CASE LAW: Imposition of Penalty where PAN number not/ wrongly
quoted in TDS returns of Rs. 10000 for multiple wrong/ no PAN numbers
Pls
go through the case and enlighten whether non furnishing of PAN number
by deductee is reasonable cause for non quoting of PAN in TDS
return.....
Court
INCOME TAX APPELLATE TRIBUNAL
Brief
Briefly stated the facts are as under.
The assessee is a cooperative bank engaged in the banking business. For
the first quarter of financial year 2007-08, the assessee has filed its
TDS returns without quoting the PAN numbers of deductees in 1933 cases.
In view of the A.O. it is very much essential on the part of the
assessee to quote the PAN numbers of all the deductees in the TDS return
filed. The A.O., therefore, proceeded to levy the penalty u/s.272B of
the Act and issued the show cause notice to the assessee.
Citation
ITO, TDS-II Gr. Floor, Quereshi
Mansion, Gokhale Road, Naupada,Thane (W) ......…. Appellant Vs The Thane
Janata Sahakari Bank Ltd.Anant Laxmi Chambers,Gokhale Road, Naupada,
Thane (W),Dist. Thane .....… Respondent
Judgement
IN THE INCOME TAX APPELLATE TRIBUNAL
“H” BENCH: MUMBAI
CORAM: SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.6643/Mum/2009
(Assessment Year: 2008-09)
ITO, TDS-II
Gr. Floor, Quereshi Mansion,
Gokhale Road, Naupada,
Thane (W) ......…. Appellant
Vs
The Thane Janata Sahakari Bank Ltd.
Anant Laxmi Chambers,
Gokhale Road, Naupada, Thane (W),
Dist. Thane .....… Respondent
C.O. No. 161/Mum/2010
Arising out of ITA No.6643/Mum/2009, A.Y. 2008-09
The Thane Janata Sahakari Bank Ltd.
Anant Laxmi Chambers,
Gokhale Road, Naupada, Thane (W),
Dist. Thane ......…. Cross Objector
Vs
ITO, TDS-II
Gr. Floor, Quereshi Mansion,
Gokhale Road, Naupada,
Thane (W) .....… Respondent
PAN:AAAAT 4062 E
Revenue-Appellant by: Shri Goli Sriniwas Rao
Assessee-Cross Objector by: Shri Arun Sathe
Date of Hearing: 07.07.2011
Date of Pronouncement: 19.08.2011
O R D E R
PER R.S. PADVEKAR, JM:
This
appeal is filed by the revenue challenging the impugned order of the
Ld. CIT (A)-II Thane dated 26.10.2009 for the A.Y. 2008- 09. The
assessee has filed the cross objection raising the grievance against the
part of the order sustaining the penalty levied by the A.O.
The revenue has taken the following effective grounds:-
“1. On the facts and
circumstances of the case and law, the Learned CIT (A) erred in reducing
the penalty levied u/s.272B of I.T. Act to Rs. 10,000/-.
2. On the facts and
circumstances of the case and law, the Learned CIT (A) erred in holding
that there was single default instead of 2112 defaults as held by the
Assessing Officer u/s.272B of the I.T. Act.
3. On the facts and
circumstances of the case and law, the Learned CIT (A) erred in relying
upon the decision of Hon’ble ITAT, decision in the case of Financial
Cooperative Bank Ltd. vs. Income-tax Officer 117 TTJ (Ahd) 782.”
2.
Briefly stated the facts are as under. The assessee is a cooperative
bank engaged in the banking business. For the first quarter of financial
year 2007-08, the assessee has filed its TDS returns without quoting
the PAN numbers of deductees in 1933 cases. In view of the A.O. it is
very much essential on the part of the assessee to quote the PAN numbers
of all the deductees in the TDS return filed. The A.O., therefore,
proceeded to levy the penalty u/s.272B of the Act and issued the show
cause notice to the assessee.
3.
