Commissioner of Income Tax (TDS), Chandigarh v. The Collector, Land Acquisition, Department of Industrial & Commerce

Judgment

1. This order shall dispose of ITA Nos. 172 and 173 of 2012 as according to learned counsel for the revenue identical issues are involved therein. For brevity, the facts are being taken from ITA No. 172 of 2012.

2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 9.3.2012 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal) in ITA No. 1230/CHD/2011, for the assessment year 2009-10, claiming the following substantial question of law:- “Whether on the facts and in the circumstances of the case, the ITAT has erred in observing that non- issuance of form 16A to the deductee within time as ITA No. 172 of 2012 -2- required u/s 203(1) of the Income Tax Act, 1961 was only technical and venial breach of provisions contained in Rule 31 of the Income Tax Rule, 1962 read with section 203(1) of the Income Tax Act, 1961 whereas the Person responsible had not taken adequate steps under Rule 31A of the Income Tax Rule, 1962 read with section 203(1) of the Income Tax Act, 1961 to ascertain the PAN Number from the payees and issuing the requisite certificate in the prescribed period, resulting in inordinate delay?”

3. The facts necessary for adjudication of the present appeal as narrated therein are that the Income Tax Officer (TDS-1), Chandigarh vide letter dated 13.8.2010 informed the respondent about the default committed under Section 203 of the Act for non-issuance and late issuance of Form 16A to the deductees. In some cases, Form 16A have been issued late and in some cases the same are yet to be issued. A notice dated 16.8.2010 was issued to the respondent to show cause as to why the penalty under Section 272A(2)(g) of the Act be not initiated for delay of 192632 days in issuing Form 16A. It was pleaded by the respondent that the landowners were asked to submit their PAN numbers vide letters dated 22.11.2007, 9.1.2008, 3.3.2009 and public notice to that effect was also published in the “Daily Ajit” newspaper on 17.8.2010. Another show cause notice dated 14.12.2010 was issued to the respondent to explain the default committed under Section 203 of the Act. In response thereto, the respondent filed reply dated 28.12.2010. ITA No. 172 of 2012 -3- Due to change of the Additional Commissioner of Income Tax (TDS), Chandigarh, fresh show cause notice dated 18.1.2011 was issued to the respondent who submitted replies dated 25.1.2011 and 27.1.2011 with regard to the present penalty as well as penalty under Section 272A(2)(k) of the Act. The Additional Commissioner of Income Tax (TDS), Chandigarh vide order dated 28.1.2011 (Annexure A-1) levied penalty under Section 272A(2)(g) of the Act to the tune of ` 1,48,08,430/- (equal to the amount of tax deductible/ deducted at source). Against the said penalty, the respondent filed an appeal before the Commissioner of Income Tax (Appeals), Chandigarh [in short “the CIT(A)”]. The CIT(A)

vide order dated 13.10.2011 (Annexure A-2) confirmed the penalty imposed under Section 272A(2)(g) of the Act and dismissed the appeal. Still dissatisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 9.3.2012 (Annexure A-3) allowed the appeal and cancelled the penalty. Hence, the present appeal by the revenue.

4. Learned counsel for the revenue made three fold submissions. Firstly, that the findings had been recorded by the Assessing Officer, the CIT(A) and the Tribunal that the respondent had not issued the tax deducted at source certificate within time. According to the learned counsel once that was so, the respondent was liable for penalty under Section 272A(2)(g) of the Act. Next, there was no reasonable cause as available under Section 273B of the Act had been pleaded by the respondent and, therefore, the Tribunal was in error in deleting the penalty. Lastly, relying upon the judgment of Patna High Court in Veena Theater v. Commissioner of Income-Tax and another ITA No. 172 of 2012 -4- (2010) 322 ITR 260 (Patna) it was urged that failure to submit certificate of tax deducted at source in time made the respondent liable for penalty under Section 272A(2)(g) of the Act and the finding that there was reasonable cause for such failure as recorded by the Tribunal, was legally unsustainable.

