The Income Tax Appellate Tribunal (ITAT), Delhi bench in JCL Infra Ltd v. Addl ACIT, held that financial crisis can be a reasonable cause for not depositing the TDS amount with the Government account within the stipulated time. The bench clarified that in such cases, the assessee can be immune from the levy of penalty under Section 273B of the Income Tax Act, as the same would amount to a mere technical breach.
The assessee is a company and the tax deducted at source by the assessee was not paid to the credit of the Central Government within the prescribed period. The department treated the assessee as an ‘Assessee-in-default’ on the ground that there was a delay of 543 days in depositing the TDS amount to the Government Exchequer.
On appeal, the assessee contended that they were in severe financial crisis and, therefore, the TDS could not be deposited in time.
The CIT (A) dismissed the appeal and noted that the assessee had not only delayed the filing of the quarterly returns but also did not deposit the tax deducted by it. The CIT (A) also noted that had the assessee committed the default of only late filing, it could have been held to be a mere technical breach but since the tax was not also deposited within the prescribed period, the penalty was imposable.
Allowing the contentions of the Assessee, the bench comprising President G.D. Agarwal and Judicial Member Sudhanshu Srivastava allowed the appeal. The bench observed that “However, it is our considered opinion severe financial crisis is a reasonable cause which would have prevented the assessee from depositing the TDS within the prescribed time period. In such a circumstance, we hold that the explanation offered by the assessee would constitute ‘reasonable cause’ within the meaning of section 273B of the Act and hence the assessee would be entitled to immunity from the levy of penalty u/s 272A(2)(k).”
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