The assessee contended that the PAN numbers of the assesses were
inadvertently left out in the soft copy of the format due to the system
error in generating the concerned report. It was also
contended
that after receiving show cause notice from the A.O. the assessee
furnished the revised returns with the details of the PAN and Form No.60
for e-filing. The A.O. was not convinced with the reply of the assessee
as he was of the opinion that the revised return is belated in e-TDS of
NSDL w.e.f. 1.4.2007 as the validation utility of the NSDL does not
allow uploading if the return does not quote PAN of minimum 70%
deductees are not collected. The assessee also contended that the
revised return could not be uploaded in e-TDS of NSDL as if the 70% of
the PAN numbers of the deductees are not quoted. The assessee-bank also
explained that most of their customers are submitting Form 60 as per
Rule 114B who have not having PAN numbers. In those cases, it is not
possible to levy the penalty. The A.O. was not impressed with the
explanation of the assessee, as in his opinion, it is not reasonable
cause. The A.O., therefore, held that the assessee bank without
reasonable cause failed to comply with the provisions of section 272B
and accordingly committed default and as per Sec 272B what is default?
The penalty of Rs. 10,000/- is to be levied. The A.O. accordingly levied
the penalty of Rs. 1,93,30,000/- (Rs. 10,000/- X 1933 cases). The
assessee challenged the penalty order by taking the different
contentions and pleas. In sum and substance, the plea of the assessee
was that there was no conscious failure on the part of the assessee.
Moreover, in any of the cases, deductees are filing Form no.60. It is
not possible to quote PAN umbers. It was pleaded that the assessee is
regularly filing the TDS returns and due to the system error, the column
in which the PAN is required to be quoted is left blank. The assessee
also filed the revised return giving the details of the PAN numbers. The
Ld. CIT (A) sustained the penalty to extent of Rs. 10,000/-. The
operative part of the reasoning of the Ld. CIT(A) is as under:
“5.
I have gone through the penalty order of the AO and the submissions
made by the appellant during the penalty proceedings before me. I intend
to agree with the submissions made by the appellant. The plain reading
of the penal section makes it very clear that the default u/s.272B is
not divisible. Default u/s.272B cannot be divided into several or
multiple defaults to impose penalty under the section under reference in
each and every case of the deductee of the appellant. As an assessee
the penalty, if at all to be imposed, can be imposed only once and not
1933 penalties can be imposed on a single assessee in a single order.
the AO has imposed penalty of Rs..1,93,30,000/- @ of Rs..10,000/- each
on the basis of total number of 1933 cases found wherein the PAN was not
quoted. All the defaults cannot be taken separately and thereafter as
basis for imposition of penalty in each and every case. This is not the
correct interpretation and implementation of the legislative provisions.
Reliance is placed on Hon'ble ITAT, Ahmedabad decision in the case of
Financial Cooperative Bank Ltd. vs Income Tax Officer (2008) 117 TTJ
(Ahd.) 782 wherein on the similar facts and circumstances penalty
u/s.272B was cancelled by the Hon'ble bench.
5.1
Section 139A(5A) puts the deductees under obligation to supply their
PAN to the deductor and further the deductor u/s.139A(5B) is under
obligation to quote such PAN of the deductees while filing its TDS
return. In the instant case the appellant has admittedly committed the
default of not quoting the PAN in certain cases but there was a reason
for that. What confronted with the situation, the appellant during the
proceedings before the ITO, TDSII Thane clarified the position by
stating that a system error had occasioned while generating the return
in e-format, so the column in which the PAN was required to be quoted
was not lifted and as a result the column got hidden and the same data
was uploaded in the return at NSDL. It has been contended by the
appellant that two officers of the bank met the AO on 30.01.2008 and
submitted a soft copy and also a hard copy wherein PAN of deductees
appeared and were placed in the record file of the ITO, TDS II Thane. It
can be seen therefore, that the appellant has committed the default but
there was a reasonable cause for that.
5.2
Notwithstanding whatever has been stated above, there is no denying the
fact that the default is committed by the appellant for not quoting the
PAN in certain cases and the violation of provisions of section 139A
has taken place and the appellant is liable for penalty u/s.272B of the
I.T. Act, 1961, but the same cannot be taken as multiple defaults. The
default is a single default for which the appellant is liable for
penalty of Rs..10,000/- as stipulated in the section u/s.272B.
Imposition of 1933 penalties on the single entity order is not the
intention of the legislature. Even the appellant has admitted the
default vide submissions dated 02.01.2009 at para 2.3 stating that in as
much as section 272B stipulates the default and also provides the
measure of penalty it is a complete code in itself. The measure of
penalty is provided at Rs..10,000/-. It is not dependent on the gravity
of the default or does not provide any discretion as to the amount
except that he may conclude that the penalty is not leviable, but once
he decides that it is leviable it should be levied at Rs..10,000/-.
