1981 (11) TMI 90 - AT - Income Tax

Summary

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

Detailed Analysis:

1. The appeal was filed by the assessee against the penalty imposed by the Income Tax Officer (ITO) under section 10 of the Compulsory Deposit Scheme (CDS) Act, 1974, which was upheld by the Appellate Assistant Commissioner (AAC). The assessee was required to make a compulsory deposit for the assessment year 1976-77 by a specified date. The ITO found a shortfall in the deposit made by the assessee based on the current income, leading to the imposition of a penalty.

2. The AAC confirmed the penalty but directed the ITO to modify it based on the difference between the estimated income for the deposit and the actual return income. The assessee argued that due to the nature of income from registered firms, it was not feasible to accurately estimate the income by the deposit deadline. The assessee contended that the deposit was based on the last returned income for the previous assessment year.

3. The department opposed the assessee's arguments, stating that the penalty under section 10 was automatic upon default. The department highlighted that the assessee had sufficient time to estimate the current income accurately. The assessee's counsel cited decisions from other IT Appellate Tribunals to support the argument that the penalty was not automatic.

4. The Tribunal analyzed the contentions and cited decisions from the IT Appellate Tribunal, Madras Bench, and Jaipur Bench, emphasizing that the penalty under the CDS Act was not automatic. The Tribunal considered the unique circumstances of the case, where the assessee's main income sources were from registered firms, making it challenging to estimate income accurately by the deposit deadline.

5. The Tribunal agreed with the assessee's argument that due to the nature of income from the firms, it was reasonable to base the deposit on the last returned income for the previous assessment year. Considering the specific circumstances and the inability to obtain accurate income figures by the deadline, the Tribunal concluded that the shortfall in the deposit was justified and that no penalty under section 10 of the CDS Act should be imposed.

6. Consequently, the Tribunal allowed the appeal, overturning the penalty upheld by the AAC. The Tribunal's decision was based on the understanding that in certain situations, such as the unique nature of income sources and the inability to estimate income accurately by the deadline, penalties under the CDS Act need to be considered on a case-by-case basis.