5. After hearing the learned counsel for the revenue, we do not find any merit in the appeal. Under Section 272A(2)(g) of the Act, an assessee is liable to penal action by way of penalty where the assessee after deducting the tax fails to furnish certificate in Form 16-A within time prescribed to the person from whom tax has been deducted. However, Section 273B of the Act provides that the assessee is entitled to plead and establish that there was reasonable cause for not issuing the certificate in Form 16-A within time. Though there is no specific reference to Section 273B of the Act in the order of the Tribunal, but the Tribunal on appreciation of material came to the conclusion that the respondent had deducted the tax in time and deposited the same in the Government account but was prevented by sufficient cause in not issuing the certificate to the person from whom the tax was deducted as no PAN numbers were available with the respondent. The findings recorded by the Tribunal read as under:- “8. We have heard the rival submissions and have also perused the materials available on record. In this case, the Assessing Officer has levied the impugned penalty for the violation of the provisions of Rule 31 of the Income Tax Rule, 1962 read with section 200(3) ITA No. 172 of 2012 -5- (1) of the Income Tax Act, 1961. The assessee failed to issue TDS certificates within the time prescribed u/s 200(3) read with Rule 31 of the I.T. Rule, 1962. The explanation of the assessee for non-issuing the certificates within time prescribed was that the interest component in the compensation paid to the District Court for disbursement to the land owners/right holders is taxable as per Income Tax Act, 1961 and tax @ 11.2% have been deducted and deposited in the Government Account. The assessee further explained before the authorities below that it was difficult to file return as the payment of compensation was made by the Hon'ble Court and no PAN numbers were available with the office. It is also submitted by the assessee before the lower authorities that its office has filed all the TDS returns in form No. 24Q for the Ist, 2nd, 3rd and 4th quarters of the financial years 2006-07, 2007- 08, 2008-09 and 2009-10. The delay has been attributed on the part of the land owners due to the fact that land owners have not submitted their PAN numbers required for the purpose. However, the land owners had been asked to submit their PAN numbers vide this office letters dated 22.11.2007, 9.1.2008,

3.3.2009 and Public Notice has also been given in Daily Ajit Newspaper on 17.8.2010. The assessee ITA No. 172 of 2012 -6- categorically stated before the lower authorities that due to non availability of the PAN numbers there was a delay in issuing Form No. 16A. Considering the entire facts and circumstances of the present case, we are of the view that the assessee was prevented by sufficient cause from issuing Certifications in Form No. 16A within period prescribed by the relevant rule and hence no penalty is leviable. Even otherwise also there was only a technical and venial breach of provisions contained in Rule 31 of the I.T. Rule, 1962 read with section 200(3) of the Income Tax Act, 1961, requiring the assessee to furnish a Certificate of deduction at source in Form No. 16A. The TDS was deducted at the rates prescribed by the Income Tax Department. The tax was deposited well in time in the Govt. Treasury. Thus, the assessee has fulfilled its responsibility for deduction of tax and depositing of tax. It is also apparent from the records that the assessee has made a maximum efforts to obtain the PAN numbers of deductees. In our view, delay in furnishing the Certificates has not caused any loss to the Revenue. The Hon'ble Supreme Court in the case of Hindustan Steels Ltd. v. CIT (1972) 83 ITR 26 has inter alia held as under:- “An order imposing penalty for failure to carry ITA No. 172 of 2012 -7- 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 a guilty or 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.”

9. In this case, Form No. 16A was not submitted within time and hence there was only technical and venial breach of provisions contained in Rule 31 of the Income Tax Rules, 1962 read with section 200(3) of the Income Tax Act, 1961. Therefore, in view of the ITA No. 172 of 2012 -8- decision of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. CIT (supra), no penalty can be levied.”

6. The said finding was not shown to be erroneous or perverse in any manner. Adverting to the judgment in Veena Theater's case (supra) referred to by the learned counsel for the revenue, it may be noticed that the High Court in that case after appreciating the facts came to the conclusion that the finding had been recorded by the Tribunal that there was no reasonable cause for not furnishing the tax deducted at source certificate which is not the case here. The said judgment, thus, does not advance the case of the revenue.

7. In view of the above, none of the pleas raised by learned counsel for the revenue merits acceptance. There is no merit in these appeals and the same are hereby dismissed. (AJAY KUMAR MITTAL) JUDGE September 17, 2012 (RAKESH KUMAR GARG) JUDGE ITA No. 172 of 2012 -9- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 173 of 2012 (O&M) Date of Decision: 17.9.2012 Commissioner of Income Tax (TDS), Chandigarh ....Appellant. Versus The Collector, Land Acquisition, Department of Industrial & Commerce ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE RAKESH KUMAR GARG. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. AJAY KUMAR MITTAL, J. For orders, see ITA No. 172 of 2012 (Commissioner of Income Tax (TDS), Chandigarh v. The Collector, Land Acquisition, Department of Industrial & Commerce). (AJAY KUMAR MITTAL) JUDGE September 17, 2012 (RAKESH KUMAR GARG) JUDGE