PAN number is compulsory for TDS Return except reasonable cause involved and penalty under sec 272B cannot attract in such cause

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