Reasonable cause for compulsory deposit default led to cancellation of penalty where successor management lacked immediate control of records.

Penalty for failure to make the compulsory deposit was held unwarranted where the assessee showed reasonable cause for the default. The appellate authority had not considered the objection that the managing shebait had died and the successor shebait, being newly in charge, could not obtain complete control of the deity's affairs and records within a short time. On those facts, the default was treated as attributable to circumstances amounting to reasonable cause, so the penalty was cancelled.

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Issues: Whether penalty under section 10 of the Compulsory Deposit Scheme (Income Tax Payers) Act, 1974 was justified for failure to make the compulsory deposit, and whether the assessee had shown reasonable cause for the default.

Analysis: The appellate authority had not considered the assessee's objection that the failure occurred because the managing shebait had died and the successor shebait, being new to the management, could not obtain complete control of the deity's affairs and records within a short time. On these facts, the default was held to be attributable to circumstances constituting reasonable cause, and the imposition of penalty was found unwarranted.

Conclusion: Penalty under section 10 was not sustainable and stood cancelled in favour of the assessee.

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