By TIOL News Service

NEW DELHI, JULY 18, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether delayed deposit of TDS to Government's A/c can be forgiven, if such default was backed by severe financial crises. YES IS THE ANSWER.

Facts of the case:

The assessee company had made certain payments during the relevant year for which it had deducted TDS, but had failed to credit the same to Government's A/c within the prescribed period. Further, the assessee did not file the quarterly statements in Form 26Q within the prescribed time. The AO also noted that quarterly statements in Form 24Q were also delayed by 543 days. He, accordingly, imposed a penalty of Rs. 1,08,600/- for both the defaults. Similarly, in A.Y 2009-10, the quarterly statements were filed belatedly. There was a delay of 376 days for the first quarter, 251 days for the second quarter and 161 days for the third quarter. Thus, the total delay in filing was counted at 788 days and, accordingly, a penalty of Rs. 78,800/- was imposed.

On appeal, the FAA submitted that the period of default should be calculated in respect of period of delay after the payment of TDS to the Central Government. The assessee submitted before the FAA that the assessee was in severe financial crisis and, therefore, the TDS could not be deposited in time. The FAA noted that assessee had not only delayed the filing of quarterly returns but also did not deposit the tax deducted by it. The FAA 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, penalty was imposable. He however restricted the quantum of penalty as there were mistakes in counting the number of days of default.

Tribunal held that,

++ the assessee has pleaded before the FAA that the delay was due to severe financial crisis which the assessee was facing. However, it is seen that the FAA has not considered this submission of assessee and has upheld the penalty on the ground that even the tax deducted at source was not deposited in time. However, severe financial crisis is a reasonable cause which would have prevented the asssessee from depositing the TDS within the prescribed time period. In such a circumstance, this Court holds that the explanation offered by assessee would constitute 'reasonable cause' within the meaning of section 273B and hence the assessee would be entitled to immunity from levy of penalty u/s 272A(2)(k).

(See 2018-TIOL-1089-ITAT-DEL)