2003 (5) TMI 16 - HC - Income Tax

Whether, Tribunal was justified in cancelling the penalty levied under section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974? - The submissions and the admitted fact that the assessee has estimated his nil income and that has been filed his statement under section 209A(2), no direction was given by the Assessing Officer under section 6 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, for deposit of any amount under the Compulsory Deposit Scheme (Income-tax Payers) Act. Considering these admitted facts, we are of the view that the Tribunal was justified in cancelling the penalty

Summary

Issues: Penalty under section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974.

Analysis:
The case involved a penalty imposed under section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974. The assessee, deriving income from various sources, failed to make a compulsory deposit as required by the Act. The penalty was levied by the Assessing Officer, confirmed by the Commissioner of Income-tax (Appeals), and subsequently challenged before the Tribunal. The Tribunal considered that since the assessee had estimated his income as "nil" and no direction was given to correct the estimate or make the required deposit, there was no justification for imposing the penalty under the Act.

The Tribunal's decision was based on a detailed analysis of the relevant provisions of the Act. Section 4(1) of the Act mandates compulsory deposits for individuals whose income exceeds a specified threshold. However, in this case, the assessee had filed an estimate of "nil" income under section 209A(2) of the Income-tax Act. The Tribunal noted that as per section 4(3)(b) of the Act, the current income of the assessee would be considered "nil" in the absence of any directive to the contrary. Therefore, the Tribunal concluded that there was no liability on the assessee to make a compulsory deposit as per the Act.

Furthermore, the Tribunal highlighted that section 10 of the Act, which prescribes penalties for failure to make compulsory deposits, requires that a person must be liable to make such a deposit without reasonable cause to attract the penalty. In this case, the assessee had a reasonable cause for not making the deposit, given the "nil" income estimate. The Tribunal emphasized that even if the section were to be applied, the assessee's explanation of filing a "nil" estimate should be considered a reasonable cause for non-compliance.

Based on these legal interpretations and the specific facts of the case, the Tribunal found that the penalty imposed on the assessee was unwarranted. The Tribunal concluded that the penalty cancellation was justified in light of the admitted facts and circumstances of the case. Consequently, the question posed for the court was answered in favor of the assessee and against the Revenue, leading to the disposal of the reference accordingly.