Sections 200(3), 206C, 273B — Non-availability of PAN of payees who were ordinary labourers constitutes reasonable cause for delay in filing TDS returns.
Facts:
The assessee, a private limited company, deducted tax at source from payments made to labour contractors from many unorganised sectors. The amount of tax deducted at source was paid, but the TDS returns for the four quarters of financial year 2005-06 were delayed by a period ranging from 733 days to 1031 days. The Assessing Officer (AO) rejected the explanation furnished by the assessee and levied a penalty of Rs.2,14,550 for failure to comply with section 206/206C of the Act.
Aggrieved the assessee preferred an appeal to the CIT(A) who recorded the following findings and cancelled the penalty levied:
(a) The applicable provision is section 200(3) which provision has been inserted w.e.f. 1-4-2005 and this was the first year after the introduction of the provision;
(b) Under Rule 31A of the Income-tax Rules, the assessee has to obtain PAN from deductees. Since the deductees were small-time labourers, there was difficulty in collecting those details from them;
(c) The nature of contract was such that the assessee had to employ labour contractors from many unorganised sectors, which made it more difficult to collect the PAN;
(d) The Chief Accountant of the assessee company who was working with it for past ten years and was looking after TDS and IT-related compliances resigned. He was replaced by another accountant who also resigned and had to be replaced;
(e) Every corporate assessee has faced similar difficulties in preparing the statements or in filing them in electronic form;
(f) Despite all the difficulties, the quarterly TDS returns were ultimately filed voluntarily without being prompted by any notice from the Department;
(g) There is no revenue loss since the tax deducted has been paid to the Government. Only paperwork was delayed, which is only a technical breach.
Aggrieved, the Revenue filed an appeal to the Tribunal.
Held:
The Tribunal noted that though the penalty order refers to section 206/206C, the default, as found by the CIT(A) and as explained to the Bench, is u/s.200(3). It also noted that the penalty order was in a cyclostyled form without referring even to the appropriate section. This may show non-application of mind. The only question which arose was whether the delay on the part of the assessee was due to a reasonable cause within the meaning of S. 273B. The Tribunal held that the findings of the CIT(A), which were not disputed by the Revenue, constituted a reasonable cause for delay in filing the TDS returns. The Tribunal upheld the order passed by the CIT(A).
The appeal filed by the Revenue was dismissed.
