2011 (6) TMI 201 - AT - Income Tax

Penalty - In the letter dt. 25th March 2004 the CBDT has advised that penalties u/s. 271-D and 271-E for violation of the provisions of Section 269-SS and 269-T respectively should not be indiscriminately imposed - it remained the allegation of the appellant that recovery action was taken by the A.O by attaching bank account of the appellant u/s. 226(3) on 29.3.2010 on the basis of first appellate order passed on 3rd Februry 2010 and was served upon the assessee on 31st March 2010 - t is thus a fit case for invoking the provisions laid down u/s. Subsections 2(B) of Section 254 of the Act to impose cost on the Revenue to be paid to the appellant to compensate the harassment caused by the officers of the Revenue at fault to the appellant to some extent - Decided in the favour of the assessee

Summary

Issues Involved:
Adjudication of Ground No. 3 regarding penalty under Section 271E of the Income Tax Act 1961.

Detailed Analysis:

Issue 1: Adjudication of Ground No. 3
The appeal was focused on Ground No. 3, which raised concerns about the penalty imposed under Section 271E of the Income Tax Act. The appellant, a Credit Co-operative Society, argued that they were under a bonafide belief that certain tax provisions did not apply to them due to lack of knowledge among their managing committee members. They highlighted that corrective actions were taken once the correct legal provisions were understood, including strict compliance with the relevant sections. The appellant cited legal precedents to support their argument that their bonafide belief constituted a reasonable cause for the alleged non-compliance.

Issue 2: Allegations of Arbitrary Behavior by Tax Authorities
The appellant contended that the tax authorities acted arbitrarily, illegally, and high-handedly by ignoring the appellant's explanations and legal precedents. They emphasized that the penalty under Section 271E was imposed despite the acceptance of contentions for another default. The appellant also raised concerns about the timing of the penalty imposition and subsequent recovery actions, alleging that the authorities disregarded circulars advising against indiscriminate penalties for Co-operative Credit Societies.

Issue 3: Assessment of Costs and Compensation
The appellant sought substantial costs under Section 254(2B) of the Act to compensate for the financial losses, mental distress, and defamation caused by the tax authorities' actions. They presented a breakdown of expenses incurred and cited legal decisions supporting their claim for costs. The respondent, however, argued that the authorities acted within the provisions of the law and denied any bias or malafide intent.

Judgment:
The Tribunal found in favor of the appellant, acknowledging that the Revenue failed to address the appellant's submissions adequately. Considering the ignored advice from CBDT and circulars advising against indiscriminate penalties, the Tribunal concluded that the appellant, a Credit Co-operative Society, was unjustly harassed by the authorities. Therefore, invoking Section 254(2B) of the Act, the Tribunal awarded a cost of Rs. 5000 against the Revenue to be paid to the appellant within three months. The appeal was allowed, and the judgment was pronounced on 8th June 2011.