VISA CHEMICAL INDUSTRIES,THANE vs. ADDL CIT TDS RG, THANE

Visa Chemical Industries Addl. CIT TDS RG S-6 Ratnamanjuah Industries Quareshi Manison, Gokhale Compound, Naupada Vs. RD, Naupada Thane-400602 Thane-400602 PAN No.AACFV2308L Appellant .. Respondent .. Shri M Subramanian, AR Assessee by Revenue by .. Shri Pradeep Kumar Singh, DR .. Date of hearing 18-05-2017 Date of pronouncement .. 26-05-2017 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of CIT(A)-1, Mumbai, in appeal No. 355/13-14 dated 21-03-2016. The penalty was levied by ACIT, TDS Range, Thane for the A.Y. 2009-10 vide order dated 03-05-2013 u/s 272A(2)(K) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

Visa Chemical Industries (A.Y:2009-10) 4. As there was delay in filing of TDS statements due to the reason that it did not have PAN of the deductees and therefore was unable to upload the TDS returns on the system of the department. Hence, there was delay. The AO levied the penalty and CIT(A) confirmed the same. Before us, the learned Counsel filed a copy of Tribunals order in the case of State Bank of India vs. JCIT [2015] 56 taxmann.com 311 (Cuttack - Trib.) wherein exactly on same facts the Tribunal has deleted the penalty vide Para 7 which reads as under: - “We have heard the contentions of the rival parties at length. We do find that the penalty so levied by the AO and confirmed by the learned CIT(A) appears to be leaning more on holding assessee in default for such penalty as a mechanical/automatic levy insofar as it is the Department itself, who has insisted the e-filing of such returns as late as making the assessee literate about the data to be uploaded on the basis of tax deducted at source already given credit to by the I.T. Department on the basis of TDS certificates furnished by the assessee namely the deductee. The bonafide 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 DR that the filing of quarterly statement was in favour of the assessee on the basic connotation that the deductee 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 @Rs.100 per day as have been put forth by the Assessing Officer and confirmed by the learned CIT(A) 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 Page 2 of 6 Visa Chemical Industries (A.Y:2009-10) the learned Counsel of the assessee before us indicates that there is no less to the Revenue for attracting or levy of such penalty. ITAT, 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 PAN 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 DR has insisted that the proviso to Rule 31-A of the I.T.Rules clearly indicate that the penalty was ripe for levy not because the insistence of the Department on assessee 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 DR insofar as the Department itself was handicapped as the bonafide of the assessee has been established in the negative way as they would have filed the hard-copy 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 assessee insofar as the generation of that number would have never occurred till such time the PANs 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 assessee was in default not being computer literate their principal officers who have been held responsible for such late filing of the quarterly statements was an administrative glitch. It was not in the interest of the Government employee to hold back the information which they have already gathered insofar as they are now being governed by the computer which software has its own filters for accepting the quarterly statements for which the assessee in default Visa Chemical Industries (A.Y:2009-10) 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-TDS quarterly return, which was entrusted to an authorized service provider and the delay has occurred unintentionally. The assessee deductor is law compliant and the delay occurred only due to the reason that the assessee deductor is dependent on information of TDS and its deposit from the sub treasury of the Government and filing of e-return through the designated service provider of Income-tax Department. The assessee deductor has no technical competency to file the return by itself without external aid. The assessee is also not competent to do so by itself 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 willful negligence nor any malafide on the part of the assessee in the matter of compliance and the delay was due to reasonable cause, the default being beyond the control of the assessee deductor. It is at best a technical or venial breach of the provisions of the act or where the breach flows from a bonafide belief that the assessee is not liable to act in the manner prescribed by the statute. The penalty u/s 272 (A)(2) cannot be levied in a routine manner. Law is well settled that a bonafide breach cannot lead to a penalty u/s. 272(A) [Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC)]. In the present case of the assessee, either Government bodies or aided by Govt., are public office and since the tax deduction and payment are made by treasury and there is undisputedly no default. There arises, no reason for non-filing of TDS return with an intentional act or willful act to attract a Visa Chemical Industries (A.Y:2009-10) quasi-criminal, imposition of penalty. The assessee has relied on the decisions of the honorable High Court of Rajasthan in the case of CIT v. Superintending Engineer [2003] 260 ITR 641/131 Taxman 596 and the decision of ITAT, Mumbai Bench in the case of Royal Metal Printers (P.) Ltd. v. Addl. CIT [2010] 37 SOT 139 and the decision of ITAT, Cuttack Bench in the case of Garrision Engineer (I) R & D, (supra) wherein it has been clearly held that for such technical or venial breach supported by reasonable cause, penalty under sec. 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 hard-copy into soft-copy was to be learnt by respective Government DDOs from the department officials. There is reasonable cause for delay in filing ETDS return U/s 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 assessee is not all justified. We, therefore, cancel the penalty levied u/s.272A(2)(k) for the assessee for the respective AYs as captioned in the cause title of this order by allowing the appeals under consideration.”