2017 (3) TMI 428 - AT - Income Tax

Penalty u/s. 271(F) - non furnishing the return within the due date - reasonable cause as attributed by the assessee in this regard is that assessee was under a bonafide belief that the income/allowance as MLA was exempt u/s. 10(14) and also in view of the earlier case laws where receipt of goodwill from the firm at a time of retirement was not taxable he considered the same exempt - Held that - Upon careful consideration in our consider opinion the reasonable cause attributed by the assessee for failure to comply with the provision of filing return on due time is reasonable of acceptable. Hence the assessee case false under the sweep of Section 273 B of the I.T. Act. The said section provides that no penalty shall be impossed inter-alia for failure under this section if the assessee proves that there was reasonable cause of the said failure. There was reasonable cause for the failure of the assessee to comply with the provisions of the Act. Accordingly assessee should not be visited with the regour penalty u/s. 271(F) of I.T. Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Confirmation of penalty under section 271F of the Income Tax Act, 1961 by the CIT-A.

Detailed Analysis:

Issue 1: Confirmation of penalty under section 271F by the CIT-A
The case involved an appeal by the assessee against the order of the CIT-A confirming a penalty of ?5,000 under section 271F of the Income Tax Act, 1961 for filing the return beyond the permitted time. The Assessing Officer (AO) issued a show cause notice under section 271F as the return for the assessment year 2006-07 was filed late. The assessee contended that the delay was due to a bonafide belief that certain receipts were not taxable. The AO, however, rejected this argument stating that the assessee had not disclosed relevant details in previous returns and ignorance of the law could not be an excuse for the delay. The CIT-A upheld the penalty, noting that there had been a change in the law, and the assessee's claim of ignorance could not be accepted. The CIT-A confirmed the penalty of ?5,000 under section 271F.

Upon appeal, the Tribunal considered the submissions of both parties. The assessee argued that the delay in filing the return was due to a bonafide belief that certain income was exempt and that previous case laws supported this belief. The Tribunal found the assessee's reasons reasonable, citing section 273B of the Income Tax Act, which states that no penalty shall be imposed if there was a reasonable cause for the failure to comply with the filing provisions. The Tribunal held that the assessee's belief was reasonable given the circumstances and set aside the CIT-A's order, deleting the penalty of ?5,000 under section 271F.

In conclusion, the Tribunal allowed the appeal by the assessee, emphasizing that there was a reasonable cause for the delay in filing the return, as per section 273B of the Income Tax Act. The penalty under section 271F was deemed unjustified in light of the bonafide belief held by the assessee, and the Tribunal set aside the CIT-A's order, ruling in favor of the assessee.