Calculation Sheet as enclosed with penalty order. However, the said Calculation Sheet was neither provided to appellant nor the undersigned, as admitted by AD himself during remand proceedings. Thus, it is not ascertainable as how much delay was there in issuing certificates to the deductees during each quarter. It has to mention here that during the appellate proceedings; it was informed by appellant that Vardhman Infra Developers (P) Ltd. there was delay in deposit of TDS also in respect of each deductee and due to this default. prosecution proceedings u/s 279(2) were going on and appellant had filed application for compounding of offence which was accepted also by the Chief Commissioner of Income Tax (TDS) as mentioned in her order dated 14.09.2015 u/s 279(2) of IT Act. Thus, the appellant itself has admitted this fact that there was delay in deposits of TDS in respect of various deductees and penalty was leviable on such defaults and the TDS certificates could not have been issued without the deposits of TDS amounts. Since the number of days or delay in issue of TDS certificates is not ascertainable in the present appellate proceedings against the penalty order as the Calculation Sheet was not provided by AO, but it is ascertainable that there was default by appellant at least to that extent it has itself admitted the delay in deposits of TDS and for which compounding of offence u/s 279(2) of IT Act was applied. In view of this, I direct the AO to compute the quantum of penalty up to the date of defaults made in respect of deductees till the dates of deposits of TDS for which compounding of offence u/s 279(2) of IT Act has been applied by appellant and accepted by Chief Commissioner of Income Tax(TDS) vide her order dated 14.09.2015. The grounds taken by appellant are partly allowed.”
Before us, none appeared on behalf of the assessee. Therefore, we heard the Ld. Sr. Departmental Representative (‘Sr. DR’). With the help of facts mentioned in orders of the Authorities below, prayed for dismissal of the appeal. On specific query by us, the Sr. DR admitted that the issuance of TDS Certificates depended on filing of Quarterly TDS Statements after deposit of TDS.
We have heard Ld. Sr. DR and have perused the material available on the record. We take note of the fact that unless Quarterly TDS Statements are filed after deposit of TDS, the consequential TDS Certificates cannot be issued by the Deductor assessee. The issuance of TDS Certificates solely depends on filing of Quarterly TDS Statements after deposit of TDS. For Vardhman Infra Developers (P) Ltd. defaults entailing the non-issuance of TDS Certificates, the assessee had already paid the interest and late filing fee under section 201(1A) and 234F of the Act along with the compounding fee under section 279(2) of the Act for offence of late deposit of TDS after deduction of tax punishable under section 276B of the Act. The non-issuance TDS Certificates within the prescribed time period under section 203 of the Act is the consequence of vicious cycle of delay in deposit of TDS and delay in filing Quarterly TDS Statements. Here, the assessee has taken following as reasonable cause: (i) financial conditions of the assessee, (ii) non-contumacious conduct on the part of the assessee and (iii) non-loss of revenue on account delay in issuance of TDS certificate have been taken as reasonable cause. The payment of interest and late filing fee under section 201(1A) and 234F of the Act along with the compounding fee under section 279(2) of the Act are also taken into account while deciding this appeal.
The Hon’ble Supreme Court, in the case of Hindustan Steel Ltd. 83 ITR 26 has held that an order-imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. As discussed above, we have taken note of the fact that the assessee’s conduct was law abiding. Thus, it appears that the provisions of section 272A(2)(g) of the Act Vardhman Infra Developers (P) Ltd. have been used by the Range Head-TDS as a deterrent to ensure timely issuance TDS Certificates. We are satisfied with the reasons of non-timely issuance TDS Certificates as the same is solely dependent on timely deposit of TDS and timely filing of Quarterly TDS Statements. There is no deliberate defiance of law or is guilty of conduct contumacious or dishonest or act in conscious disregard of the legal obligation. We therefore, hereby set aside the impugned order and delete the penalty of Rs.90,57,620/-.
In the result, the assessee’s appeal is allowed. Order pronounced in open Court on 30th July, 2025