Income Tax Appellate Tribunal - Mumbai
Porwal Creative Vision P. Ltd, Mumbai vs Assessee
1
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "C", MUMBAI
BEFORE SHRI N.V. VASUDEVAN (JM) & SHRI RAJENDRA SINGH (AM)
I.T.A.Nos.5556 & 5557/Mum/2009
(A.Ys. : 2006-07 & 2007-08))
M/s. Porwal Creative Vision P.Ltd., Addl. Commr. of Income-tax (TDS),
59, Khadilkar Road, Nr. Madhav Range-2,
Bhavan, Mumbai-400 004. Mumbai.
PAN: AACCP2177N Vs.
Appellant Respondent
Appellant by S/Shri H.N. Motiwalla & M.P.
Chhajed.
Respondent by Shri Shravan Kumar.
ORDER
PER RAJENDRA SINGH, AM :
These appeals are directed the orders dated 26-02-2008 and 27-08- 2009 of CIT(A) for the asstt. years 2006-07 and 2007-08 respectively in respect of penalty u/s.272A(2)(c) & (k) of the I.T. Act. As the dispute raised in both the appeals is identical, these appeals are being disposed of by a single consolidated order for the sake of convenience.
2. Briefly stated, the facts of the case are that the AO, on examination of records, noted that the assessee had not filed the TDS returns which were required to be filed at the end of every quarter. Under the provisions of sec. 200(3) read with Rule 31A, a quarterly statement of TDS in Form No.26Q is required to be filed by the assessee by 15th July, 15th October, 15th January and 2 15th June (for last quarter) of the year. The delays in submission of TDS returns for the asstt. year 2006-07 quarterlywise were compiled by the AO as under :
Type of Periodicity Tax Due date Date of Delay by Penalty Return deducted filing days (In Rs.) 26Q QI 59635 31-8-05 14-9-07 744 59635 26Q Q II 56417 15-10-05 14-9-07 699 56417 26Q Q III 89272 16-01-06 14-9-07 606 60600 26Q Q IV 63843 15-06-06 14-9-07 456 45600 Total 2505 2,22,252 2.1 Similarly, in asstt. year 2007-08 also, there were similar delays in filing of the TDS returns as mentioned in the table below :
Type of Periodicity Tax Due date Date of Delay by Penalty Return deducted filing days (In Rs.) 26Q QI 45810 15-7-06 14-09-06 426 42600 26Q Q II 47906 15-10-06 14-09-06 334 33400 26Q Q III 53930 15-1-07 14-09-07 242 24200 26Q Q IV 42654 15-06-07 14-09-07 91 9100 Total 1093 109300 2.2 The AO, therefore, issued show notice for both the years to the assessee asking it to explain as to why penalty u/s. 272A(2)(c) & (k) should not be levied. The assessee, by letter dated 14-09-2007 for both the years, explained that the assessee had already filed the quarterly returns and also enclosed the acknowledgement slips for filing the returns. It was accordingly submitted that penalty should be dropped.3
2.3 The AO, however, on examination of the quarterly returns, noted that there were substantial delays as mentioned in the tables above, for which there were no valid reasons. He, therefore, imposed penalty @ Rs.100/- per day of delay amounting to Rs.2,22,252/- and Rs.1,09,300/- for the asstt. years 2006- 07 & 2007-08 respectively.
3. The assessee disputed the decision of AO and submitted before the CIT(A) that the assessee had incurred certain expenses such as professional fees, rent, contract labour and commission which attracted TDS. The assessee was incurring losses and there was financial crisis and therefore due to non- availability of funds there were delays in making the payments and filing the returns. It was accordingly submitted that there was reasonable cause and penalty should be deleted. Reliance was placed on the judgment of Hon'ble High Court of Allahabad in the case of CIT v. Shriram Memorial Education Society (287 ITR 155) and the decision of Mumbai Bench of Tribunal in the case of Crest Communication Ltd. (11 SOT 47). The CIT(A) was, however, not satisfied. It was observed by him that the delay was admitted. The assessee had not only failed to pay the taxes but also delayed the filing of the returns. Therefore, the explanation of the assessee based on financial crisis could not be accepted. The CIT(A) accordingly confirmed the penalty levied for both the years, aggrieved by which the assessee is in appeal before the Tribunal for both the years.
4. Before us, the ld. A.R. for the assessee submitted that penalty had been imposed u/s.272A(2)(c)(k). It was pointed out that clause (c) of sec. 272A(2) related to return/statement u/s. 133, 206 and 206C. It was pointed out that 4 sec. 206 was not applicable as the same was in force only upto 31-03-2005. Sec. 206 related to collection of tax and not TDS, whereas sec. 133 related to other provisions and not TDS. Therefore, clause (c) of section 272A(2) was not applicable in the case of the assessee. It was also submitted that clause (k), which requires a person to deliver or cause to be delivered copy of the statement within time specified u/s. 200(3), was applicable in the case of the assessee. Under the provisions of sec. 200(3) read with Rule 31A, a person deducting tax at sources is required to prepare a statement in the prescribed form and deliver the same to the prescribed Income-tax authority after paying the tax deducted to the credit of the Central Government. It was pointed out that return u/s.200(3) could be filed only after paying the taxes. Therefore, penalty, if any, could be levied only in respect of delay after payment of tax. As regards the delay in payment of tax, it was submitted that the assessee had severe financial difficulties. He referred to the P & L a/c. and balance-sheet for the year ended 31-03-2010 to point out that the assessee was incurring losses and there were substantial liabilities on account of sundry creditors. The assessee had deducted tax at the time of credit of the amount in the books of account and payment could not be made due to financial difficulties. The assessee had, however, subsequently paid the amount and also filed TDS returns. It was, therefore, requested that penalty should not be levied. He placed reliance on the following decisions in support of this plea :
(1) 106 ITD 558 (Mum.) in the case of Crest Communication Ltd. vs. Addl.
