Levy of Penalty for non-filing of quarterly TDS Statement in Form 27EQ is invalid: ITAT [Read Order]

Levy of Penalty - quarterly TDS Statement - Form 27EQ - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Allahabad Bench held that levy of penalty for non-filing of quarterly TDS Statement in Form 27EQ is invalid.

The assessee, District Mining Officer has submitted that the AO has initiated the penalty proceedings under section 272A(2)(k) by issuing the show cause notice for delay in submitting the quarterly TDS Statement in Form 26Q.

In reply, the assessee has categorically stated that the assessee has not entered into any such alleged transaction of payment subjected to TDS and thereby casting any obligation of the assessee to deduct TDS and submit the statement / TDS return in Form 26Q.

The assessee has referred to an affidavit filed by the assessee on a stamp paper and submitted that the assessee has clearly pointed that no such TDS was either deducted or deductible in any of the transaction of the assessee during the year. Rather the assessee is receiving the payment for the leasing of mines to the successful bidders.

The AO passed an order wherein under section 154 after the penalty order passed under section 272A(2)(k) of the Income Tax Act.

The assessee has submitted that the initiation of penalty proceedings by the AO are not valid when the assessee has not carried out the alleged transactions of payment which are subjected to TDS and, therefore, the initiation and the consequential penalty order passed by the AO are invalid and liable to be quashed.

Once the Assessing Officer has passed an illegal order, the same cannot be rectified to valid by passing an order under section 154 that has changed the nature of transactions.

The assessee has contended that the penalty levied by the AO and confirmed by the ld. CIT(A) are liable to be deleted as the same are invalid.

However, the department has submitted that there is no dispute that the assessee has received various payments which are subjected to TCS and not TDS however, despite the Tax Collected at Source and depositing to the account of the Government, the assessee has failed to deliver the statement/returns in Form 27EQ.

Therefore, the assessee has failed to comply with the proviso to section 206 of the Income Tax Act and is liable for the penalty levied under section 272A(2)(k) of the Income Tax Act.

The coram consisting of Vijay Pal Rao while deleting the penalty under section  272A(2)(k) held that once the assessee has stated on the affidavit and given an undertaking that the assessee has not paid any amount or deducted any TDS on any sum during these assessment years which requires to submit in Form 26Q, the levy of penalty for default of delivering the Form 26Q is invalid and consequently the penalty order passed by the AO is bad in law, ab initio.

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