5.3
In view of the facts and circumstances explained above, the action of
the AO imposing penalty upto Rs..10,000/- in the case of the appellant
for the period under consideration is confirmed and balance penalty
imposed is deleted.”
4.
Now the revenue is in appeal before us raising the grievance for
sustaining penalty to extent of Rs. 10,000/- only and assessee has filed
the Cross Objection raising the grievance for sustaining the penalty of
Rs. 10,000/-.
5.
We have heard the parties and perused the record. In this case there is
no dispute that the assessee has filed the TDS return. The contention
of the Ld. Counsel is that e-filing of the TDS return was newly
introduced and there was a system error and no fault can be attributable
to the assessee for non-quoting of the PAN number and it as the
defective software of the system. He further submitted that the assessee
immediately filed the revised return along with the PAN numbers. He
further submitted that there was again system problem in uploading the
revised return and as per the (latest prevalent) system unless the 70%
PAN numbers are quoted, uploading is not possible. He submits that
responsibility of the assessee-bank is aske for the PAN or to ask
receiver of interest to file Form No.60 . It cannot force the deductees
that they must furnish the PAN numbers, if they do not have.
6.
In the Cross Objection, the Ld. Counsel submits that even there is no
justification to sustain the penalty of Rs. 10,000/-. He pleaded for
deleting the entire addition towards levy of the penalty. We have also
heard the Ld. D.R.
7.
The facts are narrated in detail hereinabove. The short controversy is
that the assessee did not quote PAN number in TDS ereturn while
uploading the e-returns. In our opinion, it is a reasonable cause. What
we find that as admittedly the new system of filing e-TDS-returns is
introduced. Being a new system, having a some problems with software and
for that the assesse bank can not be held responsible. No where is
denied by the A.O. that as claimed by the Assesse, there system error.
In our opinion, it is a reasonable cause for not quoting PAN numbers in
e-return of TDS. We further find that the assessee thereafter
immediately filed the revised TDS ereturn and also have furnished Form
no.60. In the case of Hindustan Steel Ltd. vs State of Orissa 83 ITR 26
the Hon’ble Supreme Court has held as under:-
“An order imposing penalty for
failure to carry out a statutory obligation is the 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 conduct contumacious or dishonest, or acted in
conscious disregard of its obligation. Penalty will not also be imposed
merely because it is lawful to do so. Whether penalty should be imposed
for failure to perform a statutory obligation is a matter of discretion
of the authority to be exercised judicially and on a consideration of
all the relevant circumstances. Even if a minimum penalty is prescribed,
the authority competent to impose the penalty will be justified in
refusing to impose penalty, when there is a technical or venial breach
of the provisions of the Act or where the breach flows from a bona fide
belief that the offender is not liable to act in the manner prescribed
by the statute.”
8.
In our opinion, there is a reasonable cause on the part of the assessee
for not quoting the PAN numbers in e-TDS return and no penalty is
leviable. Accordingly, all the grounds in the revenue’s appeal are
dismissed and the cross objection filed by the assesse is allowed and we
delete the penalty sustained by the Ld. CIT (A). . In the result,
revenue’s appeal is dismissed and assessee’s cross objection is allowed.
Order pronounced in the open court on this day of 19th August 2011.
Sd/- Sd/-
(P.M. JAGTAP) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 19th August 2011
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A)–II, Thane.
4) The CIT (TDS), Pune.
5) The D.R. “H” Bench, Mumbai.
/ / True Copy / /
By Order
Asstt. Registrar
I.T.A.T., Mumbai
*Chavan
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Sr.N.
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Episode of an order
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Date
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Initials
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Concerned
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1
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Draft dictated on
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08.08.2011
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Sr.PS
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2
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Draft placed before author
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09.08.2011
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Sr.PS
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3
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Draft proposed & placed before the second Member
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JM/AM
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4
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Draft discussed/approved by Second Member
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JM/AM
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5
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Approved Draft comes to the Sr.PS/PS
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Sr.PS/PS
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6
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Kept for pronouncement on
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Sr.PS/PS
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7
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File sent to the Bench Clerk
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Sr.PS/PS
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8
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Date on which file goes to the Head Clerk
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9
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Date of dispatch of Order
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Regards
CA Amit Chadha
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