Penalty: Sections 139A and 272B: A. Y. 2003- 04: Quoting PAN in TDS certificates: Failure: Where assessee-deductor did not mention PAN of deductees on TDS certificates issued by it, as same was not provided by deductees within time prescribed, there was reasonable cause for non-compliance of section 139A(5A), and, therefore, penalty u/s. 272B could not be imposed:

The assessee, a public sector undertaking, had deducted income tax at source as per the provisions of sections 194C and 194J on all the payments made to contractors/professionals during the financial year 2002-03. The tax so deducted was also deposited by it in the government treasury in time. The annual return of TDS as per the provisions of section 203 was also filed in the prescribed ‘Form 26C’ and TDS certificates were issued to contractors/professionals. However, penalty at the rate of Rs. 10,000 for each 350 defaults committed by the respondent-assessee was imposed by the revenue on the ground that the respondent-assessee has not mentioned PAN in Form 16A issued to 350 contractors. The assessee’s contention that there was reasonable cause for not mentioning the PAN in Form 16A since the deductee had not provided the PAN was rejected and penalty was imposed. The Tribunal deleted the penalty, holding that there was reasonable cause for default.

On appeal by the Revenue, the Allahabad High Court upheld the decision of the Tribunal and held as under “
i) A perusal of section 139A(5A) shows that it puts an obligation on the person receiving any sum or income or amount from which tax has been deducted under the provisions of Chapter XVII (which include sections 194C and 194J) to intimate his permanent account number to the person responsible for deducting such tax under the Chapter. In the present case, it is clear that it was statutory obligation of the contractors, who received certain amounts from the respondent-assessee, from which tax was deducted under the provision of Chapter XVII-B, to intimate their permanent account number to the respondent-assessee.

ii) It is the specific stand of the assessee that certain contractors had not intimated their permanent account number, and for that reason it could not be mentioned in Form 16A issued to such contractors. Section 139A(5B) makes it obligatory for every person deducting tax under Chapter XVII-B to quote the permanent account number of the person to whom such sum or income or amount has been paid by him. Thus, reading both the provisions together, namely, sections 139A(5A) and section 139A(5B), it appears that the deductor may be at fault under section 139A(5B) if he does not quote the permanent account number of the persons to whom the amount has been paid, despite the intimation of permanent account number by such person to the deductor u/s. 139A(5A) of the Act. There is nothing on record to show that the contractors to whom certain amounts were paid by the respondentassessee, had intimated their permanent account number to the respondent-assessee as required u/s. 139A(5A). In the circumstances, therefore, the assessee successfully explained the reasonable cause to satisfy the provisions of section 273B.

iii) Considering the provisions of section 272B, 273B and sections 139A(5A) and 139A (5B), a bare reading of the provision itself makes it clear that the penalty u/s. 272B would not ordinarily be imposed, unless the assessee had either acted deliberately in defiance of law or was guilty of conduct which is contumacious, dishonest or acted in conscious disregard to its obligation. The penalty u/s. 272B cannot be imposed merely because it is lawful to do so. It can be imposed for failure to perform statutory obligation. The imposition of penalty for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially, after considering the explanation of reasonable clause submitted by the assessee and on a consideration of all the relevant circumstances.

iv) On the findings recorded by the Tribunal that there was no revenue loss and mere technical breach, it clearly satisfies the test of reasonable cause u/s. 273B. In the present case the levy of penalty u/s. 272B by the assessing authority was fully unjustified.”