1993 (8) TMI 109 - AT - Income Tax

ITAT Cancels Penalties for Late Tax Returns Due to Seizure: Analysis

Burlingtons Of Calcutta. Versus Assistant Commissioner Of Income-Tax.

Burlingtons Of Calcutta. Versus Assistant Commissioner Of Income-Tax. - ITD 047, 543 Issues:Penalties imposed under section 271(1)(a) for delayed submission of returns of income, reasonableness of delay due to seizure of books of account, justification for penalties sustained by the CIT (A), impact of tax dues on penalty imposition.Analysis:The judgment by the Appellate Tribunal ITAT CALCUTTA-A involved appeals filed by the assessee against penalties imposed under section 271(1)(a) for delayed submission of returns of income for the assessment years 1982-83 and 1983-84. The consolidated order of the CIT (A) had sustained penalties of Rs. 11,962 and Rs. 9,848 for the respective years. The assessee, a registered firm in Calcutta, faced delays in filing returns due to a search in its business premises on 20-7-1982 resulting in the seizure of books of account. The ITO initiated penalty proceedings despite the assessee's explanations citing the seizure, lack of inspection permission, and changes in accountants as reasons for delay.The CIT (A) acknowledged the difficulties caused by the seizure but reduced the period of default attributed to the assessee to 10 months in each year. The department did not appeal this decision, leading to the assessee challenging the sustained penalties. The assessee argued that the penalties should be cancelled based on the reasonableness of the delay, supported by an affidavit detailing repeated requests for inspection of seized books. The assessee also contended that the delay was not intentional and highlighted decisions supporting the impact of seized books on penalty imposition.Upon careful consideration, the Tribunal found that the seizure of books of account indeed hindered the timely filing of returns. The Tribunal noted that the assessee's delay in seeking permission for book inspection did not negate the reasonableness of the delay caused by the seizure. The Tribunal emphasized that the penalties should not be imposed unless there was a deliberate defiance of the law, contumacious conduct, or conscious disregard of obligations. Given the circumstances and the small amount of tax due after adjustments, the Tribunal concluded that the penalties were unwarranted.Consequently, the Tribunal cancelled the penalties sustained by the CIT (A) for both years, considering the lack of deliberate withholding of tax and the reasonableness of the delay attributed to the seizure of books of account. The Tribunal's decision was based on the principle that penalties should not be imposed without clear evidence of intentional non-compliance or misconduct. The appeals by the assessee were allowed, leading to the cancellation of the penalties.