2021 (12) TMI 556 - AT - Income Tax

Levy of penalty u/s 272A(2)(e) - returns of income was filed belatedly after the due date specified u/s. 139(4A) and 139(4C) - reasonable cause as provided u/s. 273B - Delay due to Illness of Managing Trustee of the trust - HELD THAT - The assessee has explained reasons for delay in filing return of income, as per which, the Managing Trustee Smt. Chitra Ganapathy, was falling ill from the year 2006 and was hospitalized for treatment to various illness. In her absence, no one was in a position to take care day to day affairs of the assessee which resulted in delay in finalization of accounts and filing return of income for all these assessment years. But, the delay in filing of return of income was neither intentional nor to derive any undue benefit. Illness of Managing Trustee of the trust during the relevant period will definitely comes under reasonable cause as provided u/s. 273B of the Act for not filing return of income within due date specified under the Act. We further noted that the assessee neither intentionally filed return of income belatedly, nor derived any benefit by filing belated return. In fact, the assessee was having excess of expenditure over income for all these years and thus, by not filing return of income within due date specified under the Act, there is no loss of revenue to the Government - reasons given by the assessee for not filing return of income within due date specified u/s. 139(4A) of the Act comes under reasonable cause as provided under the Act for not levying penalty u/s. 272A(2)(e) - Decided in favour of assessee.

Issues:
Appeals against common order for assessment years 2007-08 to 2010-11 - Penalty u/s 272A(2)(e) for delayed filing of income tax returns - Justification for penalty - Reasonable cause for delay - Principles of natural justice - Appeal grounds - Excess expenditure over income - Loss of revenue to the Government - Appellate authority's decision upheld by tribunal - Recall of tribunal's order - Arguments for and against penalty - Adverse findings by AO - Illness of Managing Trustee - Compliance with law - Deletion of penalty.

Analysis:

1. Common Grounds for Appeals:
The appeals filed by the assessee were against a common order for assessment years 2007-08 to 2010-11, challenging the levy of penalty under section 272A(2)(e) for delayed filing of income tax returns. The grounds of appeal raised various legal contentions related to the validity and justification of the penalty imposed.

2. Reasons for Delayed Filing:
The assessee, a charitable trust, cited the illness of the Managing Trustee as the reason for the delayed filing of income tax returns. The Assessing Officer (AO) initiated penalty proceedings, contending that the reasons provided did not constitute a reasonable cause for the delay.

3. Appellate Proceedings:
Before the first appellate authority, the assessee challenged the penalty order on grounds of limitation, which was dismissed. The tribunal initially upheld the decision but later recalled the order for reconsideration of specific grounds raised by the assessee.

4. Arguments and Counterarguments:
The assessee argued that the delay in filing returns did not result in any loss of revenue to the Government as there was excess expenditure over income for the relevant years. The Revenue, however, supported the penalty, asserting that the reasons for delay did not qualify as a reasonable cause under the law.

5. Judicial Analysis and Decision:
Upon review, the tribunal found that the illness of the Managing Trustee was a valid reason for the delay, falling under the reasonable cause provision of the Act. The tribunal disagreed with the AO's rejection of the assessee's arguments and concluded that no intentional delay or benefit was derived from the late filings.

6. Outcome and Relief Granted:
In light of the circumstances and the legal provisions, the tribunal set aside the appellate authority's decision and directed the AO to delete the penalty imposed under section 272A(2)(e) for all four assessment years, thereby allowing all the appeals filed by the assessee.

7. Final Verdict:
The tribunal's order, delivered on December 8, 2021, in Chennai, provided relief to the assessee by overturning the penalty levied for delayed filing of income tax returns, emphasizing the importance of considering reasonable causes and factual circumstances in penalty assessments.

This detailed analysis encapsulates the legal journey, arguments presented, judicial scrutiny, and the ultimate decision that led to the favorable outcome for the assessee in the context of the penalty imposed for delayed filing of income tax returns.

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