Kolkata bench of Income Tax Appellate Tribunal (ITAT) allowed the appeal in New India Assurance Co. Ltd versus JCIT and held that a technical venial breach would not attract penalty under section 272A (2)(k).
The bench comprising Aby. T. Varkey, judicial member & M.Balaganesh, accountant member heard the case of Assessee. In instant case, Assessee had submitted quarterly TDS statement with some delays of 517 and 425 days in respect of 2nd and 3rd quarters respectively.
Since AO proceeded with show cause notice Assessee submitted that due to the replacement of former software module with the other one, it had to face various accounting problems. Even the assessee’s day to day work and customer services had hampered. Since he was unaware of new software had to face many technical problems and had not been possible for the assessee to prepare the quarterly statements of TDS and submit the same within the prescribed dates.
However, AO confirmed the penalty under section 272A (2)(k) by stating that reasons stated for the delay does not constitute ‘reasonable cause’ within the meaning of section 273B of the Act and rejected the explanation given by Assessee.
The order of levying penalty was upheld by the lower authority and being aggrieved Assessee carried the dispute to this Tribunal. None of them appeared at the behest of Assessee. The tribunal while hearing the recitals admitted that switching over from one software to another would create hindrance or time barrier at the initial stage so that the new Module could function smoothly later on.
However, the tribunal observed that “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) of the Act. Moreover, we find that there is absolutely no loss to the exchequer due to the delay committed by the assessee in filing the quarterly TDS statements as admittedly the entire TDS has been duly remitted within the prescribed time by the assessee to the account of the Central Government”.
Finally, the bench held that the assessee had committed only a technical venial breach, for which it should not be invited with the penalty under section 272A (2)(k) of the Act.