DIT.
(2) 11 TTJ 386 (Bom.) in the case of 3rd ITO vs. Bombay Cable Co. P. Ltd. and (3) 9 TTJ 442 (Madras) in the case of R. Karuppaswamy vs. 2nd ITO. 5 4.1 The Learned DR on the other hand supported the orders of authorities below and placed reliance on the findings given in these orders.
5. We have perused the records and considered the rival contentions carefully. The dispute is regarding levy of penalty under section 272A(2)(c)(k). The penalty has been levied for not submitting the quarterly returns for tax deducted at source (TDS) within the prescribed time limit. We have gone through the relevant legal provisions. The Learned AR for the assessee has rightly pointed out that clause (c) of section 272A(2) is not applicable as the same relates to return/ statement under section 133, 206 and 206C. The section 206 was in force only up to 31.3.2005 and therefore is not applicable in case of the assessee. The section 206 related to collection of tax and not TDS whereas section 133 was also unrelated to TDS and therefore these sections are not applicable. The clause (k) of section 272A(2) is however found applicable in case of the assessee which requires a person to deliver or caused to be delivered copy of the statement as specified under section 200(3). Under the provisions of section 200(3) r.w.r.31A a person deducting tax at source is required to prepare a statement in the prescribed form being the Form No.26Q and deliver the same to the prescribed income-tax authorities after paying the tax deducted to the credit of Central Government. The said section 200(3) is reproduced below as a ready reference.
200(3) Any person deducting any sum on or after the first day of April, 2005 in accordance with the foregoing 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 6 such statement for such period as may be prescribed and deliver or caused 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.
6. Thus under the provisions of section 200(3) aforesaid r.w.r. 31A a quarterly statement of TDS in Form No.26Q is required to be filed by the assessee by 15th July, 15th October, 15th January and 15th June (last quarter of the year). In this case there has been delay in both the years as indicated by the AO in the table reproduced at page 2 of this order. The penalty has therefore been levied @ Rs.100/- per day of default is starting from the due date to the date of filing the quarterly return. The case of the assessee is that it had deducted the TDS at the time of crediting amounts in the books of account and the payment could not be made due to financial difficulties and since the payments had not been made the TDS returns could not be filed as the same required data relating to payment of TDS. The Learned AR has also argued that penalty under section 272A(2)(k) could be levied only from the date of payment of tax as the statement under section 200(3) is required to be filed only after payment of tax to the Central Government. We find force in the argument advanced by the Learned AR. Section 200(3) which has been reproduced earlier clearly provides that after paying the tax deducted to the credit of Central Government within the prescribed time, the assessee shall prepare a statement as prescribed and submit to the authority concerned within the prescribed time limit. The assessee therefore can file the return only after paying the tax to the Central Government. The quarterly returns of TDS require filling of data relating to payment of taxes and therefore such returns 7 could be filed only after paying the tax to the Central Government. Therefore in our view penalty has to be levied for the delay only from the date of paying the tax to the Central Government.
6.1 As regards the default in not paying the tax to the Central Government in time or for non deducting the tax at source, there are other provisions for ensuring compliance. In case the assessee fails to deduct the tax at source or after deducting fails to pay the same to the Central Government the assessee is deemed to be in default under section 201(1) and is liable for penalty. The assessee is also liable to pay interest for the period of default till the payment of tax under section 201(1A). Therefore in our view the period for levying the penalty has to be counted from the date of payment of tax because the delay in filing the return till the date of payment of tax is already explained on the ground that the assessee could not pay the taxes for which separate penal provisions exist. The assessee has also explained the reasons for not paying the tax to the Central Government in time which was because of financial difficulties. The assessee has filed the copies of P & L account and balance sheet to substantiate the claim that it was incurring losses and there were substantial liabilities on account of creditors. The assessee has placed reliance on some decisions of the tribunal in which financial difficulties have been accepted as reasonable cause for default in payment of tax. The Madras bench of the tribunal in case of R.Karuppaswamy Vs 2nd ITO (9 TTJ 442) had cancelled the penalty levied for default in payment of self assessment tax on the ground paucity of funds. Similarly the Bombay bench of the tribunal in case of 3rd ITO Vs Bombay Cable Co. Pvt.Ltd. (11 TTJ 386) had upheld the dropping of penalty proceeding and deletion of interest levied under section 201(1A) for failure to deposit the TDS with Central Government on the ground of financial difficulties. 8 Once the delay in payment of tax is explained satisfactorily, penalty under section 272A(2)(k) for the period till payment of taxes, cannot be levied in our opinion.
7. In view of the foregoing discussion we hold that penalty under section 272A(2)(k) shall be levied only for the delay from the date of payment of taxes by the assessee. The order of CIT(A) is modified accordingly.
8. In the result appeals of the assessee are partly allowed in terms of the order above.
9. The decision was pronounced in the open court on 18.03.2011.
Sd/- Sd/-
( N.V.VASUDEVAN ) (RAJENDRA SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date : 18.03.2011
At :Mumbai
Copy to :
1. The Appellant
2. The Respondent
3. The CIT(A), Mumbai concerned
4. The CIT, Mumbai City concerned
5. The DR "C" Bench, ITAT, Mumbai
// True Copy//
By Order
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
Alk