Thursday, 16 January 2014

Sec. 272B: High Court Explains Scope For Levy of Penalty For TDS Default

CIT vs. DHTC Logistics Ltd (Delhi High Court)

Sec. 272B penalty on deductor for wrong/ non-stating of PAN in TDS return is not applicable if information is not furnished by deductee. Penalty is Rs. 10,000 per deductor and not per wrong PAN

The assessee filed a TDS return in which the PAN of 30,706 deductees was either missing or was incorrectly stated. The AO held that as penalty of Rs. 10,000 u/s 272B was levaible for the non-mentioning of the PAN, the penalty had to be computed per PAN/deductee. He accordingly levied penalty of Rs. 30.70 crore at the rate of Rs. 10,000 per deductee. The CIT(A) restricted the penalty to Rs. 10,000 on the ground that as per the CBDT’s letter dated 05.08.2008 bearing No. 275/24/2007-IT(B), s. 272B penalty is linked to the person/ deductor and not with the number of defaults in the PAN quoted in the TDS return. The Tribunal upheld the view of the CIT(A) (order attached). On appeal by the department to the High Court HELD dismissing the appeal:
There are two reasons why the appeal cannot be entertained. Firstly, the AO in the penalty order u/s 272B has not specifically referred to any default or failure by the assessee mentioning PAN Number even when the said particulars and details were available. The stand taken by the assessee was that the PAN Numbers were not furnished by the truck owners and, therefore, they were not quoted by them or PAN Numbers as informed were quoted. In case, the PAN Numbers are not furnished by the deductees, the assessee cannot be penalized u/s 272B. S. 139A also imposes the obligation on the deductees to furnish PAN Number to the deductor. Secondly, the stand taken by the revenue is contrary to the stand taken by the CBDT. The AO had imposed penalty of Rs.10,000/- in each case where PAN Number was not provided by the deductee. However, the CBDT has in letter dated 5.8.2008 vide No.275/24/2007-IT(B) clarified that penalty of Rs.10,000 u/s 272B is linked to the person, i.e., the deductor who is responsible to deduct TDS, and not to the number of defaults regarding the PAN quoted in the TDS return. Therefore, regardless of the number of defaults in each return, maximum penalty of Rs.10,000/- can be imposed on the deductor. Penalty cannot be imposed by calculating the number of defective entries in each return and by multiplying them with Rs.10,000/-. This also appears to be a legislative intent, as in many cases, the TDS amount may be small or insignificant fraction of Rs.10,000. (Clarified that the Q whether penalty u/s 272B can be imposed if the deductor has not correctly recorded the details despite proper representation by the deductee is not decided)

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