2010 (1) TMI 801 - AT - Income Tax

Penalty - assessee did not furnish the tax audit report the due date for filing of the return of income - imposing penalty for failure to carry out a statutory obligation - Held that - It is not the case of the A.O. that the Act of the assessee is deliberate or acted in conscious disregard of its obligation. As the penalty proceedings like the present one is quasi criminal proceedings, the A.O. has to make out the case that it was a deliberate act of the assessee. Merely because, the assessee did not furnish the report before the due date of filing of the return, that may not automatically attract the penalty, assessee s appeal is allowed.

Summary

Issues:
Whether penalty u/s. 271B justified for violation of Sec. 44AB.

Analysis:
The appeal challenges the order of Ld CIT(A)-XVIII, Mumbai for A.Y. 2005-06. The sole issue is the justification of levying a penalty of Rs. 30,912 under Sec. 271B for violating Sec. 44AB. The assessee's total turnover exceeded Rs. 40 lakhs, necessitating an audit report by the due date. The delay was attributed to floods damaging records. The A.O. issued a show-cause notice, unsatisfied with the explanation, and imposed the penalty. The assessee cited Hindustan Steel Ltd. V/S. State of Orissa, emphasizing penalties for statutory obligations require deliberate defiance or contumacious conduct. The A.O. failed to establish deliberate non-compliance, leading to the appellate tribunal's decision.

The tribunal noted the absence of deliberate defiance or conscious disregard by the assessee. As penalty proceedings are quasi-criminal, the A.O. must prove deliberate intent. Mere delay in filing does not automatically warrant a penalty. Citing Hindustan Steel Ltd., the tribunal stressed the need for a justified penalty based on deliberate non-compliance. In this case, the tribunal found no grounds for penalty imposition. Consequently, the penalty order was revoked, and the appeal was allowed in favor of the assessee.

In conclusion, the tribunal's decision hinged on the absence of deliberate defiance or contumacious conduct by the assessee. The A.O. failed to establish deliberate non-compliance, leading to the cancellation of the penalty order. The tribunal emphasized the quasi-criminal nature of penalty proceedings, requiring a strong case for deliberate non-compliance to justify penalty imposition. The decision aligned with the principles outlined in Hindustan Steel Ltd., emphasizing the necessity of deliberate defiance for penalty imposition in cases of statutory obligations.