2018 (11) TMI 427 - AT - Income Tax

Penalty u/s 272A(2)(e) - return was not filed within due date prescribed u/s 139(4A) following the advice given by the Accounts Manger of the trust - reasonable cause for the failure - bonafide belief - delay due to ignorance of law - Held that - The provisions of section 139(4A) lay down that every religious or charitable institution whose income was exempt u/s 11 and 12 of the Act is required to furnish return of income of the previous year within due date prescribed u/s 139(1) of the Act. In the present case, undisputedly, there is delay in filing return of income by 541 days. As held in the case of Aditanar Educational Institution 1997 (2) TMI 3 - SUPREME COURT the assessee claiming exemption u/ss.11 and 12 of the Act, should mandatorily file return of income as the assessee s claim for exemption could be decided by the department only after relevant material is placed before the department by filing the return of income. The provisions of section 273-B mandates that penalty is not to be levied if a reasonable cause is established. In the present case, the Parliament had inserted section 272A in the provisions of section 273-B only by Finance Act, 2012 w.e.f. 01/04/2012. Therefore, during the previous year relevant to assessment year under consideration, levy of penalty is mandatory even if there is a reasonable cause. Therefore, no merit in the submission made by the assessee. The Act does not confer any discretion on the AO not to levy penalty in case reasonable cause is shown to exist. - decided against assessee.

Issues:
1. Justification of penalty under section 272(2)(e) of the Income-tax Act, 1961 for delay in filing return of income.
2. Interpretation of provisions of section 139(4A) regarding filing return of income by religious or charitable institutions claiming exemption under sections 11 and 12 of the Act.
3. Consideration of reasonable cause for delay in filing return of income.
4. Applicability of penalty provisions under section 273-B in the relevant assessment year.
5. Whether penalty can be levied on the trust itself or only on the trustees as representative assessee.

Issue 1: Justification of Penalty under Section 272(2)(e):
The appeal was against a penalty imposed under section 272(2)(e) for delay in filing the return of income. The appellant argued that the penalty should be cancelled as they believed in good faith, based on advice, that no return was required. However, the Tribunal held that the delay of 541 days in filing the return was due to ignorance of law regarding the mandatory filing requirement for exempt institutions under sections 11 and 12 of the Act. The Tribunal emphasized that the Act does not provide discretion to the Assessing Officer (AO) to waive the penalty even if a reasonable cause is shown.

Issue 2: Interpretation of Section 139(4A) Provisions:
The case involved the interpretation of section 139(4A) which mandates religious or charitable institutions claiming exemption to file returns within the prescribed time. The AO imposed a penalty after the appellant failed to file the return within the specified period. The Tribunal noted that the appellant's claim for exemption could only be considered by the department upon filing the return. The Tribunal cited relevant case law to support the strict interpretation of section 139(4A) and upheld the penalty based on the mandatory nature of the filing requirement.

Issue 3: Consideration of Reasonable Cause for Delay:
The appellant argued that ignorance of law constituted a reasonable cause for the delay in filing the return. However, the Tribunal held that during the relevant assessment year, the penalty was mandatory even if a reasonable cause existed. The Tribunal referred to the provisions of section 273-B and the specific penalty provisions under section 272A introduced by the Finance Act, 2012, to support its decision to uphold the penalty.

Issue 4: Applicability of Penalty Provisions under Section 273-B:
The Tribunal discussed the applicability of penalty provisions under section 273-B, emphasizing that the Parliament inserted section 272A in the provisions of section 273-B, making the penalty mandatory even in the presence of a reasonable cause. This legislative amendment was considered in the context of the penalty imposed on the appellant for the delay in filing the return.

Issue 5: Levying Penalty on Trust vs. Trustees:
The appellant raised a point that the penalty should be levied on the trustees as representative assessees and not on the trust itself. However, as this issue was not raised before the lower authorities or in the grounds of appeal, the Tribunal did not render a decision on this specific issue. Therefore, the Tribunal dismissed the appeal filed by the assessee.

In conclusion, the Tribunal upheld the penalty imposed under section 272(2)(e) for the delay in filing the return of income by the trust, emphasizing the mandatory nature of the filing requirement for institutions claiming exemption under sections 11 and 12 of the Income-tax Act. The Tribunal's decision was based on the specific provisions of the Act and relevant case law supporting the strict interpretation of filing requirements for exempt institutions.

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