1981 (2) TMI 132 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under section 10(1) of the Compulsory Deposit Scheme (Income-Tax Payers) Act, 1974 for delayed deposit.

Detailed Analysis:
The appeal before the Appellate Tribunal ITAT Jaipur involved the question of whether the penalty of Rs. 1,125 imposed on the assessee for delayed deposit under section 10(1) of the Compulsory Deposit Scheme (Income-Tax Payers) Act, 1974 was justified for the assessment year 1977-78. The assessee failed to make the compulsory deposit by the due date of 15th December 1976 and deposited it on 20th December 1976, resulting in penalty proceedings initiated by the Income Tax Officer (ITO). The ITO issued a show-cause notice under sub-section (3) of section 10 of the Act, 1974. The assessee explained that he believed the deposit was due by 31st December 1976 and cited a shortage of funds due to advance tax payment made on 16th December 1976. However, the ITO imposed a penalty of Rs. 1,125, which was upheld by the Appellate Authority for Advance Rulings (AAC).

The assessee appealed to the Tribunal, arguing against the automatic imposition of penalty under section 10(1) for delayed deposits. The Departmental Representative contended that no reasonable cause needed to be considered under section 10 and that the penalty was automatic for delayed deposits. The Tribunal disagreed with this stance, emphasizing the importance of considering reasonable cause before levying penalties. The Tribunal noted that the AAC had already determined that the assessee did not establish a reasonable cause, which led to the penalty being upheld. The Tribunal highlighted that the legislative provision of sub-section (3) of section 10 mandated providing a reasonable opportunity to the assessee before imposing a penalty, indicating that penalties were not automatic.

The Tribunal referenced a decision of the Calcutta High Court in CIT vs. Wesman Engineering Co. P. Ltd (1976) 104 ITR 605 (Cal) to support the requirement of a reasonable opportunity before levying penalties. The Tribunal emphasized that if a reasonable opportunity is to be given, the assessee could demonstrate a reasonable cause to avoid penalties. In this case, the assessee's belief that the deposit deadline was 31st December 1976 constituted a reasonable cause, which was not refuted by the authorities. Therefore, the Tribunal disagreed with the AAC's findings and canceled the penalty of Rs. 1,125.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and canceling the penalty imposed under section 10(1) of the Compulsory Deposit Scheme (Income-Tax Payers) Act, 1974 for delayed deposit.