2010 (2) TMI 1322 - AT - Income Tax

Tribunal Upholds Penalty for Late Tax Returns, Emphasizes Legal Obligation

Shri G. Pulla Reddy, Hyderabad Versus JCIT, Kurnool Range, Kurnool

Shri G. Pulla Reddy, Hyderabad Versus JCIT, Kurnool Range, Kurnool - TMI Issues Involved:1. Sustainment of penalty under Section 272A(2)(e) of the IT Act, 1961.2. Assessment at NIL income and the intention behind delayed returns.3. Exemption under Section 10(22) and obligation to submit returns.4. Nature of returns filed under Section 148 and their regularization.5. Validity of returns deemed 'Non est in law'.6. Time limits for filing returns under Section 139(4) and penalty computation.7. Jurisdiction of JCIT, Kurnool in levying penalties.8. Raising jurisdictional objections during penalty proceedings.9. Reasonable cause for delay in filing returns.10. Timeliness of penalty imposition.11. Limitation period for assessment and penalty for the year 1997-98.Issue-wise Detailed Analysis:1. Sustainment of Penalty:The CIT(A) Guntur's order sustaining the levy of penalty under Section 272A(2)(e) was challenged. The Tribunal upheld the penalty, noting that the assessee did not file returns from 1997-98 to 2003-04 and filed them voluntarily in October 2004 without any evidence of departmental insistence.2. Assessment at NIL Income:The assessee claimed no deliberate intention to delay filing since the income was assessed at NIL. The Tribunal found this argument unconvincing, emphasizing the legal obligation to file returns irrespective of the assessed income.3. Exemption under Section 10(22):The Tribunal noted that the assessee's income was exempt under Section 10(22) as a charitable trust. However, it held that the obligation to file returns persisted, as supported by case law, including the Punjab & Haryana HC in Late Gopi Mal Kuthiala Charitable Trust Vs. ITO.4. Nature of Returns Filed:The Tribunal clarified that returns filed voluntarily in October 2004 were not in response to any notice under Section 148, thus invalidating the claim that these were regularized returns.5. Validity of Returns:The returns filed were deemed 'Non est in law' as they were beyond the prescribed time limits. The Tribunal upheld the JCIT's treatment of these returns as invalid, leading to continuous default until the penalty was levied.6. Time Limits for Filing Returns:The Tribunal agreed with the assessee that penalty should be computed only up to the time limits prescribed under Section 139(4). It directed the AO to recompute the penalty accordingly.7. Jurisdiction of JCIT, Kurnool:The Tribunal upheld the JCIT, Kurnool's jurisdiction, noting that the main trustee resided in Kurnool, and the engineering college was located there. The assessee's failure to raise jurisdictional objections timely further validated the JCIT's jurisdiction.8. Raising Jurisdictional Objections:The Tribunal found the assessee's jurisdictional objections untimely and without merit. It emphasized that such objections should have been raised within the time allowed by notice under Section 148.9. Reasonable Cause for Delay:The Tribunal rejected the assessee's claim of reasonable cause for delay, noting the trust's active operations and lack of specific reasons for the delay. It emphasized that negligence and lack of due care could not constitute a sufficient cause.10. Timeliness of Penalty Imposition:The Tribunal dismissed the argument that penalties should be imposed within a reasonable period, noting no prescribed time limit under Section 272A(2)(e) and the independence of penalty proceedings from assessment proceedings.11. Limitation Period for 1997-98:The Tribunal acknowledged that for the assessment year 1997-98, the time limit for filing returns under Section 148 expired on 31.3.2004. It held that the penalty could not be levied for returns filed beyond this date.Conclusion:The Tribunal partly allowed the appeals, directing the AO to recompute the penalty based on the time limits under Section 139(4) and upheld the JCIT's jurisdiction and the validity of penalties for the other years.