2021 (8) TMI 854 - AT - Income Tax

Penalty for late tax return filing deleted due to reasonable cause. Detailed explanations key.

The penalty imposed under section 271F of the Income Tax Act, 1961 for non-filing of the return of income was deleted. The Ld. CIT(A) and Tribunal found ... Penalty u/s 271F - failure of the assessee to furnish its return of income required u/s 139(1) - CIT-A deleted the addition on reasonable cause - HELD THAT:- We find that the assessee before Ld.CIT(A) has stated that the important documents were in possession of the Directors and there was serious legal dispute was going on with the former Directors in this regard. Therefore, considering the totality of the facts and material placed before us, we do not find any infirmity in the order of Ld. CIT(A) and same is hereby affirmed. Thus, Ground of the appeal raised by the Revenue is dismissed. Issues:- Deletion of penalty imposed under section 271F of the Income Tax Act, 1961 for non-filing of the return of income.Analysis:1. The appeals filed by the Revenue were directed against the orders of Ld. CIT(A)-4, New Delhi, for the assessment years 2011-12 to 2015-16. The main issue in these appeals was the deletion of penalty imposed under section 271F of the Income Tax Act, 1961 for non-filing of the return of income.2. The Assessing Officer initiated penalty proceedings under section 271F as the assessee had not filed its return of income for the assessment year 2011-12. Despite the assessee providing explanations, the penalty of Rs. 5,000 was imposed. The Ld.CIT(A) deleted the penalty, leading to the Revenue's appeal.3. The Ld. CIT(A) considered the submissions made by the appellant and noted that the company had paid advance tax installments on an estimate basis. Due to legal disputes with former directors, important records were unavailable, causing a delay in filing the return. The Ld. CIT(A) found that the appellant had shown reasonable cause for the delay and canceled the penalty.4. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the appellant had demonstrated a reasonable cause for the delay in filing the return. The legal battle with former directors and the subsequent payment of taxes after finalizing the accounts were considered valid reasons for the delay. Therefore, the penalty imposed was deleted.5. For the assessment years 2012-13 to 2015-16, the grounds raised by the Revenue were identical to those in the assessment year 2011-12. The Tribunal dismissed these appeals as the facts and issues were consistent with the earlier assessment year, and the reasons for deleting the penalty remained the same.This judgment highlights the importance of demonstrating reasonable cause for delays in filing income tax returns and the impact of legal disputes on compliance obligations. The decision emphasizes the need for taxpayers to provide detailed explanations supported by evidence to justify their actions and mitigate penalties under the Income Tax Act, 1961.